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Devastating Damage from the Pandemic Is a Long Line of Bad News

It’s time for my semi-regular roundup of where the economy has gone since the last roundup, and …

It’s a long line of devilish details

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The Great 2020 Bailout Bonanza

Let us speak of megabanks and global corporations, chicanery and swine, and speak of how the great have feasted in the troughs of trillions dumped out by the present administration, congress, and the Fed, for 2020 makes the bailouts of the Great Recession look like childhood snacks.

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Employment’s Recovery Road Comes to an End

Jobs didn’t get much worse in September, but they stopped getting better.
This is a tale of where the recovery road for the US economy ended. Unemployment is the crux of the Covidcrisis economic story. While jobs showed a little improvement in September, a little digging through the numbers reveals the return to full employment has started a turn toward the worse. (Not as bad as “worst,” but “worse” than May-July.)

The two warmest parts of the economy during the September calm that I wrote about in my last article (“A September to Remember“) were the job market and the housing market. I promised to cover those in detail in separate articles because they are more important than the other currents I brought up and more complex to where the headline numbers don’t quite lay out an accurate picture. In this article, I’ll uncover what lies below the surface of the employment numbers.

Let us dig deeper into the slightly positive jobs reports of September


At the start of September, MarketWatch gave the first hints that the jobs recovery was waning:

‘What’s concerning is that the pace of jobs growth is slowing down’ — economists react to August jobs report

The August jobs report on Friday showed the coronavirus-battered U.S. economy recovered 1.4 million jobs last month, with the unemployment rate falling to 8.4% from 10.2%….

“Yes we’ve added large numbers the last few months, but still digging out of a very big hole.” — Martha Gimbel, economist at Schmidt Futures….

“What’s concerning is that the pace of jobs growth is slowing down. If we had nothing but months like Aug going forward, it’d take another 8 months to get back to Feb levels, and longer to get back to our pre-COVID trajectory.” — Ernie Tedeschi, economist at Evercore ISI….

“Unemployment breaking the 10% barrier so decisively is a big psychological lift … . The hiring of Census workers significantly added to jobs, but there were other key gains in the hard-hit retailing sector. Unfortunately, the easier jobs gains are over, and now we’ll be battling permanent layoffs once thought to be temporary, bankruptcies, secondary layoffs and maybe major layoffs in the airline industry. Expect that starting this month we’ll struggle to drop the unemployment rate as much, and possibly see break-even jobs months and even backsliding.” — Robert Frick, corporate economist at Navy Federal Credit Union.

MarketWatch

And so it actually went in the month that played out.

New jobless reports stacked up like this at the start of September:

Zero Hedge

New jobless claims continued to drop, but they were still NEW jobless claims, coming in at a rate four times faster than seen before the Covidcrisis. Moreover, the entire tiny amount by which new jobless claims dropped is more than accounted for by the fact that our most populous state, California, stopped processing initial unemployment claims until it can resolve its the claims fraud it has identified.

Continuing claims also continued to drop but were still churning along at a much higher level than pre-COVID:

As Zero Hedge reported in conjunction with these minimally improving graphs, however, these numbers were “completely useless” and even misleading for a second reason bigger than California in impact:

There is just one problem: the latest claims report was nothing more than the latest goalseeked government propaganda, boosted this time by a brand new “seasonal adjustment.”

As Goldman explains, the DOL switched from a multiplicative to an additive seasonal factor in this release. If one had applied the historical, multiplicative, seasonal factor, the seasonally adjusted initial claims would have decreased by only 17k to 994k, 44k worse than expected.

Zero Hedge

That would have looked like this, according to ZH, presenting an actual slight rise in joblessness (and this is without factoring in the California situation):

It gets worse: when looking at the initial applications under the separate federal Pandemic Unemployment Assistance program which targets the self-employed, gig workers and others who don’t typically qualify for state programs, here the number jumped by about 152,000 to 759,000….

Add up all joblessness, and the grand total actually looked like this:

From trundling downward to hiking sharply back uphill (and that is still without factoring in the California situation because you can’t because the number of legitimate new claims isn’t even known by California.)

The fix is in

So, while the headline numbers from August that arrived in September seemed to show some improvement, the real story is that falling unemployment did more than come to a dead end, it turned back uphill:

The number of people applying for unemployment benefits could fall sharply when the government reports jobless claims on Thursday, but it won’t necessarily mean far fewer people are losing their jobs….

