Non-Recovery Alert

Reading time: 2,800 words, 10 pages, 7 to 11 minutes.

The ass media’s “Recovery” propaganda is on steroids lately. As I’ve long said, we cannot pretend our way out of trouble. That the ass media propaganda machine is trying so hard to deceive us is an indication of how bad things are really getting.

Logistics gives us an interesting perspective because it’s the lifeblood of an economy. Once called Physical Distribution, logistics manages and controls the movement of stuff (goods) from the lowly necessities of life like groceries to discretionary luxury goods like diamonds and Lamborghinis and everything in between.

Logistics is a very reliable economic indicator. When people run out of money and their credit cards are maxed out, they don’t buy stuff. This falling demand reduces the volume of logistics and says a lot about the direction an economy is headed. There are two charts below and they’re both very ugly. The first is U.S. logistics, the second is global.

This is what Zero Hedge says in Freight Shipment Volumes Plunge To Lowest In Two Years about the U.S. logistics chart below.

“Freight shipment volumes are rather obviously seasonal, but as Bloomberg Brief notes, the Cass Freight index shows shipment volumes have slumped for four consecutive months and are back to their worst levels in two years. This is the first year-over-year contraction since the 2007-2009 Great Recession – and places the reality of the dismal Q4 GDP print in context. If that wasn’t enough good news about the real economy, the cyclicality of the shipments are losing momentum (i.e. each seasonal rebound in the last three years has been weaker – just as we saw in the lead up to 2008) and freight expenditures fell in January leading to a 1.6% drop over the last year – compared to a 27.2% rise in January 2011, and 22.2% rise in January 2012. As Cass noted, these volumes will not be enough to “have a significant impact on the unemployment numbers.”

“Cass Shipments (upper pane) are back at two-year lows but critically the momentum of each seasonal cycle (lower pane) has been weaker and weaker in recent years…”

20130219_shipment Zero Hedge

The bottom (blue line) chart above is the important one. It measures Rate of Change (ROC), an important technical analysis that measures the speed at which something changes to determine momentum. Thus, ROC is a reliable leading indicator. The red, downward pointing arrows for 2010 to 2012 are similar to 2006 to 2008 that presaged the last recession which officially began December, 2007. As a leading economic indicator it forecast the downturn more than a year in advance. The ROC is saying again indicating the U.S. has gone into another recession. In fact, so has the entire global economy as measured by the BDI below.

The Baltic Exchange Dry Index (BDI) is also a very reliable leading indicator. It measures global shipping costs. Again, falling demand reduces logistics volume and results in lower cargo freight rates as measured by the BDI. This too is a very ugly chart because it is ‘bottom bouncing’ i.e. no sign of improvement. This too presages another world-wide economic downturn despite the ass media’s incessant bullshit.

bdi_log 3-06-13

The bottom yellow line is what technical analysts call ‘resistance’. This typically is an area that is difficult to break through. Ship owners will be blowing their brains out because this is below their cost i.e. they’re losing money operating their ships.

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DOW Record! NOT Including Inflation

The central bank manipulated DOW stock index reached a nominal record high and the ass media is in its glory. Break out the party hats! However, the key word is ‘nominal’ meaning NOT adjusted for inflation. Adjusted for official inflation it is still down 16%. I’ll give Bloomberg credit for at least getting the official inflation picture in asking
“A REAL Record High for the DOW?”

However, adjusted for REAL inflation, the DOW is a pathetic joke that the brainless ass media are not allowed to report.

Canada also fudges the Consumer Price Index (CPI) and has been for decades. In the 1980’s Winnipeg’s Free Press had a ‘filler’ – a brief news snippet used to fill a blank space between articles before computers were used to stretch a story. It said that Stats Canada had removed bottle washers from the ‘Consumer Basket of Goods’ because the price, having gone from 79¢ to $1.49, was “distorting the CPI”. Hey people, if the inflation rate for bottle washers is 88% then the inflation rate for bottle washers is 88%. Period!

It is telling that, although that news snippet came from the ass media, there was NO commentary about it. Nothing! Complete silence! Investigative journalism, it seems, died decades ago.

