All of our sources in France warned that labor civil unrest was going to explode. Now, hundreds of thousands of citizens have poured onto the streets in France and some are calling this the new French Revolution. They have been trying to impose a total media blackout in the Western news outlets to hide what is going on, as they fear the public will assume there is safety in number and join in.
The British government claims it made a mistake in sending thousands of postal ballots to EU citizens living in the UK. The UK Electoral Commission had to admit it sent 3,462 ballots to EU citizens who have no legal right to vote. They claim it was a software error.
In the Scottish vote, they had British and EU members counting votes for the Scots. No doubt, that was one for you, two for me. They now claim that they will not count those votes. Good one. Of course they will count them. Will they now have people checking passports to vote? Highly doubtful.
The job market collapsed in May as the Labor Department reported on Friday that the nation’s economy added only 38,000 jobs. The experts were expecting a modest gain of 150,000 jobs. Additionally, there were actually 59,000 fewer new jobs in March and April than previously estimated. Then, looking closely at the 38,000 new jobs that were created, only 25,000 were in the private sector with the rest created in non-productive government jobs which feed off of taxes.
What people are also ignoring is regulation. Under Obamacare, there is absolutely no possible way even I would hire more than 24 Americans. We have people working in Beijing to Germany. Then you have the pension crisis. Companies are hiring part-time to avoid pensions. Even the US Post Office is playing that game. The heaps of regulation associated with this entire mess is crazy. And politicians want to raise the minimum wage to $15? All they will do is replace workers of a major scale. We already have robots and drones replacing workers because of regulation, pensions, and healthcare. Eliminate all that, and $15 is no big deal. If government wants to get more money into the pocket of workers, how about eliminating the income tax. Even if the lower income does not pay income tax and get the bilk refunded at year-end, the government has borrowed that money for free cheating them out of an opportunity to invest, and then they complain the rich get richer from investment while denying that opportunity to the lower classes.
When we look at the markets, each has moved to our key numbers are bounced. The Dow bounced off of the Month Bullish to close below it, gold held the critical number on a daily closing that would confirm the break under $1,000, and the euro also bounced from the key support. The markets are showing the lack of a decision to breakout or breakdown just yet as people remain confused. Nevertheless, the Dow did not crash and technically is holding still.
This is all reflective of the confusing trends as the economy is shifting. The jobs numbers on the one hand would say no rate hike. However, if assets continue to take off, the Fed will be accused of helping the rich get richer and will have to raise rates of be crucified by the socialists. So as we have been saying, this is the crazy times. All we can do is watch the key numbers and timing.
COMMENT: Here in France, they are blaming this flood on global warming. It seems that anything to do with weather they point to global warming and want more regulation.
REPLY: While France’s rainfall levels in May were the highest since 1873, it was the 1910 flood that was the most devastating. Before automobiles, Paris was flooded and remained so for two months. I fail to understand how raising taxes and piling more regulation will stop rain. But, what do I know.
Claude Frédéric Bastiat (b. 1801-1850) was a French, classical liberal theorist, political economist, Freemason, and member of the French National Assembly whose fundamental ideas have provided a foundation for libertarianism. In economics, Bastiat is remembered for his concept of opportunity cost and for introducing the parable of the broken window or the “glazier’s fallacy.” Essentially, a boy breaks a pane of glass in a shopkeeper’s store. The owner gets angry for it will cost him six francs. The argument is that this is good for the economy, for now the glazier profits by installing a new pane of glass, thereby increasing the flow of money within the system. Thus, the linear conclusion is to go around and break all the windows in town to stimulate the economy. But what if the glazier paid the boy to go break windows in town? Then it becomes fraud.
Bastiat argued that there was an opportunity cost that was not being viewed. The six francs the shopkeeper must spend on the pane of glass may have been spent in a completely different sector to stimulate that part of the economy. Some have taken the “glazier’s fallacy” and applied it to war. Granted, war is seen as good for the economy for it reduces unemployment (and population) and compels defense spending.
The Invisible Hand entered and compelled developments in weaponry, such as the creation of nuclear weapons. True, nuclear blasts ended the war in the Pacific. However, it is also true that further development led to nuclear energy for power. The opportunity cost cannot be determined so easily because the question of nuclear energy could have taken perhaps 10 to 20 more years to develop, yet it would have been possible to do so without war.