Why the change?

The agency’s traditional season-adjustment process worked fine when the U.S. experienced regular ups and downs in employment around the holidays or the end of the school year…. The claims numbers are adjusted to smooth out these normal swings in employment.

Yet the old approach to seasonal adjustments has been thrown out of whack by a once-in-a-century pandemic.

MarketWatch

So, they fixed it.

The new method of adjustment, based on an additive instead of a multiplicative approach, is complicated to explain.

Of course it is. It always is when the government’s old ways of jacking the numbers around are no longer working for them, so they have to calibrate in new methods to improve the results. And, just to make the improvement look better …

If it’s not confusing enough, the government won’t revise prior figures for jobless claims under the old method of seasonal adjustments.

Why bother correcting the numbers from the earlier part of the Covidcrisis when it looks better for August/September to leave the old numbers looking worse because of how adjustments had been made so the newly adjusted numbers in September shine all the more. Besides, the grunts doing all the crunching are short-staffed due to the crisis anyway.

But it gets worse

Those were the government numbers, but as you can expect the truth gets worse when you look at non-government reports that didn’t get the same adjustment modifications. ADP’s September report on new jobs for the month of August came in well below what economists had expected:

Private-sector companies added or regained 428,000 jobs in August, ADP said…. Wall Street economists had forecast an increase of 1 million private-sector jobs….

MarketWatch

So, to the charts of job losses above, we add the following chart of new jobs that opened up according to ADP:

MarketWatch

You can see the moves to the positive have nearly ended, and the total of all positives during reopening fell far short of making up for the nosedive we took during the COVID lockdown.

The economy has recouped fewer than half of the 20 million-plus jobs lost in the early stages of the coronavirus pandemic. What’s worse, a number of companies … have recently announced new layoffs with their businesses still struggling months after the pandemic began.

Eventually, when temporary job layoffs last long enough, they are rolled over into being considered permanent layoffs. As those rollovers into permanent status have kept tallying up, the total permanent job losses by the start of September looked like this:

Recovery Road’s dead end

The increase in permanent layoffs demonstrates what I’ve meant when I said during the summer that, by late summer, it would become obvious how much the economy had NOT recovered under reopening. The start of recovery, I said, would look like a “V.” For many, that would be enough to confirm their V-shaped recovery narrative. However, what mattered, which I urged you to look out for, was how far short the upside of that “V” ended compared to the downside. In other words, you only know the “permanent” damage when you have gone on long enough through the reopening to see where recovery stopped and what that leaves you with.

The permanent job layoffs are the people who go from COVID unemployed due to temporary shutdowns to permanently unemployed because their employers never reopened for business due to bankruptcies or to infeasibility under reduced occupancy mandates and other kinds of permanent business closures.

As a percentage of the total labor force, ZH reported the shortfall in the recovery looked like this:

Zero Hedge

We sputtered out less than halfway back to normal — more of a square-root than a “V” so far.

By October, The Hill summarized what we saw during the September reports this way:

The number of people who have joined the ranks of long-term unemployment has spiked to a record high in a worrying sign of the economic recovery’s health….

“Last week we saw the biggest spike in long-term unemployment since they started measuring long-term unemployment,” said Michele Evermore, senior researcher and policy analyst at the National Employment Law Project.

The number of long-term unemployed workers is expected to rise in the months ahead, something likely to be exacerbated by President Trump’s decision to scrap talks with Democrats on a COVID-19 economic relief bill before the elections. The talks were aimed at restoring at least some of the supplemental federal unemployment benefits that dried up at the end of July.

The Hill

While the president seems to have been deploying his “art of the deal” by walking away from a bad deal to get the other side to come down, it is not clear — yet — if that worked and will result in a deal of any kind. If not, the hurt under this huge overhang of permanent unemployment will be huge for the entire economy as unemployment benefits of various kinds and business relief programs start to expire.

Without a new relief package, small businesses hoping for another round of forgivable loans will be left in the dust. The travel, leisure and entertainment sectors, in particular, may face closures and additional layoffs as colder weather makes dining and entertaining outdoors difficult.

Even if the pandemic comes under control, it could take years to return to earlier employment levels.

