06/07/10 Baltimore, Maryland – Well, the much-awaited unemployment report came out on Friday. The pundits, analysts, and kibitzers were all waiting. Their mouths open. Their pulses racing. They expected an “I told you so” moment.
Bloomberg polled them a week or two ago. The 2000 of them surveyed were overwhelmingly bullish…with the average forecast of a 27% increase for the stock market in 2010.
They must have thought the job figures would show that the ‘recovery’ was firmly underway…with unemployment finally turning down in a big way. Then it would be clear sailing…
Oops… Bummer!
It turned out that 95% of the new jobs were census takers – people paid by the government to count the people who pay the government.
It also turned out that people are waiting longer than ever to find a job…an average of 34 months compared to only 16 months in 2007.
Investors’ mouths turned down. They sold stocks so they could go home for the weekend without worrying. The Dow dropped 323 points.
The shorthand interpretation? It’s a Great Correction…not a recovery.
The census takers illustrate our point. Government spending – including government jobs – do not really make us richer. They make us poorer. If you could make people better off by hiring them to count each other, why not count them twice? Or three times?
The trouble is, no matter how often you do it…or how well you do it…counting people doesn’t add to our wealth; it takes away from it. Because it diverts resources – human labor – from worthwhile activities to activities that are a waste of time. And the more people you hire, the bigger the waste…and the poorer you get.
Why count people anyway? So you can apportion seats in the House of Representatives? We got a census form in the mail. It looked official…and very nosey. As far as we’re concerned, it’s none of their damned business!
But wait a minute. What if the government hired people to do useful things – such as baking and pole dancing? Well, as Jefferson put it, if you expect the government to do your baking for you, you “will soon want bread.”
As for the pole dancing, we don’t know…
But there’s no secret to what makes people wealthier. No magic. No miracles. No free lunches.
People want to believe that the feds can pull off some trick…that they can turn this Great Correction around by stimulating this or regulating that. Or how about tarring and feathering the BP chairman? Or sacrificing a few of Goldman’s young virgins? What? There are no virgins at Goldman? Well, how about some old sluts from JPMorgan?
JPMorgan just got fined $50 million – the largest penalty ever handed out by a UK regulator. What was its crime? “Failing to protect billions of dollars of client money by keeping it in segregated accounts,” says The Financial Times.
How much did clients lose as a result of JPMorgan’s faithlessness?
Not a penny. But they could have lost big-time, said the FSA. And besides, the regulators are getting tough everywhere.
Back in the USA, BP faces criminal charges. We don’t know exactly what its crime was either…but with so many laws on the books, it’s hard to imagine the giant oil company didn’t break a few of them.
Not that we’re shedding any tears for the goo pumper. If they can’t keep the oil in their pipes, they should get out of the oil business. But it’s a tough business. And accidents are bound to happen.
Destroying the oceans and endangering life on planet earth could be called a mistake. But destroying the economy is malicious mischief. Which is what the feds are doing.
So, Friday, the news was let out that the jobs stimulus effort was a flop. And as it made its way from one Bloomberg terminal to the others…the traders sold!
‘Risk off’…the traders call it. It means that they are selling their ‘risky’ investment positions and putting the money into safe positions – notably, US treasury bonds. The dollar rose on the news – and is now near a 4-year high.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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I trust we all realise that for every share Sold on Friday there was a Buyer.
That no net-money was pulled safely out of the market. That for every dollar pulled out another dollar went in.
We do relise don’t we? that there is in fact zero money “in” the market. Stocks and money trade “through” the market.
All the money is in investment accounts, none of it is in the stock market.
The market does tell us the value of all those shares in the investments accounts but the market itself has zero money in it.
What investors as a whole did, was bid the price of stocks down, they did not, as whole, pull one single dollar out of the market.
“Destroying the oceans and endangering life on planet earth could be called a mistake. But destroying the economy is malicious mischief. Which is what the feds are doing. ” No matter how forward thinking all you hotshots think you are,it’s thinking like this that got the human race and this entire planet we destroyed into the quagmire we are in. People of your ilk will be in their desk chairs waist deep in sea water trying to figure out how to squeeze another nickel out of disastrous greed and it’s calamitous results. Stick to financial advice and leave ecological prioritization for us who don’t care about being being greedy scumbags.
With U-6 at almost 20%, what “worthwhile activities” is the census diverting resources from? That is,in essence, one of the many fatal flaws of Austrian eco. theory: it assumes worthwhile activities exist for resources when U-6 is at 20% and capacity utilization is under 70%. There ain’t no worthwhile activities, otherwise, we would not be in this shape.
bye
BB
Take a Valium, man. Better yet, two or three.
Then go buy a horse. A very nice horse.
“Destroying the oceans and endangering life on planet earth could be called a mistake. But destroying the economy is malicious mischief. Which is what the feds are doing. ” Be careful there Bill. You might be considered sarcastic.
like .99 cents is so much lower than $1.00. Pitiful.
Investors friend-
Assumming the number of stocks in existence is static day to day and they trade for fewer dollars at the end of the day, hasn’t money been removed? Have you been at this long?
For those of you who think BP has destroyed the entire ocean, do a quick estimate how much oil gets into the water from personal watercraft and boats all day everyday.
I know BP has caused huge localized problems, but those are the easiest to clean up. As for the long term impact of residual oil, they have had a lot of help in polluting the water.
Cheers.
Where is Harry to gloat about how much money he made? Come on out of hiding, you worthless moron! Once the Dow is down another couple of thousand points, maybe you’ll jump. Or just go ahead and jump now.
Our mission is to please everybody simultaneously.
JRod
No net cash was removed my friend, every dollar sold was adolalr bought.
Some value disappeared into thin air but no net cash removed.
I would clearly be pro tarring and feathering the BP chairman and take the whole of JP Morgan with him. Maybe they will love their new lives.