Mish's Global Economic Trend Analysis |
- Rand Paul Strikes Back at Lindsey Graham, Neocons: "In Reality, They Have Been On Obama's Side"; Reflections on the "Far-Wrong"
- Fruity Booty Trojan Horse; Some Truth in Pack of Lies; Greek Hypocrisy and Solidarity with Stupidity
- Mish's "Core Unemployment" Thesis vs. Bernanke's "Natural Unemployment" Thesis
| Posted: 08 Apr 2015 06:22 PM PDT On April 5, US Senator Lindsey Graham made the statement "The best deal, I think, comes with a new president. Hillary Clinton would do better. I think everybody on our side, except maybe Rand Paul, could do better." Graham made that statement on CBS' Face The Nation. Today Sean Hannity asked Rand Paul "What do you say to Lindsay Graham, who took a shot at you and said, everyone would have gotten a better deal?" Paul replied "Almost anyone in the Congress would better defend the Bill of Rights than this particular senator, so touche." His position on Syria is also correct. In the same interview Paul said "I was the leading opponent of bombing Assad [Syrian leader Bashar al-Assad]. Why? Because I thought Isis would grow stronger. And I guarantee you right now ISIS would be in Damascus right now ruling the whole country had we done that." However, note the accusations that Rand Paul, unlike his father, has flip-flopped on Iran. In 2007, Paul, then a surrogate for his father's presidential campaign, told radio host Alex Jones that "Even our own intelligence community consensus opinion now is that they're not a threat." Today he says "I'm going to keep an open mind." "I do believe that negotiation is better than war," Paul told TODAY's Savannah Guthrie in an exclusive interview. "What I would say is that there has always been a threat of Iran gaining nuclear weapons, and I think that's greater now than it was many years ago. I think we should do everything we can to stop them." The sorry state of US politics is that Paul cannot win the nomination if he too badly upsets the "far-wrong". That explains why he is now in favor of more military spending as well. Whether flip-flopping serves him well remains to be seen. He did stick to one important principle "negotiation is better than war". That is not only a correct position, it will serve him well if Obama pulls this deal off and Iran removes its centrifuges. Attack Ad Blasts Rand Paul Meanwhile, a "far-wrong" Attack ad blasts Rand Paul's support of Obama on Iran negotiations. Rand Paul Responds to Neocon Attacks In a response to the attacks, Paul says In Reality, They Have Been On Obama's Side, Made The Mideast More Chaotic WOLF BLITZER, CNN: I want you to respond to this new ad that came out yesterday apparently a million dollar buy by some Republican group out there. They said that basically charges that your foreign policy is very close to President Obama's foreign policy, and they specifically have a quote from you back in 2007. I'll play a little clip of it. ... Alright, I want you to respond to that, but specifically, the 2007 quote where you said that Iran was not a real threat to the United States. SEN. RAND PAUL: You know, I think the whole thing's sort of a farce and factually incorrect. In fact, PolitiFact said it was mostly false. When you look at the actual facts on the ground, I have been one of the leading proponents saying that any agreement that we come to with Iran has to come back and be voted on by Congress. I have been saying repeatedly that I'm skeptical for the main reason that Iran's Foreign Minister is now tweeting out in English that the agreement doesn't mean what President Obama says the agreement means. ... So, really, I think that people are desperate somehow to latch on to the status quo and so they put out falsehoods but there's really nothing about the ad that's correct. Even the statement from 2007, even in 2007 I did believe that Iran was potentially a threat and developing a nuclear weapon was bad, and now eight years later, which is a long time, I think the threat has become heightened. I think it's unfair to take statements out of context from eight years ago and then to basically lie about my position on Iran now. ....But I think the main thing about this is these are people -- this is sort of this neocon community and the neoconservatives have really never met a war they didn't like. And so what you'll see is these attacks saying, 'Oh, you're close to Obama's position. In reality, the neocons have been with President Obama on the war in Libya; they have been with President Obama on wanting to bomb Assad; and, they were really also for taking out [Saddam] Hussein. Everything that they have been for over the last decade has really been to make America less safe and to make the region more