“It’s bad news,” said Evermore. “It’s hard on people to be unemployed for such a long time. It’s hard on their mental health, it’s hard on their children’s performance in school, and it makes their employment prospects much worse in the future.”

In short, we’re not out of the woods. In fact, we’re barely beginning to see what the woods feels like as the evening shadows settle in around us with a long winter’s night still ahead.

Federal Reserve Chairman Jerome Powell on Tuesday cited the swelled ranks of the long-term unemployed as a primary reason more government support was necessary.

“There is a risk that the rapid initial gains from reopening may transition to a longer than expected slog back to full recovery as some segments struggle with the pandemic’s continued fallout,” he said in a speech urging Congress to pass more fiscal stimulus.

Thus the month of waning summer in September, turned notably and predictably worse by the start of October:

‘Massively concerning’ jobs report sends a signal that the economic recovery could be fading

Weaker-than-expected job growth in September sent a signal that the sharp economic recovery off the coronavirus shutdown may be hitting a wall.

The Labor Department reported Friday that nonfarm payrolls increased by 661,000 in September, held back by declines in government employment and an exodus of workers from the labor force….

As it stood, the total was a fairly wide miss from Wall Street’s expectation of 800,000. The unemployment rate fell more than expected to 7.9%, but that was mostly due to a sharp decline in labor force participation.

CNBC

So, the apparent terminus in our road back to full employment that we came to in August, played out as expected.

“This report is massively concerning. We are not where we need to be, nor are we moving fast enough in the right direction as we head into fall.”

Where does all of this leave us?

As you can see from this graph put out by Zero Hedge, it leaves us right back on track with a longterm decline in job growth that began long before the Covidcrisis at the start of 2019.

Only thing is, the economy had extremely low unemployment back when the total job openings started that downtrend, and now we’re back to that downtrend in total jobs that are available at a time when the economy has near-record unemployment. Not what you need to climb out of a deep hole.

That’s why we are now utterly dependent on government (fiscal) stimulus. Without those $1,200 stimulus checks, without the $600 augmentation of unemployment (now $300), and without the extension of unemployment eligibility beyond its normal limits, stock-market sentiment and especially consumer sentiment, as highlighted in my last article, will fall fast in light of the sustained massive unemployment problem laid out above.

For now, people are remaining hopeful that stimulus will carry us over the COVID chasm. So, consumer sentiment has remained fairly good. However, Jim Rickards, former senior managing director for market intelligence at Omnis, Inc., believes that hope is under dire threat due to these problems.

Businesses that were expecting a reopening and a V-shaped recovery have found that the reopenings have been delayed by new lockdowns and that the recovery is real but weak. We’re starting to see a second wave of layoffs as the Payroll Protection Plan money runs out and the economy doesn’t recover as hoped. Meanwhile, states and cities are also planning huge layoffs in the coming weeks as tax revenues dry up and the costs of riots and looting begin to add up.

The reality is, the economy’s in very bad shape. The idea that we’re going to bounce back out of this with all this pent up demand is nonsense. The data is already indicating we’re in a recovery, yes. But if you fall into a 50-foot hole and climb 10 feet up, you’re still 40 feet in the hole.

We’re not going to see 2019 levels of output until 2023 at the earliest. We’re not going to see 2019 low levels of unemployment until probably 2025. We’re not getting back there for three or four or maybe five years. So we’re looking at a long, slow recovery.

And that’s if things don’t get worse from here. But they could, especially if we get a deadly second wave of the virus.

Daily Reckoning

Matching up with my own views about the dead Fed, Rickards goes on to say,

The Fed can “print” all the money in the world. But if people don’t actually spend it; but save it instead, it won’t create inflation because there’s no velocity. And now, because of high unemployment and failing businesses, people are not spending money even when the economy reopens. They’re saving instead…..

And since consumption is 70% of the U.S. economy, the immediate aftermath of the pandemic will be slow growth, disinflation and even deflation (disinflation and deflation aren’t the same). So we’re looking at disinflation and deflation for now, despite all the money creation we’re seeing now. But that doesn’t mean inflation is dead. The inflation will come, just not yet.

Inflation will come when people lose confidence in the dollar and suddenly dump dollars for any hard assets they can find….