Governments use many techniques other than the above outright manipulation to fudge the official inflation rate. ‘Substitution’ replaces a higher priced item with a lower priced item. If the price of steaks goes up a lot, they assume shoppers switch to lower priced chicken. “Hedonics” is another way they manipulate the numbers. An item’s price goes up but the government fudges the number lower to account for an increase in quality. By overstating quality improvements, governments and businesses keep their pensioner and employee cost-of-living adjustments down so consumers have less to spend and our standard of living declines.

The Globe and Mail reported on this a long time ago. We still have the occasional investigative reporting but it’s few and far between and the Globe is Canadian and considerably more reliable than its U.S. counterparts.

In any case, our so-called slow economic growth is a pathetic lie. If economic growth is a paltry 2% and the REAL inflation rate is 7% then 2 minus 7 equals negative 5. Canada’s economy is contracting by 5% a year. The U.S. is worse at about 7% annual contraction. What this means is that government’s inflation statistics are fudged by measuring against a declining standard of living.

And, you wonder why your paycheck runs out before the month does? Here’s an amateur video that gets the point across

True inflation rate in Canada from 1995 to 2010 is 7 % per year

For more detail, see Viable Opposition’s The Everyday Price Index – A Superior Measurement of Inflation.

When you consider the power of compound interest, our economies are in serious decline.

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U.S. Jobs Report a Joke

The ass media’s headlines on Friday, March 8 were all screaming better employment numbers and nothing but good times ahead. Yay, break out the party hats again and let the good times roll (there really needs to be a sarcasm font!)

Here’s a smattering of these headlines:

U.S. economy adds 236,000 jobs in February
MarketWatch“The U.S. added 236,000 jobs in February and the unemployment rate fell to 7.7% from 7.9%, marking the lowest level since December 2008, in another sign that hiring and economic growth are gaining momentum.”

US adds 236,000 jobs as unemployment drops to 7.7%
Financial Times“The US added a much stronger than expected 236,000 jobs in February and the unemployment rate fell to 7.7 per cent, the lowest in more than four years.”

U.S. Added 236,000 Jobs in February; Unemployment Falls to 7.7%
New York Times“The American economy added 236,000 jobs in February as the unemployment rate fell to 7.7 percent, the lowest level in more than four years, the Labor Department reported Friday.”

CNN“The U.S. government said Friday that the economy added 236,000 jobs in February – much stronger than the prior month.”

Ok, enough with the bullshit, now let’s look behind the headlines at the sordid details – after all, this is a bunk buster blog. Before going any further, do you notice how ‘cookie cutter’ these headlines are? You could switch the opening sentences among any of the headlines and it would make NO difference.

Why? Because there is no reporting in the lame scream media. All the ass media does is repeat the government’s propaganda releases. The only real news you’ll find is on alternative news blogs and even there you need to take them with a grain of salt and a dose of skepticism. My next project will post a list of alt blogs that I consider to be fairly reliable. Save your brain; stop watching so-called TV news and read the real news on these alt news blogs.

Here’s a graph going back to 1947 showing the duration of unemployment. If the last “Great Recession” supposedly ended in 2009, then why is the duration of unemployment so long? Because the recession NEVER ended except by using these fudged inflation statistics. Using REAL inflation numbers, GDP is still shrinking. We’re in a 20 year depression.

duration unemployment

Here’s what Viable Opposition says in Work in America – A Long Time Comin’

“If the Great Recession had been a “normal” economic contraction, the mean length of time that a worker would be out of work at this point in the economic cycle would be around 15 weeks. Instead, we find that the current mean is 35.3 weeks, nearly 2.5 times as long as it should be.

“Not only that, but to heap insult upon injury, of the total unemployed, 36.1 percent have been unemployed for 27 weeks or longer, a level that is nearly twice as high as what it should be at this point in the economic recovery as shown here.”

percent unemployed

Viable Opposition goes on to say, “So, when you read headlines in the mainstream media or listen to the propaganda spewing forth from central bankers and politicians, keep in mind that the data behind the headline statistics is not always a pretty sight. In this case, it means a dramatically extended period of suffering for millions of American families who are spending very long periods of time without work.”

Another factor to consider is the quality of new jobs rather than just the quantity. Most new jobs are low wage McJobs in the service industry. Since 70% of western economies are consumer driven, this doesn’t add much discretionary income to economies. How can economies recover if few people have money to spend?

