AN ANALYSIS OF US EMPLOYMENT IN 2019 to confirm the Profit Investment Connection still stands.
January 11, 2020 6 Comments
-
Follow
Following
Already have a WordPress.com account? Log in now.
This WordPress.com site is dedicated to independent working class politics. Contact me at briangreen@theplanningmotive.com
January 11, 2020 6 Comments
THEPLANNINGMOTIVE.COM 
“The widespread idolizing of Alan Greenspan may be the simplest explanation of why America’s post-election melodrama has produced so little popular anxiety…. As long as he safeguards prosperity, the country can bear the suspense of not knowing the next occupant of the White House. This Greenspan-worship is as understandable as it is delusionary.” Newsweek 11/26/00
“In a nutshell, the risk is that investors will perceive the Fed as a kind of infallible guardian angel, and therefore make rash investment decisions because they believe that Mr. Greenspan will be there to save them.” TheGlobeAnd Mail. 1/9/01
And we know what happened. This euphoria will end as well. The “409Ks” will become 201Ks or less. Earnings coming up.
Total repos on the Fed’s balance sheet as of Jan 8 were $211. The Fed is also buying T-Bills which is about another $200+ billion — for a total of $400+ billion in just four months so far.
The overnight and term repos do unwind. On January 8, the Fed drained $45.2 billion; on January 9, it added $36.5 billion; and on January 10, it drained $8 billion. So, on net over those three days, the Fed drained $16.7 billion via its repo operations from the money market.
Great analysis and timely. Thank you.
Thanks for the insight. You made me check the weekly data and yes as of Wednesday the 8th the FED’s assets dropped by $24 billion from the previous Wednesday (1st), but it is still the second highest number since September. Your comment made me think of two further issues. Firstly, that investors are today more confident, or should we say arrogant, therefore more reckless than 2000 because of being bailed out in 2008. 2008 convinced them they can only win, win even when they lose. Secondly, Y2K which is pertinent to your comment. As you will recall, fearing the potential shock frozen computer clocks at the end of the century central banks pumped huge quantities of money into the markets which caused the Nasdaq to shoot up even higher in the first quarter of 2000. The markets then crashed once the FED started withdrawing liquidity. I think the FED has not forgotten that lesson which is why the REPO infusion will continue. Your thoughts?
Thanks but not my insight. WSJ is implicitly lying about repos. Wolf street blog on the other hand is worth checking out. Not Marxist but credible and precise. Today there is a post on commercial and industrial loan growth. It has trickled to 0.6%. Historically negative C&I loan growth has been a precursor to recessions. Indeed it appears that capitals have gone on investment strike. Likely loan growth will go negative sooner than later.
As regards to the repo infusion continuing, the Fed had originally said they would continue at least through the end of this month. The reason why is the fact that the real reasons for the repo infusions have not been disclosed yet. Who was the Fed bailing out? So this is a big deal. Correct me if I am wrong but in one your posts you say that the underlying reason is insufficient profits to pay bills. Profits continue to fall. It should get worse. My take on it is that the Fed will begin to drain slowly and cautiously until it blows up again.
In August 1929 – just weeks before the stock market crashed – the Fed raised the interest rate from 5 percent to 6 percent. You’d think that the current Fed knowing that would not raise rates and would not “drain liquidity” but they did so last year. The stock market has become too expensive. It will require massive infusions to eke out a few additional percentage points in the face of declining mass of profits. This is becoming very unstable in my opinion and the Fed knows it.
Your last point, that as the absolute market cap increases, it requires a proportionately greater infusion to achieve the same incremental increase, is most important. That is where we are and I would assume the REPO injections has something to do with it. I always advise Marxist theoreticians to follow Wall Street analysists to keep in touch with current affairs and the Wolf Street blog is a good one. I think the FED has been hoisted by its own petard. They are not in a position to drain liquidity from the market without provoking another crash, greater and more permanent than 2008. I am of the opinion that we are dealing with a nervous capitalist class not a confident capitalist class, one that instinctively feels its weakness. It recognises that another crash will strip it of legitimacy and alter the political landscape for ever. So it will trade time at the cost of escalating the potential blow back from any crash.
Retail data out on Thursday. It will be interesting. Also, the GVA and Gross Output data for the third quarter 2019 has been updated on 9th Jan. You inspired me with your comment on industrial and commercial loans to contrast that to the movement in turnover and working capital. My next post this week will contain this analysis on an annual basis going back to 1955 and a quarterly basis going back to 2005. Let us see what connections are revealed.
In the US the word socialism used to be a dirty word not too long ago but I am stunned at the speed in which that has changed. Surely the capitalist class feels vulnerable.
Looking forward to reading your next post. I’m also curious about connection between rate of profit and C&I loans.