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Full Employment Abandoned

Shifting Sands and Policy Failures

by William Mitchell, Professor of Economics, Centre of Full Employment and Equity, University of Newcastle, Australia and Joan Muysken, Professor of Economics, CofFEE-Europe, University of Maastricht, The Netherlands

My review:

There are only 2 books that I know of that are ‘in paradigm’ and the other is Wray’s ‘Understanding Modern Money’ which I also highly recommend.

This new book by Bill Mitchell is also solidly ‘in paradigm’ and for those of you not all that interested in the details of unemployment per se I suggest beginning with ‘Part III’ which does an outstanding job of outlining the imperatives of non convertible currency which will serve you well in analyzing today’s markets. From monetary operations to fiscal measures, the mainstream economists and media continue to get it wrong. Bill lays down the fundamentals that can help you understand where the mainstream goes astray, and hopefully translate into you getting it right.

Regarding unemployment (aka the ‘output gap’ by today’s central bankers), it is readily acknowledge that inflation isn’t all that sensitive to changes in unemployment. In their words, “The good news is that the Phillips curve is flat. And the bad news is that the Phillips curve is flat.” The essence of what Bill proposes is that an employed labor bufferstock is a far superior price anchor than today’s labor bufferstock of unemployed. And this is one of those things that seems obvious and indeed is absolutely correct, yet entirely overlooked as a policy option.

So click and order a copy or two, jump to Part III, and then start at the beginning to get a leg up on where we are, how we got here, and what policy options are open- particularly a form of full employment that further supports output, growth, and price stability.

Then pass it around your office and send copies to your favorite members of Congress, thanks!

Order now: http://www.e-elgar.co.uk/Bookentry_Main.lasso?id=1188
 
 
Warren Mosler
 
 
 
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Publisher’s Spiel:

“This book by William Mitchell and Joan Muysken is both important and timely. It deals with the issue of the abandonment of full employment as an objective of economic policy in the OECD countries. It argues persuasively that macroeconomic policy has been restrictive over the recent, and not so recent past, and has produced substantial open and disguised unemployment. But the authors show how a job guarantee policy can enable workers, who would otherwise be unemployed, to earn a wage and not depend on welfare support. If such a policy is fully supported by appropriate fiscal and monetary programmes, it can create a full employment with price stability, and which the authors label as a
Non-Accelerating-Inflation-Buffer Employment Ratio (NAIBER). This book is essential reading for any one wishing to understand how we can return to full employment as the normal state of affairs.”
-Philip Arestis, University of Cambridge, UK

Contents:

Part I: Full Employment: Changing Views and Policies

1. The Full Employment Framework and its Demise
2. Early Views on Unemployment and the Phillips Curve
3. The Phillips Curve and Shifting Views on Unemployment
4. The Troublesome NAIRU: The Hoax that Undermined Full Employment

Part II: Full Employment Abandoned: Shifting Sands and Policy Failures

5. The Shift to Full Employability
6. Inflation First: The New Mantra of Macroeconomics
7. The Neglected Role of Aggregate Demand

Part III: The Urgency of Full Employment: Foundations for an Active Policy

8. A Monetary Framework for Fiscal Policy Activism
9. Buffer Stocks and Price Stability
10. Conclusion: The Urgency of Full Employment References Index

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Summation of Commercial Paper Outstanding AND Combined Commercial and Industrial Loans Outstanding

Combined commercial and industrial loans and commercial paper show a leveling off after the initial drop.

Back in mid 2006, I remember commenting that I thought the government deficit was no longer high enough (given everything else that was going on) to support the credit structure.

The last push up was largely a product of fraudulently obtained sub prime and Alt-A loans.

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Lehman cuts oil demand forecast

by Richard Valdmanis

(Reuters) Investment bank Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) said Wednesday it slashed its forecast for 2008 world oil demand growth due to a steeper-than-expected slowdown in energy consumption in the United States and other OECD countries.

Lehman added it believes the oil market is “approaching a tipping point” with prices expected to decline to an average of $90 a barrel in the first quarter of 2009.

“We now forecast annual oil demand for 2008 at 86.3 million barrels per day, a growth of 790,000 bpd from 2007. The growth has been revised down from projections of 1.5 million bpd in December,” Lehman said in a research note titled ‘Demand Demolition’.

If true, and non-Saudi supply remains about flat, Saudi production might fall to about 9 million bpd and the price would still remain wherever the Saudis set it.

