The Mess That Greenspan Made - Part 21

April Retail Sales Disappoints

Markets will likely cheer the news from the Commerce Department that U.S. retail sales flat-lined in April (when most analysts were expecting solid gains) as this makes it less likely that the Federal Reserve will raise interest rates anytime soon.

As shown above, the result for April was slightly negative, but rounded to zero and, when combined with the report on business inventories in the next hour or so should make for an exciting update to the Atlanta Fed’s closely watched GDPNow forecast at 10 AM.

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Wednesday Morning Links

Oil glut worsens as OPEC market-share battle just beginning – Reuters
Greece Back in Recession as Bailout Impasse Drains Economy – Bloomberg
US considers military patrols of South China Sea – Guardian
Ruble-yuan settlements booming, set to reshape global finance – RT News
China April Economic Reports Signal PBOC Has More Work Ahead – Bloomberg
Chicago credit rating plummets to junk status following pension ruling – Chicago Tribune
An Incredible Time-Capsule View of One Downtown’s Development – Atlantic
Christians drop, ‘nones’ soar in new religion portrait – USA Today
American Religion: Complicated, Not Dead – The Atlantic
‘Many powerful people don’t want peace,’ Pope tells children – RT News
Rand Paul plans Patriot Act filibuster in Senate – Yahoo!
Paul Krugman’s Pretense of Economic Knowledge – National Review

Stocks: Get ready for a rebound – CNN/Money
When both bonds and equities sell off… – Economist
Fed Officials Tell Markets the Training Wheels Are Off – WSJ
Main Street Portfolios Are Investing in Unicorns – NY Times
Bears Beware: Rout Puts Investors on Wrong Side of Central Banks – Bloomberg
Why ‘rate rage’ may not be coming for this market after all – MarketWatch
Gold steadies on weaker dollar, higher shares limit gains – Reuters
Silver Bullion Buying Outstripping Supply As JP Morgan Buys – GoldCore
Goldmine cheaper than Sydney house as boom ends in fire sale – Mineweb

The U.S. economy has left behind 20 million Americans – MarketWatch
Wage growth may be on tap as more Americans quit jobs – Reuters
U.K. Election Isn’t a Win for Austerity – Bloomberg
Bank of England slashes its UK growth forecast – Standard
For the first time in five years, the euro zone’s largest economies are all growing – Quartz
Brazil’s $900 million World Cup stadium is now being used as a parking lot – Vox
Oil, Politics Pave Path Toward $9 Billion Default in Puerto Rico – Bloomberg
With Manhattan Luxury Property Hitting Highs, Some Fear Air Is Getting Thin – WSJ
Foreign Money Is Pouring Into U.S. Real Estate, and It’s Not Just Houses – Bloomberg
The Problem with Central Banks: They Become the Greater Fools/Bag-Holders – of two minds
Fed said to have emergency plan to intervene if U.S. defaulted on debt – Reuters


U.S. Debt and Equities Since 1981

Doug Noland’s weekly commentary that provided some hard numbers to back up Bill Gross’ recent claim that the end may be nigh for the global financial system as we know it seemed to just be crying out for someone to make a stacked bar chart or two, so, voila!

Of course, for data points that span 33 years, you have to somehow adjust this to take into account population growth and inflation. Looking at stocks and bonds as a percentage of GDP seems like the right thing to do here, so, again, voila!

Less dramatic, to be sure, but equally disturbing when you think about it.

I mean, what, aside from the grotesque multi-decade expansion and current size of the global financial system itself, is so different between 1981 and 2014.

Tuesday Morning Links

Greece taps reserves to pay IMF loan – BBC
Eurogroup keeps alive hope of Greek deal – euobserver
Greece Inches Closer to an Accident – Bloomberg
OECD: Signs of US economy flagging, China losing steam – Reuters
Why Would Anyone Want to Restart the Credit Default Swaps Market? – Bloomberg
The New York Times’ Secret Rule Forbidding Its EU Writers from Reading Krugman – NEP
The Fed’s Labor Market Conditions Index Close To 3-Year Low – Capital Spectator
How Government Debt Disinherited the Next Generation…and How To Fix It – Fiscal Times
Drillers Answer Low Oil Prices With Cost-Saving Innovations – NY Times
Picasso Painting Sells At Auction For $179 Million, A Record – NPR
A Tale Of Two Graphs——Why Bubble Finance Will Fail – Contra Corner
Reflation Or Economic Zombie Trading – Alhambra Partners
A Portrait of the Classical Gold Standard – Mises

Global stocks shaken by bond market gyrations – AP
Market building for a breakout — and it may be bad – MarketWatch
Bond yields hit 6-month high, spooking investors – USA Today
Wall Street’s favorite stocks fly below the radar – MarketWatch
Gold Up on Safe-Haven Demand, Sliding U.S. Dollar – Kitco
Precious Metals Should Be Part Of A Diversified Portfolio – GoldSilverWorlds
China’s Silk Road Economic Project Will Include Gold – BullionStar
What’s next for Gold? – Merk Investments
Gold’s day will come – Mineweb

ASS Economics – TSI Blog
America’s Vanishing Worker – Zero Hedge
Millennials Become the Biggest Generation in the U.S. Workforce – WSJ
The Average Age Of A Minimum Wage Worker Is 36 – Economic Collapse
France tells shops: No more wildcard sales – The Local
China’s Smartphone Market Contracts For The First Time In 6 Years – Forbes
Who Is Coming to America? Chinese Students and Indian 20-Somethings – WSJ
Owning a home is falling out of fashion around the world – Telegraph
Fed’s Dudley Says Interest Rate Increases Will Mark Regime Shift – Bloomberg
Bank of England Holds Rates Steady – NY Times


What a Difference Two Percent Makes?

The chart below from this item at the Wall Street Journal’s Real Time Economics Blog may go a long way in explaining why wages aren’t rising nearly as fast as  they should be, given the tumbling jobless rate and steady rise in non-farm payrolls over the last few years.

While the overall jobless rate is now back to the pre-2008 norm of the low 5 percent range (and, yes, the historically low participation rate has helped push this down), the make-up of that workforce is different enough (i.e., part-time workers for both reasons in the chart above are about one percentage point higher than before the financial crisis) that pressure on wages is much less than it would otherwise be (or so the theory goes).

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