The Fed, as we have seen, is now reluctant to step in with any new programs or with ramping up its existing programs and has handed the baton off to the federal government. That is what Powell’s words were all about. That’s because the Federal government can put money (created by the Fed) directly into the hands of the people. Stimulating stocks isn’t going to help in the present economic crisis.

High inflation will begin if people lose faith in the dollar or if too much money winds up chasing too few goods, as could become the case if government stimulus keeps putting more money into the hands of the unemployed than they had when employed. So long as the government only offsets the losses, it won’t matter unless we also have a shortage of goods. We could enter exactly that scenario as unemployment or COVID causes a shortage of manufactured goods or breakdowns in shipping or closures of retail or if trade wars diminish supplies from overseas.

So, I’m not predicting high inflation will happen but saying be vigilant. Hyperinflation isn’t likely to happen with new stimulus money if it comes unless we also have a shortage of goods or if the stimulus money continues to exceed people’s losses. Then that money will bid prices up to get the goods that are in short supply.

That is the ugly road by which you can wind up with very high unemployment and high inflation at the same time.

The road to recovery has ended. That doesn’t mean we cannot keep recovering. It just means we’ll have to build more road as we go from this point on. The easy road has delivered all it is going to. Progress will be much slower and more problematic. It’s not even clear we have any leaders capable of mappings out a new road or of funding its construction, and meanwhile pitchforks and torches are running down the old road toward us.

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US Bankruptcies Busting Out to Match 2009 Peak Mean Trouble for Stock Market

Bloomberg reported this week that thirteen US companies (in the 50-million-plus size) filed for bankruptcy last week.

That brought the total for the big boys and girls this year to 117, which matches the record peak for the first half of a year set in 2009.

Already running consistently higher than last year before COVID-19, US bankruptcies just broke past their 2009 peak. | Source: Bloomberg

The slew of bankruptcies also set a record in the health-care sector which has seen thirteen bankruptcies this year, almost double the seven seen in the same period last year. Ironically a health crisis was not even good for the health of the health-care industry.

Some big names of companies that were already distressed have gone down — Hertz, J. Crew, J.C. Penney and Neiman Marcus.

The Numbers for Small Businesses Are Just as Bleak

The numbers above, however, scarcely compare to the number of bankruptcies for all US businesses from largest to smallest.

On a monthly basis, US bankruptcies jumped by almost half in May due to the pandemic, year on year.

U.S. courts recorded 722 businesses nationwide filing for chapter 11 protection last month, a yearly increase of 48%…. In May 2019, a total of 487 businesses filed for that type of bankruptcy….

On June 9, CBS News reported the next wave in the recession will be in bankruptcies due to the recent shutdown.

“This is a sign that already weak companies are succumbing to the lockdown recession,” Chris Kuehl, an economist with the National Association of Credit Management … said…. Businesses that were struggling before the pandemic “are starting to get in some real trouble.”

What Do These Bankruptcies Mean for the US Stock Market?

These bankruptcies, it should be noted, have been finalized in spite of all government and Federal Reserve bailouts. So, the stock market should not assume financial aid will prevent further economic damage.

On the contrary, as approved relief packages run out, one can logically expect the bankruptcy rate will go higher.

The stock market has remained oblivious to all of this, foolishly going as far as trading the value of some of these bankrupt companies up only to ride then down again.

But what does logic matter?

If the market keeps moving opposite of the business economy at this rate, shell corporations will soon be trading as trillion-dollar chips in the Wall Street casino.

Bankruptcies for businesses that don’t fully or sometimes even partially pay off their creditors eventually translate into bankruptcies for banks. Then we’re right back where we were in the abyss of 2009.

Yet the stock market is pricing upward to reach (and even beat in the case of the Nasdaq) its previous all-time highs. That is all based on the delusion of a V-shaped recovery from the pandemic.

These bankruptcies contradict that fantasy. Jobs lost in the restructuring of all these bankrupt companies aren’t coming back.

Bankruptcies don’t happen the same month big troubles hit. It takes time to prepare for filing. Many companies have, at least, a small amount of resources to weather through.

That means bankruptcies from the pandemic shutdown are just starting to flow through.

Consumer and Energy Sectors Lead the Bankruptcy Filings

The oil industry has weathered through tough times in recent years but has seen rises in bankruptcies each time, too. As described in this video, many companies in the industry are now preparing to file for bankruptcy.