Bastiat proposition of the “glazier’s fallacy” showed that we could create all sorts of innovation, reduce population excess, and create full employment by just going to war with everyone, everywhere, just like the glazier who hires the boy to break all the windows in town. Does this really produce economic stimulus or is it merely diverting resources and destroying opportunity in other areas?
Governments create public works as their first move to stimulate the economy, but that is the mirror image of destroying everything. Fine, we can create bridges and roads few people travel on, but this comes at the price of diverting resources that would have created better economic stimulus through other, more permanent economic areas. Once the building, bridge, or road is finished, the workers have no permanent job. Such stimulation rarely stimulates the economy.
Roosevelt’s WPA worked, not for stimulation reasons, but because there was a shift in employment with the combustion engine displacing people from jobs in agriculture. Moving from horses to tractors in 1925 set in motion a major decline in employment, which the dust bowl took to a whole new level.
What will technology shifts do today? Unemployment is rising in the lower job markets where robots can replace such tasks. With robots, there are no pensions, health benefits, or people like Hillary yelling to raise the minimum wage to $15, which would only hasten the shift by raising unemployment sharply. As for war, government is already working hard to replace soldiers with robots.
The danger of this advancement to robots is that governments will use them as police and they need not worry about the loyalty of the troops. Revolution typically unfolds when the military turns against their master. The best way to prevent that is to eliminate humanity in the police force.
Bastiat’s “glazier’s fallacy” is still relevant today. The reason why is rather simple. We live and function according to a bell curve. Anything to excess destroys the host. Yes, breaking one pane of glass does not alter the entire economy. However, if the glazier paid the boy to go break all the windows in town, all other segments within the economy would suffer.
Everything within reason, yet government is never reasonable.
Well if you live in Portland, you better get your kids out of school. The Portland school board is against free speech. Portland public schools have banned all textbooks that cast any doubt on climate change. They are tampering with free speech and denying any scientific examination by converting climate change into dogma and propaganda. This illustrates that once you give any group power over another, they ALWAYS abuse it.
If you remember history, Hitler also banned books. The Nazis orchestrated a massive propaganda campaign to win the loyalty and cooperation of Germans on a major scale. The Nazi Propaganda Ministry, directed by Dr. Joseph Goebbels, took control of all forms of communication in Germany: newspapers, magazines, books, public meetings, and rallies, art, music, movies, and radio. Viewpoints that threatened Nazi beliefs or the regime were censored or eliminated from all media. About a hundred years before the advent of Hitler, the German-Jewish poet, Heinrich Heine, explained history: “Where they have burned books, they will end in burning human beings.”
On May 10, 1933, students and storm troopers came together on the Opera Square in Berlin with books and writings deemed “un-German” and set them on fire. It does not matter what century we are in; the people on this school board are violating the very purpose of civilization. Banning any such book that disagrees with their view that climate change is caused entirely by man renders them no different that the Nazi movement to force compliance with their own beliefs.
On June 23, the people of Britain will decide whether to exit (BREXIT) the European Union. The outcome of this historic vote will determine Britain’s future. This is an incredibly important vote for it will determine the fate of note just Britain, but also Europe as a whole.
This special “BREXIT” report answers many of the questions surrounding the vote and explores the historical patterns that have a tremendous impact upon where we go from here.
This vote will decide the fate of Britain and Europe, but it will also directly impact the likelihood of the trend in global currencies that will impact the United States and the fate of the dollar.
We cover Britain and its 309.6 year cycle as well as provide the forecast for the British pound and the Euro/Pound Cross rates.
Purchase the “Brexit” report — $250
(Watermarked Report will be emailed next week)
A strong opening hour (+1%) for the Nikkei on the back of a better than expected data release (Wages and Services) but by late morning had fallen back to unchanged. The second half of the day saw all core indices edge higher to close around 0.5% across the board. All eyes will be on the US markets later as NFP will be released ahead of the US open. As Asia closed calls were for an estimated +164k (previous was +160k) and for the rate to decline marginally from 5% to 4.9%, with the participation rate expected at 64.8%.