chaotic. So I think we could have a good intellectual debate about this, but attack ads like this that are mostly untrue if not entirely false probably don't serve the public very well. BLITZER: You want to name names when you are criticizing or blasting the so-called neocons? PAUL: Well, you know, if these people would release their donors then we would know who they are. But these are people who want to be in the shadows and have something secret and then put up a bunch of lies. But I think there are people you will see in the Senate who basically favored giving arms to Gaddafi and then the next year they were favoring giving arms to the so-called freedom fighters. But now it turns out that the war they had in Libya, which was supported by the neocons and President Obama, the war's a disaster; radical jihad has run amok in Libya. It's chaotic and I think we are more likely to be attacked by people organizing in Libya than we were before the war. So people need to think through when war's in our interest and when war is not in our interest. Video Interview Reflections on the "Far-Wrong" It is obvious by these attack ads that the "far-wrong" considers Rand Paul a threat. There was never a need to blast Ron Paul the same way because Ron Paul never had any chance of winning. In that sense, the attack ads are a sign of Rand Paul's odds of winning. Expect a long and very dirty Republican fight. If Rand Paul does win the nomination, don't expect any genuine support from the neocons. It doesn't exist now, and never will. They may support him publicly while making every effort to undermine him privately. The war-mongers would rather have Hillary Clinton than Rand Paul. After all, she is one of them on nearly everything but abortion. She too wanted to bomb Assad. She fully supported the invasion of Iraq. When it comes to warmongering, she is one of them, and they are one with her. The neocons can easily overlook the abortion issue if they can get what they really want: perpetual war. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Fruity Booty Trojan Horse; Some Truth in Pack of Lies; Greek Hypocrisy and Solidarity with Stupidity Posted: 08 Apr 2015 12:27 PM PDT Fruity Booty Trojan Horse Greek prime minister Alexis Tsipras and Russian President Vladimir Putin met today in Moscow. The EU feared a Trojan Horse deal in which Greece would gain economic aid from Russia in exchange for a Greek torpedo fired at sanctions. I would favor such a deal actually, given that sanctions are seriously misplaced and harm both sides. The way to better relations is negotiation and free trade. The result however, was as expected: lies and platitudes from both sides including a Pledge to 'Restart and Revive' Relations. Russian president Vladimir Putin and Greek prime minister Alexis Tsipras have made a pledge to "restart and revive" bilateral relations in a meeting aimed at boosting each other's political bargaining chips in their confrontations with the EU.Some Truth in Pack of Lies How many lies can one count in the above paragraphs? Of course, Putin seeks to divide the EU. And of course Greece is engaged in gamesmanship in an attempt to gain leverage over the EU. The one truth in all of this is Putin's statement "The best solution for all would be to stop the sanctions war." Solidarity with Stupidity Notice the hypocrisy of Greece. It asserts its right to engage Russia. And it admits sanctions are stupid, yet refuses to end them. Sanction rules of the EU are such that every country must agree to them. To end the stupidity, all Greece has to do is say they will not vote to extend them. Poof. European sanctions would end. Obama would scream because he would then be the only fool with them. Instead, Greece pledged solidarity with EU and US stupidity. Russia Readies End to Greek Food Embargo On the surface, all this meeting accomplished was an agreement to revive relations. I propose reviving them here and now. Yet, one has to wonder what Tsipras is saying privately. And in spite of what Putin said, Russia's economy minister says Russia Readies End to Greek Food Embargo. Russia has drafted a number of proposals that could end the embargo on food products from Greece, Russia's Economic Development Minister Aleksey Ulyukayev said at a meeting with Greek Prime Minister Alexis Tsipras on Wednesday.What do Russia and Greece Want? What Russia seeks is the end of sanctions. Greece would like that as well. But the current budget negotiations with the hated Troika are more important to Greece. Since Germany is highly unlikely to give in to what it considers blackmail, Greece may as well have done the right thing by saying it will not vote to renew sanctions. Of course, it's very well possible that Tsipras is threatening just that in private. If that's the "real" agreement with Russia (we will find out by this summer), perhaps the meeting did serve a purpose after all. And such an agreement would better explain statements made by Russia's Economy Minister vs. the obvious lies of Putin. