SAR #9326/Weekender

It's not fraud until they get caught.

Follow Me! Japan, after twenty years of deflation and stagflation is entering another deflationary 'dip'. It's of more than academic interest, for that's the road we're headed down, too.

Does US need a second stimulus to create jobs?: Krugman & Co. are on one side, the deficit hawks and inflation fighters on the other side of a seriously spurious argument over the wrong question. The question should be “Could a second stimulus create jobs?” And the answer is no, not real jobs, not lasting jobs. Globalization has put many (most?) jobs up for bid on the global labor market, where the average wage is closer to $7 a day than $7 an hour. Until something changes – protectionism or peak oil might do the trick – unskilled and low-skill industrial jobs and many administrative tasks will continue their trek overseas. 'Shovel ready' is right – ditch digging is one of the few jobs that can't be outsourced. Yet. That does not mean that the idea of putting “the far majority of the unemployed workers to work at a minimum wage job to work on community and environmental care projects” is a bad idea. It might postpone civil unrest.

Ugly American: Asian governments are threatening (and taking) capital controls as a way of protecting their economies from an invasion of cheap US dollars – the 'carry trade'.

The Check, Please: US policies have driven short-term interest rates to zero and below. This creates free money for the banks, permits a massive carry-trade of speculation against the dollar and puts pressure on investors to abandon the safety of Treasuries and chase riskier assets higher. This is not an accident, it is a policy goal. Easy money and cheap debt paved the garden path and apparently the same paving stones are now supposed to lead us to the oasis.

Old News: As reported here earlier, a whole chorus from Bloomberg to Goldman Sachs to the NY Times has suddenly discovered that housing is not in recovery after all. Maybe the bottles were cleverly hidden.

Game, Set, and Match: The Green Revolution of 40 years ago worked – we've managed to put off starvation while doubling the world's population. Now easily twice as many will succumb to famine, pestilence, war and the collapse of societies. Food production depends on petroleum, food distribution depends on petroleum, agriculture depends on a rather familiar environment. We're about lose the fuel to grow, process and distribute foodstuffs just as the climate changes. All without a plan. And, yes, agriculture depends on natural gas for fertilizer and petroleum to administer it, not to mention the finite amounts of phosphorus... Remember, if you have a home, job, transportation, hot showers, and food every day you are among the lucky 15% that the rest of the world envies.

Peak Predictions: In 2004 the IEA predicted oil production would be 123 mbd in 2030. It dropped to 120 mbd in 2005, 116 mbd in 2007, 106mbd last year and 105 mbd now. The IEA (and the DOE's EIA) have for years adjusted their predictions to match predicted needs – what my mother called wishful thinking.

The Bernanke Bet: Morgan Stanley says that if you are holding 10-year Treasuries you are an incredible optimist, betting that the porridge will not be too hot (inflation) nor too cold (deflation) but just right. Which is having a lot of faith in the ability of those who (a) didn't see this coming, (b) didn't stop it from arriving and (c) haven't figured out how to get out of this mess - doing everything right, several years in a row.

Can't Buy Happiness: Turns out money can increase your happiness, but it's 32 times cheaper to buy therapy. Buying love is still frowned upon.

Memorize: “At some point, American workers will rebel. US unemployment is already over 17.5%. Some 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7 million homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.”

Porn O'Graph: Are you sure sub-prime mortgages did it?