"Nothing Adds Up"

There’s a new feature to the Anything-Goes-and-Nothing-Matters economy: Nothing-Adds-Up. The magicians who pretend to measure the growth of GDP (Gross Domestic Product - the monetary value of all the finished goods and services) came up with a second quarter “adjusted” figure of 1.2 percent. That would have to be construed by anyone acquainted with basic econ stats as perfectly dismal. And yet the Bureau of Labor Statistics put out a sparkly Nonfarm Payroll Report of 255,000 for July, way above the forecast 180,000.

There were so many ways to game the jobs number — between people forced to work more than one shit job and the notorious “birth/death model” used to just make up any old number for political purposes — that no one can take this information seriously. Anyway, the GDP number was instantly forgotten and the jobs number launched the stock markets to previously uncharted record altitude.

It’s that time of the year for the hedge fund boys, with their testosterone flowing, to start burning down their house rentals in the Hamptons. And it’s also the time of year for an ever more stressed financial system to go down in flames. And, of course, it’s a presidential election season. Even for one allergic to conspiracy theories, it’s not farfetched to imagine a coordinated effort by central banks — under government direction — to generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton. I think that is exactly behind the recent money-printing activities by the Japanese and European Central Banks, and the Bank of England.

Why would it end up in US markets? For bonds, because the Euro and Japanese bond sovereign yields are in sub-zero territory and the BOE just cut its prime rate lower than the US Federal Reserve’s prime rate; and for stocks, because the value of the other three currencies is sliding down and the dollar has been rising — so, dump your falling currency for the rising dollar and jam it into rising US stocks. It’ll work until it doesn’t.

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