Europe has seen a steady start ahead of the US numbers but as we approach the release FTSE has gained 1%, CAC and DAX are both around 0.5% better whilst the IBEX trades marginally lower. Earlier in the day we saw Eurozone Retail Sales disappoint releasing at 1.4% against an anticipated 1.9%. From here it all changed:- Headline Number 38k; Rate is 4.7%
This was a total shock for markets and immediately we saw Bonds higher, Stocks lower, Gold rallied and the USD was hit for six. Many are calling it a fluke or a one-off number but it presents opportunities from all sides. FTSE did manage to close still higher but halved its gains to close +0.4%. DAX, CAC and IBEX all doubled their losses to close down 1% DAX and CAC and a 1.8% decline for the IBEX.
An interesting reaction for the US major indices after the huge NFP miss was followed by the ISM at 52.9 after last months 55.7; equally the employment component miss. We did see a weaker market but there was very little follow through selling. European stocks took more of a hit and US core closed only marginally lower. DOW, S+P and NADAQ all recorded losses of between 0.2% and 0.6%. VIX declined to 13.4 which also surprised many. In late US trading the Nikkei lost an additional 2% from the Asian cash close.
Dealers are questioning the possibilities that the FED still moves in June but the market re-priced the odds (from 55% down to 5% likelihood)! Bond market everywhere saw renewed buying and with enthusiasm for the belly (5yrs) and front end of the yield curve. US 2’s traded down to 0.77% (-12bp) with 5’s declining 13bp to 1.23%. 10’s closed 1.70% a decline of 10bp on the day. 2/10 curve closed +93bp. In Europe German 10’s traded at 0.065% a 4.5bp decline in rates; this closes the US/Bund 10yr spread at 163.5bp. Italy closed 1.33% (-4bp), Greece 7.13% (-1bp), Turkey 9.34% (-24bp), Portugal 3.14% (u/c) and UK Gilt 10yr closed 1.27% (-7bp).
Gold rallied as a safe-haven bid closing up 2.5% at $1245. It was the move out of US Dollars that many were talking about this afternoon as the JPY traded down to 107.65 (2.3% move on the day. The Euro also broke higher climbing two big figures to trade 1.1365 (2.2%) which saw the DXY close 1.76% lower at 93.88.
The Nonfarm Payrolls came in substantially lower than expected. The dollar dropped with gold rising, but the Dow did not crash on the open in the same percentage move. So what is really going on here?
The economy is in a transition phase that is the same as what took place during the 1920s. Back then, the combustion engine displaced workers in many fields. Suddenly, a tractor could replace 100 farmhands. Today, we have the internet wiping out stores as Amazon changed the face of bookstores and publishing. Robots are displacing workers on a major scale. In fact, Walmart is testing drones to take inventory in their warehouses. What would take a human one month to inventory can be done by drones in one day. There are no pensions, healthcare benefits, strikes, or lawsuits. Obamacare was the worst possible thing since healthcare costs have nearly doubled. This created the incentive to eliminate workers as much as possible.
Then we have brain-dead politicians wanting to raise the minimum wage to $15. McDonalds is testing touch-screen ordering systems that will displace workers. Many stores have adopted the same thing. In the northeast of the USA, we have a chain called Wawa, which is like a 7-Eleven. They have sandwiches and a lot more. You walk up to the touch-screen and place your order and the person working there makes the sandwich.
In Frankfurt Germany, the airport is more advanced than any in the USA. You place your passport in the machine and out comes the ticket. That is standard. Then you take your bag to the next machine that weighs it, prints out the strip you place on your bag, and off the luggage goes. You have seen no one.
The markets reactions to the Nonfarm Payroll is becoming old school. Corporate profits can rise with rising unemployment within a trend of this nature. Yes, people will find that they MUST improve their skills to find a job in the future. Schools are nowhere capable of addressing this shift for most still do not teach computer programming or emphasize computers in any way.
We have entered a period where what use to be down is now up. We are going to have to pay attention to what numbers really mean to ascertain the future trend.
HSBC is altering its oversight of safe-deposit boxes in Hong Kong. Governments are targeting safe-deposit boxes to look for cash that is hiding from taxation. HSBC, a U.K. bank, is now moving against claimed financial crimes by altering conditions for safe-deposit boxes. This is becoming a global trend. Anything of value that is stored in a safe-deposit box is now considered money laundering. Governments want their taxes and all the laws are changing to ensure they get their money.