There has been some talk that the Saudis may have agreed to lower prices after the last round of meetings with US officials. Could be, but with their output running within a million or two bpd of their total capacity, it seems doubtful they would do anything to increase demand before they have the excess capacity to meet it. But there could be other factors (including the US 7th fleet and concerns about a united Iran/Iraq threatening them) that might be influencing their decision. Only time and prices will tell. Should be more clear in a week or so.

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• MBA Mortgage Applications (Released 7:00 EST)
• MBA Purchasing Index (Released 7:00 EST)
• MBA Refinancing Index (Released 7:00 EST)
• MBA TABLE 1 (Released 7:00 EST)
• MBA TABLE 2 (Released 7:00 EST)
• MBA TABLE 3 (Released 7:00 EST)
• MBA TABLE 4 (Released 7:00 EST)

MBA Mortgage Applications (Jul 18)

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MBA Purchasing Index (Jul 18)

A zig down and looking soft. Tables below show largest drops are in applications for adjustable rate mortgages, particularly government mortgages.

Also, I recall JPM’s recent earnings report showed a substantial increase in consumer mortgage lending, which could be taking volume from the mortgage bankers surveyed in this report.

Housing may be leveling off and moving up some, but no signs of actual strength yet.

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MBA Refinancing Index (Jul 18)

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MBA TABLE 1 (Jul 18)

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MBA TABLE 2 (Jul 18)

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MBA TABLE 3 (Jul 18)

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MBA TABLE 4 (Jul 18)

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Hardly need a study to figure that out!

This paper from the NY Fed was just released:

The Effect of the Term Auction Facility on the London Inter-Bank Offered Rate

Summary: This paper examines the effects of the Federal Reserve’s Term Auction

Facility (TAF) on the London Inter-Bank Offered Rate (LIBOR). The particular question investigated is whether the announcements and operations of the TAF are associated with downward shifts of the LIBOR; such an association would provide one indication of the efficacy of the TAF in mitigating liquidity problems in the interbank funding market. The empirical results suggest that the TAF has helped to ease strains in this market.

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Treasuries Fall as Fed’s Plosser Calls for Interest-Rate Boost. Treasuries fell as Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should raise interest rates “sooner rather than later.”

Fisher, Stern, and now Plosser as the palace revolt gains momentum into the August 5 FOMC meeting.

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• ICSC-UBS Store Sales YoY (Released 7:45 EST)
• Redbook Weekly YoY (Released 8:55 EST)
• ICSC-UBS and Redbook Comparison TABLE (Released 8:55 EST)
• Richmond Fed Manufacturing Index (Released 10:00 EST)
• Richmond Fed Manufacturing Index ALLX (Released 10:00 EST)
• OFHEO House Price Index MoM (Released 10:35 EST)
• OFHEO House Price Index YoY (Released 10:35 EST)
• OFHEO House Price Index TABLE (Released 10:35 EST)
• ABC Consumer Confidence (Released 17:00 EST)
• ABC Consumer Confidence TABLE (Released 17:00 EST)

ICSC-UBS Store Sales YoY (Jul 15)

Still wiggling their way higher as fiscal kicks in.

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Redbook Weekly YoY (Jul 15)

Also working its way higher.

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ICSC-UBS and Redbook Comparison TABLE (Jul 15)

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Richmond Fed Manufacturing Index (Jul)

Big dip puts it back on its downtrend.

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Richmond Fed Manufacturing Index ALLX (Jul)

Big drop in shipments,
interesting up tic in wages.

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OFHEO House Price Index MoM (May)

Better than expected, still down, but seems to be falling at a slower rate.

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OFHEO House Price Index YoY (May)

Rate of decline seems to have diminished some. So far, year over year changes for this price range doesn’t seem that severe.

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OFHEO House Price Index TABLE (May)

Several regions showing gains.

Unless commodities take a very large dive, the Fed needs an output gap in housing to keep a lid on overall prices.

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ABC Consumer Confidence (Jul 20)

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ABC Consumer Confidence TABLE (Jul 20)

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Karim writes:

• CATERPILLAR SEES ECB CUTTING RATES AT LEAST 25BP BEFORE YR END
• CATERPILLAR SEES NO SIGN OF RECOVERY IN NORTH AMERICAN HOUSING
• CATERPILLAR ASSUMES AT LEAST ONE MORE RATE CUT LATER THIS YR
• CATERPILLAR SEES ‘DIFFICULT’ FOR ECONOMY TO AVOID A RECESSION
• CATERPILLAR SEES OIL PRICE AVG ABOUT 16% HIGHER IN LAST HALF
• CATERPILLAR SAYS 2Q SALES/REVENUE UP 30% OUTSIDE NORTH AMERICA
• Caterpillar Net Rises 34% as Asia, Mideast Building Lift Sales
• Caterpillar Reports All-Time Record Quarter Driven by Strong Growth Outside North America

Right, weak domestic demand for sure. But note the last few lines that represent the booming exports even though domestic economies around the world are slowing.