Yet another factor is how many people now need more than one job to make ends meet. An increase in multiple jobholders may mean more jobs but not necessarily more people working. In fact, this is what is happening as Zero Hedge looked behind the scenes:

In February Multiple Jobholders Rose By A Record, As Full-Timers Dropped, Part-Timers Increased
“… the number of multiple job-holders rose by a massive 340K, which just happens to be a record. One wonders: how many actual people got new jobs, as opposed to how many qualified single individuals ended up getting more than one job in February in order to boost that much needed weekly income to sustainable levels.“

Multiple Job Holders

He goes on to say that the number of full-time jobs actually declined while part-time jobs increased. “Those who track the quality composition of the jobs, as opposed to just the quantity, will know that the part and full-time jobs breakdown has long been a major issue. And not unexpectedly, in February according to the Household Survey, the number of full-time jobs declined by 77K from 115,918 to 115,841. The offset: a jump in part-time workers which rose from 27,467 to 27,569, or 102K. Part-time jobs, for those who are unaware, are “jobs” only in the broadest of definitions.”

Whenever I’m out of town, I like to chat up cabbies, waitresses, bartenders and other service people. Amerikans seem to open up when they hear my Canadian accent (yes, Canadians; we DO have an accent). Throughout my six trips to the U.S. in 2008, ordinary working Amerikans expressed fears about their economy while their leaders blithely buried their heads in the sand or shoved them up their nether regions. I have a great deal more respect for ordinary working people than I do for our idiotic Powers-That-Be that got us into this economic mess and are still denying their complicity.

Even when I travel within Canada, I chat up people. I must have had an astounded look on my face talking to a Toronto cabbie when he proudly told me that he held three jobs, his wife two and each of his children at least one to help pay for their mortgage. It’s not easy finding humor in this, but the YouTube video below might give you a chuckle.

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Shadowstats Headlines

John Williams of Shadowstats.com uses the same methodology that governments once used to measure things like inflation and unemployment before governments began fudging and manipulating their dubious statistics which the ass media dutifully repeat without question.

If you have the stomach for it, here are Shadowstats.com headlines so far this year.

January 5th, 2013
• Fiscal Crisis Continues Unabated; Last-Minute “Cliff” Deal Did Nothing to Reduce or Contain Budget Deficits
• No Way of Avoiding A Recession That Already Is Underway
• December U.3 Unemployment Rate Actually Rose by 0.1%
• ShadowStats Unemployment Estimate at New High
• December Unemployment: 7.8% (U.3), 14.4% (U.6), 23.0% (ShadowStats.com)
• December M3 Annual Growth at 3-1/2 Year High

January 11th, 2013
• Official Inflation-Adjusted Merchandise Trade Deficit Hit 4-1/2 Year High
• Implications for Weaker Advance-Estimate of 4th-Quarter GDP
• Consumer Structural-Liquidity Issues Continue

January 15th, 2013
• Merrily We Roll Along, Towards Hyperinflation
• U.S. Sovereign-Solvency Concerns Could Resurface Quickly in Global Markets
• December Retail Sales Gain Was Statistically Insignificant; Activity Was Blurred by Storm Impact and Unstable Seasonal Adjustments
• Despite Stable Oil, December PPI Was Hit by Lower Food and Gasoline Prices

January 17th, 2013
housing starts

• Official Quarterly Production Growth Rates for Second-Half 2012 Were Weakest Since Recession Trough in 2009
• Corrected for Understated Inflation, Real Retail Sales and Production Show
Post-2009 Stagnation Turned into Contraction in Second- or Third-Quarter 2012
• December Year-to-Year Inflation: 1.7% (CPI-U), 1.7% (CPI-W), 9.4% (ShadowStats)
• December Housing Starts Gain Still Not Statistically Significant Despite Some Boost from Hurricane Damage

January 17th, 2013
• Actual 2012 Federal Budget Deficit Hit $6.9 Trillion

January 25th, 2013
• Congress Tries to Buy More Time to Balance Fiscal Conditions
But Patience of Global Markets is Finite
• Ongoing Economic Downturn Means Budget Prognostications Are Overly Optimistic
• QE3 Begins to Surface: Monetary Base at All-Time High, Broad Money Growth Rises