Christ Atherton, president of EnergyNet states in the video,

I believe there’s 75 to 80 publicly traded oil and gas companies of size right now. Unfortunately, it could be half that number in a year or two.

Those businesses that are left, he says, will only survive by laying off people, and selling of assets.

That’s a dire prediction about future bankruptcies from an industry insider for the largest gas companies in the US.

Because of forbearance rules in place during the shutdown, oil companies have been able to forestall bankruptcy, but it is not at all clear that demand for gasoline will return to previous levels before forbearance expires.

Many businesses plan to stay with working remotely, which means less commuting. Most big events that involve a lot of traffic are shut down for the summer and maybe longer. So, Big Oil has a lot of pain to come.

Yet, oil and gas stock prices have gone up 50% in value since their March nadir for the year:

Graph of oil and gas stock prices rising in spite of rising bankruptcies
Oil and gas stocks rise, in spite of rising bankruptcies and a sour looking future. | Source: MarketWatch

Oil Isn’t the Only Industry Feeling Gas Pains

The same can be said for retail and restaurants where many businesses that shut down during the health crisis have not opened since the economy was officially reopened for business. That means they are probably down for the count.

Many restaurants that have reopened are struggling to survive under 50% occupancy reduction rules required in some states for social distancing. Some are not even filling up to their reduced occupancy limit because customers are afraid to return.

Restaurants run on thin margins and will not remain in business long with revenue down 50% or more.

The stock market has run far ahead of the economy, and the economy does not look like it has any intention of catching up. Instead, we will continue to see wave on wave of bankruptcies resulting in permanent job losses where businesses reopened.

(This article was written for CCN.)

Papa Powell Sees “Tremendous Human and Economic Hardship” (No V-Shaped Recovery)

Jerome Powell burst the stock market bubble by publicly acknowledging there will not likely be a “V”-shaped economic recovery. He indicated that it will take years for the economy to return to the recent levels … we experienced just a mere four months ago.

Seeking Alpha
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How to Invest in Oil and How NOT to Invest in Oil

With crude oil prices having gone negative, everyone and his sister is scrambling to figure out how to invest in oil and make bank where banks have failed: There must be a way to get someone to pay me to take oil off their hands so I can resell it when the world is normal again and make a killing, right?

This week’s story of crude carnage offers oil investment lessons from a small-time trader to the massive central bank of China. The little guy almost got washed out, but with a shot of luck made a narrow killing in the end — a bit too narrow for most, including him. At that same moment, the Goliath Bank of China, took a stunning hit between the eyes.

Trying To Make Money Off Oil, This Guy Almost Wound Up With A Basement Full

In fact, he almost wound up with every basement in his home town full of oil:

I bought a few contracts of WTI CL 05-20 Futures yesterday at the low tick of -$32. Started taking profits off as it rose, but let one single contract run to $-4.

It seemed easy to invest in oil when people are paying you to take it! That was until he realized that, when the contract closed at the end of the day, he’d have to take possession of the oil! Things could have gotten messy at that point because, while oil is measured in barrels, it doesn’t usually come wrapped in them.

Investing in oil futures contracts for West Texas Intermediate isn’t like buying bonds. You’re actually buying a commodity that you have to take physical delivery of in Cushing, Oklahoma.

“What’s that? You have a train pulling up to dump oil at the end of May? Not sure my swimming pool and basement will hold that much.”

Then there are those EPA spillage fees involved with improper storage. There are a lot of ways this deal could have gone more sour than the worst of crude.

update: Thankfully the CME/NYMEX has procedures for situations like this. Final contract settlement is done by cash settlement (minus a small settlement fee) for those not wanting to take physical delivery. NYMEX rulebook section 698103….

Edit 2: yeah that rule book I referenced ? That’s for a different product. Rip.

Fortunately, when the market became a lot less liquid than oil this week, this guy figured out how to invest in oil futures and actually made about $26,000. It was simple: he prayed for angels of mercy, and they delivered, and when he returned from his heart replacement surgery, he kindly put himself up as an example of what not to do:

Praise be to the Autism gods, I was able to exit my trade due to someone else entering the market and buying my contract…. Thank you all that have reached out offering your help to store this product. Best comment goes to … “love it when our austim [sic.] bleeds into the physical realm like this.”