That’s what happens when they spend their accumulated hoard of USD here and spend less at home as they try to get rid of their USD hoards. This doesn’t stop until their holdings of USD fall to desired levels.

I still see continued domestic weakness with GDP muddling through due to exports and government spending.

And ever higher prices pouring in through the import/export channel.


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Published letter to the editor in FT.

Expect public-sector deficits and oil prices to go on rising

by Prof Philip Arestis, Dr John McCombie and Mr Warren Mosler.

Sir, Public-sector deficits and crude oil prices will probably both continue rising. Chris Giles’ reports, “Treasury to reform Brown’s fiscal rules” and “Treasury sees storm clouds gathering” (July 18), recognise the inevitability of growing deficits due to economic weakness while also implying public-sector deficits are per se a “bad thing”.

What the articles fail to appreciate are three dimensions to the argument: the first is that public-sector deficits do not present a solvency issue, only an “inflation” issue. Second, public-sector deficits equal total non-government (domestic and foreign) savings of sterling financial assets and are the only source of non-government accumulation of sterling net financial assets. Third, public-sector deficits provide the net financial equity to the non-government sector that supports the private-sector credit structure.

It is the case that the public-sector deficit will increase in one of two ways. The “nice” way would be pro-actively with sufficient tax cuts or spending increases (depending on one’s politics) that support demand at desired levels. The “ugly” way is from a slowing of demand that reduces tax revenues and increases transfer payments. If, instead, the government tries to suppress the current deficit with any combination of tax increases or spending cuts, the resulting accelerated slowdown of the economy will then increase the deficit the “ugly” way.

In any case, the current “inflation” is the result of Saudi Arabia acting as swing producer as it sets the oil price at ever-higher levels and then supplies all the crude demanded at that price. Our institutional structure then passes these prices through the entire economy over time, and there is nothing interest rates or fiscal policy can do to change these dynamics.

The ability to set crude prices can only be broken by a sufficiently large supply response, such as in the early 1980s when net supplies increased by more than 15m barrels per day, helped considerably by the US deregulating natural gas production, which allowed substitution away from crude oil products.

In sum, the deficit will go up either the nice way or the ugly way, as it always does when markets work to grant the private sector the desired net financial assets, which can come only from government deficit spending. “Inflation” will continue higher as long as the Saudis remain price-setter and continue to post ever-higher prices to their refiners.

Philip Arestis,
University Director of Research,
Cambridge Centre for Economic and Public Policy

John McCombie,
Director,
Cambridge Centre for Economic and Public Policy

Warren Mosler,
Senior Associate Fellow,
Cambridge Centre for Economic and Public Policy,
University of Cambridge, UK

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Interesting how reports of higher inflation have often meant stronger currencies in the short run due to higher anticipated rates from the CB.

Inflation, however, by definition means the currency buys less of most everything; therefore, inflation and a weakening currency are one and the same.

But it can take a long time for markets to discount this.

Emerging-Market Currency Rally Dies as Inflation Hits

by Lukanyo Mnyanda and Lester Pimentel

(Bloomberg) The five-year rally in emerging- market currencies is coming to an end as central banks from South Korea to Turkey struggle to contain inflation, say DWS Investments and Morgan Stanley.

The 26 developing-country currencies tracked by Bloomberg returned an average 0.86 percent in the past three months, down from 1.63 percent in the first quarter, 8.2 percent for all of 2007, and 30 percent annually since 2003. For the first time in seven years, investors are less bullish on emerging-market stocks than on U.S. equities, a Merrill Lynch & Co. survey showed last week.

Confidence in the Indian rupee is weakening after inflation accelerated at the fastest pace in 13 years, stoked by soaring food and energy prices. South Korea’s won will drop this year by the most since 2000, while Turkey’s lira will reverse its biggest gain since at least 1972, the median estimates of strategists surveyed by Bloomberg show.