January 30th, 2013
• Although Recovery Never Took Place, Official Double-Dip Recession Likely Will Be Clocked from Second- or Third-Quarter 2012
• Reported Contraction in Real GDP Designed to Discourage Fiscal Reform?
• Fourth-Quarter Nominal GDP Growth Collapsed to 0.46% from 5.91%
• Real Durable Goods Orders Contracted Year-to-Year, Despite Temporary Orders Boost from Year-End Defense Spending

February 2nd, 2013
• Positive Benchmark Revision to Payrolls Overstates Current Circumstance
• Annual Upside-Bias in Birth-Death Model Increased to About 620,000
• January Unemployment: 7.9% (U.3), 14.4% (U.6), 23.0% (ShadowStats)
• Month-to-Month Headline Unemployment Rates Are Not Comparable
• January M3 Year-to-Year Growth at 4.5%

February 8th, 2013
• Little Changed for the Year, 2012 U.S. Merchandise Trade Deficit Still Reflected Cumulative Loss of 6.6 Million Jobs
• December Trade Reporting Suggested Upside Contribution to First Revision of Fourth-Quarter GDP

February 13th, 2013
• Retail Sales Continued to Stagnate, Reflecting Intensifying Structural Liquidity Issues for the Consumer

February 15th, 2013
• Annual Production Growth in January Slowed to Pre-Recession Levels
• Monthly Production Decline Was In the Context of Continued Volatile and Unstable Reporting
• Production Benchmark Revision in March Should Show Weaker Activity Than Previously Estimated

February 20th, 2013
• January 2013 Housing Starts 61% Below High of January 2006
• Annualized January PPI Headline Inflation of 2.5% Was 7.1%, Before Seasonal-Adjustment Muting
• Revised Seasonally-Adjusted Inflation Data Suggestive of Instabilities in Monthly Headline Reporting

February 21st, 2013
• Real Earnings Fall Year-to-Year
• January Year-to-Year Inflation: 1.6% (CPI-U), 1.5% (CPI-W), 9.2% (ShadowStats)
• Aside from Not Measuring Constant-Standard-of-Living Inflation, The Chained-CPI Is Too Unstable for Setting Cost-of-Living Adjustments
• Outlooks Unchanged for Ongoing Economic and System-Liquidity Crises and for Inflation Crisis to Develop in Year Ahead

February 28th, 2013
real durable goods

• Fourth-Quarter GDP Revision from 0.1% Contraction to 0.1% Growth Was Just Statistical Noise at Already Insignificant Levels
• Official Double-Dip Recession Should Be Clocked from Second- or Third-Quarter 2012
• Ongoing Year-to-year Contractions in Real Durable Goods Orders Signal Renewed Economic Downturn

March 7th, 2013
• The Dow Retook Its October 2007 High on March 5th; Gold Was Up by 115% for the Same Period
• Trade Deficit Deteriorates Anew
• Inflation-Adjusted Construction Spending Shows No Recovery
• Structural Consumer Liquidity Issues Continue to Constrain Economic Activity.

March 8th, 2013
– Reflecting Ongoing, Seriously-Flawed Reporting, Neither the Jobs Gain Nor the Unemployment-Rate Decline Was Meaningful
– February Unemployment: 7.7% (U.3), 14.3% (U.6), 23.0% (ShadowStats)
– Consumer Credit Outstanding Remained Stagnant, Net of Federally-Held Student Loans
– Slowing Growth in M3 Suggests Mounting Systemic Stress, As Monetary Base Continues to Soar.

I’ll end with the usual mantra:
1) We cannot borrow our way out of debt
2) We cannot spend our way to prosperity
3) We cannot pretend our way out of trouble

Stay tuned. It’ll get worse.

Are you prepared?

Gerold
March 10, 2013

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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4 Responses to Non-Recovery Alert

  1. GBV says:

    Oh how I sometimes despise CPI!
    Even without hedonics, substitution and weighting I really do believe its an inferior metric for measuring inflation/deflation.

    What is the value of measuring *price fluctuations* to suggest that represents the overall inflation/deflation within the economy? How can we possibly ever know what *basket of goods* actually represents the average consumer and can be aggregated out over the entire economy (even if we knew that basket of goods, its still just an average or perhaps median and does not speak to the economy as a whole)?