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Mish's "Core Unemployment" Thesis vs. Bernanke's "Natural Unemployment" Thesis Posted: 08 Apr 2015 02:04 AM PDT Natural Unemployment In response to Republican questioning on monetary policy and employment, Bernanke replied the Fed Already Follows Policy Rule. "The Fed already has a rule," Mr. Bernanke said during a panel discussion at the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy. "It's committed to hitting a 2% inflation target and aiming for the natural rate of unemployment. These are rules." Of course, Bernanke failed to admit the rule makes no sense, and it doesn't. Leaving aside the ridiculousness of a 2% inflation target while ignoring asset bubbles, it is impossible for the Fed to target two things at once. For example: The Fed can set interest rate policy but then it has no control over money supply. The Fed can target money supply, but then it would lose control over interest rates. And the Fed cannot target employment at all. Thus his comment on "rules" is complete silliness. Moreover, there is no such thing as a "natural rate of unemployment" given central bank and government interference. If Bernanke wants to discuss rules, I propose
Making Sure You Don't Count Logic would dictate the unemployment rate would go up as a result of the three points above. It doesn't because the unemployment rate is carefully defined in such a manner that it doesn't. If you are in school and working you are in the labor force and employed. If you are in school and not working you are not in the labor force and therefore not unemployed. If you collect disability and are not working, you are not unemployed no matter how fraudulent the disability claim. Not employed and looking for a job on Monster or in the want-ads? Sorry, that does not count. You are not in the pool of the unemployed. The list goes on and on, and it is hugely arbitrary. The BLS makes every effort to ensure you are not counted as unemployed if you are not working. Don't blame the BLS, they are just following the rules. Right now, the BLS says the unemployment rate is 5.5%. Bernanke believes the "natural unemployment" rate may be lower than he thought previously. Of course, if you hand out enough free benefits, the unemployment rate would drop to zero given the way the unemployment rate is calculated. Employment vs. Non-Employment One is either employed or not. The "non-employment rate" calculation is easy enough: ((civilian population - employment) / civilian population) * 100. Let's define unemployment the same as non-employment. There are a few potential problems but numerous benefits with this method, so let's discuss them. Problems in Normalizing Unemployment Rates
Point number 1: The unemployment equals non-employment calculation is so simple that changes in the previous definitions of unemployment vanishes. Calculations of who wants a job, who is looking for a job, etc., vanishes, as does disability fraud. This is to the clear advantage of the non-employment = unemployment definition. Point number 2: With the aging workforce, boomers are retiring en masse. People live longer than they ever have. Many keep working because they want to. Many others want to work past age 65 but are frustrated by the lack of opportunities and stopped looking. Still others have built up a sufficient nest egg and retired early. Untangling all that is very difficult under current rules as what constitutes unemployment. Thus, in the non-employment = unemployment model, demographic skew enters into play. Point number 3: Starting in the 1960s, an increasing number of women entered the work force. Some women took jobs because they wanted to, others because they had to. Right now, it is safe to conclude we are not going back to an environment where following marriage, the male head of household works and the female stays home taking care of the kids. Point number 4: More kids than ever before are going to college. Many go on to higher education. But what about people returning to college not because they want to but because they are out of a job and feel like they need to? In the non-employment = unemployment model, education skew enters into play. However, those who would rather be working than in school are properly accounted for. Normalizing Unemployment Is it possible to normalize the above? I believe it is. Point number 1 is self-explanatory. It automatically normalizes previous definition changes via simplicity. In fact, it corrects for previous errors automatically. We address point number 3 with an assumption that we are not going back to an environment where following marriage the male head of household works and the female stays home taking care of the kids. A comparison of unemployment rates between 2010 and 1950 is invalid but comparisons from peak entry of women in the workforce going forward are valid. Points number 2 and 4 can be addressed via elimination of retirement and education issues. We do this by careful selection of the "core age group" as follows. New Definitions