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Too Big to Fail?

by Peter S Goodman

Using public money to spare Fannie and Freddie would increase the public debt, which now exceeds $9.4 trillion. The United States has been financing itself by leaning heavily on foreigners, particularly China, Japan and the oil-rich nations of the Persian Gulf.

This is ridiculous, of course. The US, like any nation with its own non-convertible currency, is best thought of as spending first, and then borrowing and/or collecting taxes.

Were they to become worried that the United States might not be able to pay up, that would force the Treasury to offer higher rates of interest for its next tranche of bonds.

Also ridiculous. Japan had total debt of 150% of GDP, 7% annual deficits, and were downgraded below Botswana, and they sold their 3 month bills at about 0.0001% and 10 year securities at yields well below 1% while the BOJ voted to keep rates at 0%. (Nor did their currency collapse.)

The CB sets the rate by voice vote.

And that would increase the interest rates that Americans must pay for houses and cars, putting a drag on economic growth.

As above.

For one thing, this argument goes, taxpayers — who now confront plunging house prices, a drop on Wall Street and soaring costs for food and fuel — will ultimately pay the costs. To finance a bailout, the government can either pull more money from citizens directly,

Yes, taxing takes money directly, and it’s contradictionary.

But when the government sells securities they merely provide interest bearing financial assets (treasury securities) for non-interest bearing financial assets (bank deposits at the Fed). Net financial assets and nominal wealth are unchanged.

or the Fed can print more money — a step that encourages further inflation.

This is inapplicable.

There is no distinction between ‘printing money’ and some/any other way government spends.

The term ‘printing money’ refers to convertible currency regimes only, where there is a ratio of bill printed to reserves backing that convertible currency.

Skip to next paragraph “They are going to raise the cost of living for every American,”

True, that’s going up!

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• Leading Indicators (Released 10:00 EST)
• Leading Indicators ALLX (Released 10:00 EST)

Leading Indicators (Jun)

Last month revised down. In line with weak, muddle through growth. The stock market is a big influence on this series.

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Leading Indicators ALLX (Jun)

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Looks and feels like spreads will be generally narrowing for a considerable period of time.

Bank earnings are better than expected with revenues growing nicely.

GDP, income, and spending being sustained by a growing government budget deficit, exports, and housing leveling off and no longer subtracting from growth.

‘Inflation’ continues with Saudi’s supporting prices and pass-throughs intensifying.

• IG On-the-run Spreads (Released 5:44 EST)
• IG6 Spreads (Released 5:44 EST)
• IG7 Spreads (Released 5:44 EST)
• IG8 Spreads (Released 5:44 EST)
• IG9 Spreads (Released 5:44 EST)

IG On-the-run Spreads (Jul 18)

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IG6 Spreads (Jul 18)

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IG7 Spreads (Jul 18)

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IG8 Spreads (Jul 18)

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IG9 Spreads (Jul 18)

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(an email exchange)

>   
>   On Sun, Jul 20, 2008 at 10:46 PM, Russell wrote:
>   
>   Brad Setser, at Follow the Money, presents a couple of graphs on changes in
>   oil export revenue: The Oil Shock of 2008.
>   
>   The following graph shows the Year-over-year change in oil exports as a
>   percent of world GDP (and in billions of dollars).
>   
>   

>   
>   Year-over-year change in oil exports
>   
>   This calculation assumes that the oil exporters will export about 45 million
>   barrels a day of oil.
>   
>   Each $5 increase in the average price of oil increases the oil exporters’
>   revenues by about $80 billion, so if oil ends up averaging $125 a barrel this year
>   rather than $120 a barrel, the increase in the oil exporters revenues would be
>   close to a trillion dollars.
>   
>   Assuming oil prices average $120 per barrel for 2008, the increase in 2008 will
>   be similar to the oil shocks of the ’70s.
>   
>   

Right, the notion that oil is a smaller % of GDP and therefore not as inflationary was flawed to begin with and now moot.

Two more thoughts for today:

First, the second Mike Masters sell-off may have run its course. The first was after his testimony in regard to passive commodity strategies which I agree probably serve no public purpose whatsoever. The second was last week as markets expect Congress to act to curb speculation this week, which they might. Crude isn’t a competitive market (Saudi’s are the swing producer) so prices won’t be altered apart from knee jerk reactions, but competitive markets such as gold can see lower relative prices if the major funds back off their passive commodity strategies.

Second, just saw a headline on Bloomberg that inflation is starting to hurt the value of some currencies.

Third, the Stern statement will continue to weigh on interest rate expectations up to the Aug 9 meeting.