He almost bled black.

Many investors experienced the impossible this week when storage in Cushing reached tank tops so oil had nowhere to flow, causing negative crude oil prices. Even people in ETFs, who never once thought about oil being a physical reality that must be dealt with because they were only trading paper (they thought), learned they had better think about reality.

Here’s a clear explanation of how this whole crazy contango went down and what to be careful of if you invest in oil so you don’t lose money like those who went long for too long:

Bank Of China Knows How To Invest In Oil And Still Got Tarred

China’s central bank was trying to roll over their oil futures contracts for May delivery in WTI, as they are accustomed to doing at this time of month. They play to make the big money by waiting to the last minute. Only this time, they found no one on the other side of the trade, and their angels weren’t so merciful. Smelling blood, those who did have storage outside of Oklahoma, waited until the BOC coughed up enough to make it worth rerouting the oil to the West Coast.

Bank Of China Sold Oil’s May Contract Into A Historic Implosion In Crude — And Retail Investors May Have Gotten Crushed

Chinese banks hawked wealth-management products tracking U.S. oil futures, marketed with flashy names like “crude oil treasure” to ordinary Chinese looking to find ways to invest their cash.

Banks and investors got slammed when banks offering these products found themselves in the unheard of position of having no one who would pay for oil because of the corona crush at Cushing. The had a lot of the current contracts to sell in order to roll into next month’s futures … or fill the banks’ vaults up with barrels of oil.

Bank of China … was rolling over West Texas Intermediate U.S. futures for May delivery on Monday, only a day before they were set to expire, unlike other Chinese banks who rolled over their oil futures at earlier dates, reported Caixin, citing traders familiar with the matter.

Oops.

Bank of China sold the May contract into a maelstrom of selling, with the now-defunct contract eventually settling at negative-$37.63 a barrel on Monday…. Angry retail investors reported they had lost all their principal, while some even said they now owed money to Bank of China.

For some perspective on how unusual this was, here’s the price of oil throughout modern history:

Think twice about how to make money on oil with this kind of price action
You can invest in oil and make big or lose even bigger. | Source: MarketWatch / Deutsche Bank

A barrel of WTI crude is effectively cheaper now than it was before cars were invented. In fact, an empty barrel of WTI became worth a lot more than a full one.

Big US Oil Funds Go for Broke

Before you decide to invest in oil to make more bank than the bank, consider the United States Oil Fund (USO), down 80% YTD.

Every day is now a scramble for survival for the largest oil ETF, the USO, which is desperate to avoid the liquidation that its smaller peer, the OIL ETN … succumbed to yesterday…. To survive, it will succumb to the lowest tricks in the book … puffing up its stock price using such cheap gimmicks as reverse stock splits…. As a result of the reverse share split, USO shareholders … will receive one post-split share of USO for every eight pre-split shares of USO they hold.

Maybe the sudden rise in share values will trick the dumbest retail investors into thinking they just made money with their oil investment, even though they have one-eighth the number of shares they once held.

Right now, that’s how you make money in oil. You didn’t know fools gold came in black, did you?

(This article was originally published on CCN)

Wall Street Bulls Battle the Bears in Mother of All Recessions

FedMed proved dead awhile ago with the whole Bulls team looking dead on the field, until Team Trump, the owner’s club, joined Coach Powell. Then Powell’s coaching team upped its game; and, finally, the Wall Street Bulls revived. “Big deal!” the Bears now yell. “Let’s get back to playing ball!”

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When Will I Get My Stimulus Check?

You want your money. Bankers are already fighting for their part of it. If it takes conflict to make a good story, the banker part will get you; but first let’s cover the basics of what you have coming to you and when:

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Bailout BONUS Bonanza Going Bonkers … Again!

The banks that are begging for bailouts still cling to their bonuses. To terrorize us into letting them keep their bonuses, the banksters are threatening to release the button on their suicide vests and blow themselves up by not taking the bailouts if they can’t have their bonuses.

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Virus Impacts an Economy Already in Decline before the Crisis

The soup lines hadn’t formed yet. Jobs had not even noticeably started to dry up, but they weren’t as easy to find anymore. You had to be angry to quit without having a better job firmly in hand. Stocks were climbing furiously above an economy that had been slowly ebbing away since summer. Sales were down for months, so revenues were down for months, and profits were down. Funding in the world’s easiest credit market — interbank repos — was extremely tight — so tight the Fed had to come to the rescue every single day for months, and the problem was only getting worse.

