The rush to buy up supply with printed moneyby Gregor MacdonaldWednesday, October 3, 2012, 10:28 AM
The Federal Reserve is probably not ready to take the aggressive plunge into Nominal GDP Targeting, but it likely will.Such a policy, which received wider attention during Ben Bernanke's Congressional questioning last year and was also highlighted this year in a paper delivered at the Jackson Hole conference (Woodford, opens to PDF), has not caught any visible traction with Washington policy makers possibly because it’s seen as either too radical, or simply too new.However, after four years of broad reflationary policy (and another year to come) failing to meaningfully spur U.S. employment growth, the Fed may be willing to try such measures by late next year, 2013.Indeed, given the Fed’s recent announcement of open-ended quantitative easing (QE), one can already anticipate the incremental move towards Nominal Gross Domestic Product (NGDP) Targeting, which has as its central belief that an aggressive and open-ended promise to pursue growth at the expense of inflation is the booster required to push a structurally broken economy back to normal trend. Moreover, in contrast to Bernanke’s swift rejection last year of NGDP on a conceptual basis, Bernanke discussed the idea in friendlier terms during hispost-Federal Open Market Committee (FOMC) news conference.What’s 'exciting' about the emergence of NGDP Targeting into mainstream economic thinking is that, once implemented, it will provide a real-world test of reflationary policy’s final effort to combat the forces that have led to the end of strong, economic growth. The appearance of the Woodford paper (link above) further highlights the reality that endless amounts of cheap capital will be provided to restart economies, now that we are in energy transition, with the world having lost its cheap oil. The battle between credit and natural resources will be renewed.What will be the effect on global natural resource extraction in an era of NGDP Targeting?Simple. All of the remaining fossil-fuel BTUs will be extracted on an accelerated basis, and governments will race to provide the capital to do so.
The Post-Abundance Era
It makes sense that just as the era of abundance is coming to an end – an era which dominated developed world economies over the past 250 years – an enthusiastic, vestigial embrace of Abundance would pour forth from culture. Books such as Abundance: The Future is Better Than You Think and also The Coming Prosperityhave appeared in a flourish, all in the past year.Is it not telling that this outpouring has occurred just as it has become crystal clear that prices of resources were not – even in the post-2008 era – returning to levels of the prior decade?It is either lurid or tragic that assertions of abundance would flower after energy prices endured a price revolution, agriculture prices did the same, and purchasing power and incomes in the developed world entered decline. Therepricing of the planet is a super-trend that has endured for more than 10 years now, and it has wreaked havoc on just about every asset class from stocks to housing. While observers currently cheer stabilization in such prices, it's worth noting that the S&P 500 first reached current levels more than 12 years ago. Therefore, each unit of the stock market buys less of everything. So much for abundance.It is additionally rather galling to be harangued by Abundance Theorists at a time when OECD economies have essentially failed, both in their financial systems and their ability to produce jobs, and are instead now producers of poverty. As purchasing power declines in the West against energy and food, what can Abundance Theorists possibly be thinking? It is not as if the industrial revolution in the Non-OECD is producing higher quality lives either, as countries like China convert themselves into waste dumps of coal-fired and chemical pollution, and India sees pluralities of its population continue to go without electricity or a reliable water supply.Abundance would mean that globally, energy is so plentiful that it would be too cheap to meter. On the contrary, global energy prices – and in particular, food prices (which are strongly linked to energy prices) – have completely broken out of long-term trend lines to the upside.There is no better measure of the aggregate loss of purchasing power against resources than the advance that poverty has made in the past 10 years, especially in the United States. While it’s true that various policy choices have exacerbated income inequality in the West for over thirty years, such explanations were more satisfying from 1975-2000, during a long period of efficiency gains in the economy. As it happens, the U.S. Census Bureau has just released fresh data on U.S. poverty, and while not a surprise, it does not make for pleasant reading. U.S. poverty is at its highest levels since 1993, but the current level -- 15% -- is very near the highs of the last 40 years:To see the charts move on to this link: http://www.peakprosperity.com/blog/79681/war-between-credit-and-resources?utm_campaign=weekly_newsletter_28&utm_source=newsletter_2012-10-05&utm_medium=email_newsletter&utm_content=node_title_79681Canada Stocks Drop as Commodities Offset Jobs
Canadian stocks fell, paring a weekly gain, as a drop in oil and metal prices offset better-than- forecast employment data.Yamana Gold Inc. lost 3.1 percent as the precious metal fell. Primero Mining Corp. (P) soared 36 percent after getting a positive ruling from Mexican tax authorities. Glentel Inc. (GLN) rose 7.3 percent for a second day of gains after securing a deal to handle mobile-device sales for Target Corp. (TGT)’s new Canadian stores.The Standard & Poor’s/TSX Composite Index (SPTSX) retreated 28.69 points, or 0.2 percent, to 12,418.99 in Toronto, paring earlier losses of as much as 0.5 percent. The benchmark equity gauge rose 0.8 percent this week, snapping two weeks of losses.“Toronto is lagging due to the underperformance of gold stocks,” said Greg Taylor, fund manager with Aurion Capital Management, in an interview from Toronto. The firm manages about C$8 billion ($8 billion). “There’s a fair bit of concern heading into earnings next week, so the fact the market is up a bit this week is a win.”Canadian employment rose by 52,100 following an August gain of 34,300, primarily on more full-time hires, Statistics Canada said today in Ottawa. The jobless rate rose to 7.4 percent from 7.3 percent as the labor force grew by 72,600. The job gain exceeded all 24 forecasts in a Bloomberg economist survey with a median of 10,000, while the unemployment rate was forecast to be unchanged.The U.S. unemployment rate unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009 as employers hired more part-time workers.
Gold Slumps
http://www.businessweek.com/news/2012-10-05/canada-stocks-little-changed-as-commodities-offset-jobsMore Americans Working Part-Time; Unemployment Declines
Take this for what it is worth. I cannot even find anything other than cold selling life insurance. QBBritt Zaragoza is among a growing number of part-time workers in a U.S. economy that is simultaneously experiencing slowing growth and declining unemployment.Enlarge image
Some 582,000 Americans, the most since February 2009, took part-time positions last month because of slack business conditions or because those jobs were the only work they could find, according to Labor Department estimates. Photographer: Patrick Fallon/Bloomberg
4:29Oct. 5 (Bloomberg) -- Edward Lazear, a professor at Stanford University's Graduate School of Business and former economic adviser to President George W. Bush, talks about the U.S. economy and labor market. He speaks with Deirdre Bolton, Michael McKee and Julie Hyman on Bloomberg Television's "In the Loop." (Source: Bloomberg)The 48-year-old single mother found employment as a receptionist at a Columbus, Ohio, law firm in August after searching for two years. Not working a full day gives her the flexibility to take care of her 10-year-old son and pursue a career in catering.“I knew sooner or later something would come up and thank God it did,” she said. “It was the perfect hours that I was looking for so I jumped on it real quick.”Joblessness unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, from 8.1 percent, according to Labor Department data issued today in Washington. Falling unemployment, as job gains exceed labor-force growth, means more people are earning paychecks, which in turn may boost the consumer spending that accounts for about 70 percent of the economy.“You’d rather have full-time than part-time employment for sure, but a job is a job,” said Ray Stone, managing director of Stone & McCarthy Research Associates in Princeton, New Jersey. Still, “if it’s part-time for economic reasons it takes some of the benefit away.”Some 582,000 more Americans, the most since February 2009, were working part-time last month because of slack business conditions or because those jobs were the only work they could find, according to Labor Department estimates.
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