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The deficit will go higher. The only question is whether it will go higher the nice way (proactive spending or tax cut to restore demand and growth), or the ugly way (revenues fall and transfer payments go up until the deficit is large enough to restore financial equity and aggregate demand).
Solvency is not an issue. The choice is purely political.

British finance minister paints bleak picture of economy

Britain’s economic downturn is worse than previously thought and there is no extra money available for public spending, Chancellor of the Exchequer Alistair Darling said in an interview published Saturday.

There’s the problem. They’ve got it backwards – the money to pay taxes comes from government spending, not vice versa as they think.

Darling also told The Times newspaper that taxpayers were at the limit of what they were willing to pay, a day after official data showed a record deficit in Britain’s public finances, and reports that the government might bend its budget rules.

“At Christmas most people remained hopeful there would be an improvement by the autumn,” he said.

“Most people would now say it’s far more profound. It’s affecting every economy and everybody. I can’t say how long it will last.”

He added: “We are going through a very, very difficult time.”

Yes, and the government is making it worse.

Darling said that the economic picture was “at the bottom end of my range” set out in his annual budget in March.

On public spending, the finance minister said he has been “very clear with my colleagues that there is no point them writing in saying, ‘Can we have some more money?’ because the reply is already on its way and it’s a very short reply.”

“I told them at the last meeting of Cabinet they’ve got to manage within the money they’ve got.”

Again, they’ve got it backwards – the money to pay taxes comes from govt spending, not vice versa as they think.

The Office for National Statistics said on Friday that public sector debt at the end of June was at 38.3 percent of GDP, but increased to 44.2 percent when the impact of nationalised mortgage lender Northern Rock is included.

Japan’s been at 150%. Doesn’t matter. It’s all a function of private/non-government savings desires which are a function of institutional structure, including tax advantages for not spending income for the likes of pension fund contributions, ins reserves, etc.

Public finances were at a record deficit of 15.5 billion pounds in June compared with the same time last year, well over market expectations of a 12.3-billion-pound deficit.

So? If demand is deemed too low it’s not enough, whatever it is.

The Financial Times, meanwhile, reported that finance ministry officials were working on plans to revise the rules to allow for increased borrowing without raising taxes amid the current economic downturn.

In actual fact they spend first, then borrow, but they don’t know that either.

One of the fiscal rules sets a government borrowing limit of 40 percent of national income.

Yes, a self imposed constraint not inherent in the system.

In The Times interview, Darling played down the report and reiterated comments made Friday that the Treasury constantly reviews its fiscal rules.

He noted, however, that while voters will “pay their fair share … you can’t push that.”

“My judgment is that there are a lot of people in this country who feel they work hard, they make their contribution and they’re feeling squeezed.”

Yes they are, but the deficit isn’t the problem.

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A minority view but a growing one.

They are thinking the low rates are destabilizing the housing and financial markets via the weak USD channel.

Stern Says Fed Rate Rise `Can’t Wait’ for Markets to Stabilize

by Vivien Lou Chen
(Bloomberg) Federal Reserve Bank of Minneapolis President Gary Stern said the central bank shouldn’t wait for financial and housing markets to stabilize before raising interest rates.

“We can’t wait until we clearly observe the financial markets at normal, the economy growing robustly, and so on and so forth, before we reverse course” and begin raising rates, Stern said in an interview in Minneapolis today. “Our actions will affect the economy in the future, not at the moment. Forecasts play a critical role.”

The comments by Stern, a voter on the rate-setting Federal Open Market Committee this year, may reinforce traders’ forecasts for a rate increase by year-end. Stern indicated that Treasury Secretary Henry Paulson’s rescue plan for Fannie Mae and Freddie Mac will help prevent a deeper housing and economic slump.

“We’re pretty well-positioned for the downside risks we might encounter from here,” said Stern, 63, the Fed’s longest-serving policy maker. “I worry a little bit more about the prospects for inflation.”

The bank president compared the current credit crunch to the one in the early 1990s, which restrained economic growth for almost three years. That’s a more sanguine assessment than others have. The International Monetary Fund has said it’s the worst since the Great Depression and former Fed Chairman Alan Greenspan said it’s the most intense in more than half a century.

17-Year High
Stern spoke two days after government figures showed consumer prices surged 5 percent over the past year, the biggest jump since 1991. Excluding food and fuel, so-called core prices rose 2.4 percent, higher than the 2.1 percent average over the last five years.