Such were the times before COVID-19 struck the world in 2020 like an asteroid from some far reach of the solar system crumbling the walls that already sat on cracked foundations, burying in ash a partying world that hadn’t yet figured out it was already slowly dying from its own internal decay.

Archeologic evidence of a society already in decline

Now we are left to dig up a modern Pompei and piece together what life was like before the explosion of the viral impact event. What follows are the last statistics to come in from the days just before the earth-shattering crisis hit. These are the final numbers that foreshadowed a nation’s deep decline.

The leading economic index rose a slight 0.1% in February, but that was before the coronavirus began to bring U.S. growth to a standstill…. “It doesn’t reflect the impact of the COVID-19 pandemic which began to hit the U.S. economy in full by early March,” said Ataman Ozyildirim, director of business cycles research…. “As a result, the economy may already be entering into a period of contraction.”

MarketWatch

Therein lies in the ash an encapsulated tale I’ve been telling of an economy that was already receding before the crisis hit. A rise so small implied a drop in GDP growth of almost 50%, which would have taken GDP growth down in the present quarter from its nearly yearlong stagnation at 2.1% to about 1% without any viral impact.

As one reader noted, in comment to that article,

This slight rise in leading indicators does not change the unfavorable trends in our economy that evolved over the last year (ever since the temporary, tax-cut boost to our economy wound down).

The fix was in, and it didn’t fix anything.

Services had also been in decline since mid-summer but plunged below the recession mark (50) in February of 2020 just as the coronavirus asteroid hit the US in the second half of the month:

Consumers were already pulling back and tightening their belts to live within their means as early as January when no human thought was being given to the coronavirus:

Revolving credit, namely credit cards, declined at a 3.3% annual rate in January. That’s the second decline in the past three months…. Consumer spending has fueled the economy in recent quarters as business investment has retreated.

Credit-card borrowing declines in January, second drop in past three month

With consumers backing off, and consumers being the only thing that had been keeping the economy barely out at recession water level, the economy’s submersion was nearly certain without the tsunami from the impact event that rapidly finished the job.

In memory of the world as it was before the virus struck

These are the last vestiges of indicators that came in before the crisis hit. They tell of twilight times slowly settling over a world soon to be struck with an exogenous event that no one saw coming.

The US and global economies were declining due to insidious problems that existed deep below their surface — problems often described here like vaults full of collateral that didn’t actually exist because the same collateral had been used several times for concurrent loans; corporate accounting that had crept for years away from a high standard of days gone by called GAAP; a cavern of cheap debt carved out beneath corporate earnings that were jacked up by use of that debt in a world where the cost of that debt was about to soar; a mountain of leveraged loans and bonds that were teetering already on being downgraded to junk; cesspools of corruption that were never dealt with after the last crisis; major global banks like Deutsche Bank and Wells Fargo that had been sinking into their own corruption for years; the largest gulf between the rich and the rest the nation had even known; quarter after quarter of stagnating economic growth funding a national deficit that was already ballooning at a rate of a trillion dollars every year. If measured as a pile of tightly compressed dollar bills, each year’s US deficit would reach a quarter of the way to the moon … right along the unseen incoming asteroid’s path!

It was into that decaying, sloppy, insensible world that the virus crashed with the impact of a large meteor that was pulled by earth’s gravity into its atmosphere, lighting space rock on fire and exploding on impact. The cracked foundations of civilization’s structures immediately crumbled, and its high towers toppled faster than its citizens ever thought possible. Crowded highways became nearly vacant. Those who had been coming and going about their business as if nothing could hurt them, ended their business activities overnight, and citizens isolated themselves by sheltering in their homes. Most of society waited on hold as numerous states and nations entered official lockdowns — waited to see how great the destruction from COVID-19 would be.

Opening quote from Earth Abides

The Bailout Bonanza is Back! (Pt 3: Boeing Goes Boing Like a Bad Check)

Boeing is a prime example of bailouts going bonkers. It flew to the government’s fuel pumps fast like a jet plane to beg the government for relief on the basis that the airline industry was disproportionately hit by something no one could see coming.

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