    If we truly wanted to know how inflation/deflation is changing year-to-year, we’d have a calculation along the lines of something like this:

    [Assets & Consumables] – [Money & Debt] = Deflation (-Inflation)

    Or to be more mathy:

    ((EA + Ap – Add) + (EC + Cp – Ccd)) – ((EM + Mi – Md) + (ED + Di – Ddr)) = Deflation (-Inflation)

    Where by:

    EA = Existing Assets (value of all existing assets from previous periods)
    Ap = Assets produced (value of additional assets created for that period)
    Add = Assets depreciated/destroyed (reduction to assets by depreciation/destruction for that period)
    EC = Existing Consumables (value of all existing consumables from previous periods)
    Cp = Consumables produced (value of consumables we produced for that period)
    Ccd = Consumables consumed/destroyed (reduction to consumables by consumption/destruction for that period)
    EM = Existing Money (value of all issued money and money-like products from previous periods)
    Mi = Money issued (value of additional money and money-like products issued for that period)
    Md = Money destroyed (reduction to money and money-like products by destruction for that period)
    ED = Existing Debt (value of all debt and debt-like products from previous periods)
    Di = Debt issued (value of additional debt and debt-like products issued for that period)
    Ddr = Debt defaulted/retired (reduction to debt and debt-like products by default/retiring for that period)

    (hopefully that makes sense; math is not my strong suit)

    Granted, it would be very difficult (impossible?) to know all these values unless you lived in some sort of 1984-style command & control society where no money/debt was issued without the government knowing and nothing was produced under the radar (but then the government is too powerful and would probably fudge the numbers anyways, and the people would just believe it, a la 1984). But a calculation along these lines would be much more accurate as to the inflation/deflation experienced for any given period by an economy.

    CPI could still be used, but it should be used to measure the *cost of living* for people. If cost of living is going up, yet inflation/deflation is stable, then something in happening within the economy to adjust prices to those specific consumer goods (e.g. if the total value of beef production drops sharply, but the total value of chicken production increases to offset the beef losses and all else remains the same, than the economy would have experienced no inflation/deflation yet prices of beef would be much higher than chicken until production returns to normal levels). Those type of specific issues should be addressed by well thought out *government policy* as opposed to interest rate manipulation and/or issuance of debt to resolve the problems. In fact, lowering interest rates and/or issuing more debt doesn’t actually address the problem at all – it just puts cheaper and/or more money into the system to drive prices up as more consumers chase after the same scarce products!

    (sorry Gerold; know I’m preaching to the choir there on interest rates & debt…)

    Of course, asking that from government is silly on my part – crafting good government policy that benefits the people and recognizes its implications on the future is the *hard road* or *hard work* choice where as interest rate manipulation, debt issuance and money issuance are the *easy road* or *easy work* choices. And we live in a society of lazy people who constantly choose the easy road, so it’s no wonder we have politicians and central bankers who do likewise.

    Cheers,
    -GBV

    • gerold says:

      Yup, there you go preaching to the choir again 🙂

      That’s an interesting formula for measuring CPI based on the assumption that increase or decrease of the money supply produces price inflation which it does, eventually. It’s not doing it now because so much is parked in banks not being lent or writing off bad debts but it’s only a matter of time before we have hyperinflation of prices and continued deflation of asset values.

      We both know governments aren’t going to do the right thing and fix the very problems they created in the first place. Only in a perfect world …

      What I’m trying to do is alert people to the fact that we are in an economic depression as defined by 5 quarters of economic contraction. Using ShadowStats REAL rate of inflation, Western economic GDP has been shrinking since the Great Recession officially started in December 2007. That more than five quarters; in fact that’s more than five years.

      It’s a Stealth Depression. The modern bread lines and soup kitchens are invisible because they’re now in grocery stores with food stamps and welfare and what Jim Sinclair calls MOPE (Management of Perspective Economics); in other words propaganda. Or as Satyajit Das said several years ago, governments know they cannot stop the collapse; all they can do is try to engineer a soft landing. Good luck with that!

  2. Fred says:

    Thanks for consolidating all this info for us !

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