The definition of "core unemployment" allows for six years of education and retirement at age 55, both generous allowances. Realistically, everyone else should be working except a relatively small (and constant) percentage of people who are genuinely disabled. If the "core unemployment rate" is on the rise, it represents one of four possibilities:
Six years into a recovery, I think we can safely remove point number four. Core Unemployment Rate 1948 to Present  In the above chart you can see the clear effect of women entering the workforce. The absolute bottom in the core unemployment rate was in April of 2000 at 18.07%. The second lowest rate was January of 1999 at 18.18%. The first dip below 19% was in February of 1998 at 18.97%. Let's zoom in on a time frame that catches peak entry of women in the work force. Core Unemployment Rate 1985 to Present  Let's now investigate some interesting developments since the year 2000. Specifically, let's compare March of 2000 with March of 2015. Core Employment March 2000  Core Employment March 2015  Core Employment March 2000 vs. March 2015 For age group 25-54, there were 1,791,000 more people employed in March of 2000 than in March of 2015 even though the population of that age group increased by 4,712,000! This is remarkable given age that group 25-54 factors out retirement and allows for six years of education. On a population-adjusted basis, age group 25-54 has a staggering 6,503,000 employment shortage compared to the year 2000. This does not even factor in part time employment. If we make the assumption that women in the workforce should stabilize, it follows that core employment should stabilize in the neighborhood of 80-82% and core unemployment should stabilize in the neighborhood of 18-20%. Age Group 25-59 Analysis In terms of normal retirement age, age group 25-59 might seem to be a better fit, but Fred does not have the Data. The BLS does have the data, but we have to manually add age groups together. Let's do a quick calculation of March 2000 compared to March 2015. Employment Subtotals 25-59 25-54 Employment March 2000: 98,292,000 55-59 Employment March 2000: 09,020,000 25-54 Employment March 2015: 96,501,000 55-59 Employment March 2015: 14,653,000 Population Subtotals 25-59 25-54 Population March 2000: 120,237,000 55-59 Population March 2000: 13,324,000 25-54 Population March 2015: 124,949,000 55-59 Population March 2015: 21,389,000 Employment and Population Totals 25-59 25-59 Employment March 2000: 107,312,000 25-59 Population March 2000: 133,561,000 25-59 Employment March 2015: 111,154,000 25-59 Population March 2015: 146,338,000 Unemployment Rate Age Group 25-59
Structural Unemployment Before the housing bubble burst, cyclical unemployment with each recession eventually corrected itself. We now have huge, unemployment (non-employment if you insist) that is not accounted for. To date, we could only see this in the declining labor force and participation rate. Yet, the participation rate itself is a poor measure. It is declining in part because of aging boomer demographics and in part because of the excess number of people who dropped out of the labor force. Disability fraud also entered the picture. Starting with a simpler definition of "unemployment" smooths all of those factors out. What we are left with is an economy that is roughly 6,503,000 jobs short of where it should be following six years of recovery (in age group 24-54 alone) . That's how bad things are, at a minimum, and for the core group alone. And that's precisely what is wrong with existing measurements and economic analysis touting the "recovery in jobs" and "new highs in employment". Many people tell me this does not "feel" like a recovery. For 6.5 million people in "core age group" 25-54 there has been no recovery. And that number does not account for other age groups, for underemployment (e.g. engineers working in restaurants), for part-time employment, or for declining real wages for all but the top 10-20% or so. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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