“Headline inflation is clearly too high,” Stern said. He added that he’s concerned that will feed through to core prices and public expectations for inflation.

As long as energy and food costs level off, core inflation ought to slow over the next year, Stern said.

Crude oil has surged 73 percent in the past 12 months, and rose to a record of $147.27 a barrel on July 11. Worldwide, prices for food commodities such as wheat and rice were 43 percent higher in April than a year earlier, according to the United Nations Food and Agriculture Organization.

Stern declined to say when policy makers may shift toward raising rates. The FOMC halted its series of seven reductions last month, after reducing the benchmark rate to 2 percent, from 5.25 percent last September.

Rate Outlook
Traders estimate 58 percent odds that the Fed will boost its main rate at least a quarter point from 2 percent in October, after keeping borrowing costs unchanged in August and September. There’s a 73 percent probability of a move by year-end, futures prices show.

Minutes of the Fed’s June 24-25 gathering, released July 15, showed that some Fed officials favored an increase in rates “very soon.” Fed Chairman Ben S. Bernanke this week said there are risks to both inflation and growth, abandoning the FOMC’s June assessment that the threat of a “substantial” downturn had receded.

“This is a very challenging policy environment,” Stern said today. “I don’t think we ought to pretend that” an end to the credit crisis “won’t take some time,” he said.

The Fed on July 13 offered Fannie Mae and Freddie Mac access to direct loans from the central bank in case the firms needed the financing before Congress acts on Paulson’s rescue plan. The Treasury chief is seeking power to make unlimited loans to and purchase equity in the companies if needed.

Stern said the proposals are “clearly designed to bolster Fannie and Freddie.”

Stern is the only FOMC member who’s served with three chairmen: Paul Volcker, Greenspan and Bernanke. He became the bank’s president in 1985.

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Seems like a sale ahead of possible Congressional action to limit ‘speculation’.

Not sure how big the dip might be, but yet another buying op as the choice remains – pay the Saudis their asking price or shut the lights off.

The price only goes down if the Saudis cut price, or if there is a supply response of more than 5 million bpd that dislodges them from being swing producer.

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• Housing Starts (Released 8:30 EST)
• Building Permits (Released 8:30 EST)
• Initial Jobless Claims (Released 8:30 EST)
• Continuing Jobless Claims (Released 8:30 EST)
• Philadelphia Fed (Released 10:00 EST)
• Philadelphia Fed TABLE (Released 10:00 EST)

Housing Starts (Jun)

Karim writes:

Continuing claims drop from 3203k to 3122k; 4wk average rises from 3126k to 3142k.

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Building Permits (Jun)

James writes:

Total starts were up 9.1% but single family was down -5.3% while multi-fam was up 42.5%. Then look at the regional break down. Multi-fams were up 102.6% m/m in the northeast which apparently has something to do w/ a tax abatement for rushing into some starts and permits in the NY area. Don’t know the details there but what matters to the broader market is that single family starts and permits declined. Less supply to compete w/ tons of inventory is what we want to see so the net/net = positive.

Right, thanks, either way housing starts are muddling around the 1 million mark, down from about 2 million not long ago.

Actual inventories of new homes are falling quickly; so seems to me a shortage is developing.

The weekly applications are steady at levels that used to be associated with maybe 1.5 million annual starts.

Starts peaked at 2.6 million units around 1972 with only about 215 million population.

They can return to 1.5 million pretty quickly, and I’d still consider that a depressed level.

4 week average jobless claims again moved down a bit, as did continuing claims.

Corporate earnings pretty good so far.

Q2 GDP looking like maybe 2% to be released July 31.

Government deficit spending moving up nicely -the tide that’s lifting all boats- and supporting prices/’inflation’ which turns the relative value story into an inflation story.

Dems ready with more fiscal packages to fire off as needed.

While shoes do keep falling, each one seems to do less damage and pass more quickly than the prior bumps. The agencies were the latest, the USD at stake were the largest, and the ‘crisis’ didn’t even last a week.

With stocks on the move there will be more talk within the FOMC of the low Fed Funds rate creating an asset bubble like they think it did in 1999 and 2003.

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Initial Jobless Claims (Jul 12)

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Continuing Jobless Claims (Jul 5)

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Philadelphia Fed (Jul)

Hanging tough off the bottom, but still depressed.

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Philadelphia Fed TABLE (Jul)

Prices paid jumped to 75.6 from numbers that were already way too high.

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When in roam, pay fees of 40¢ per minute.

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