China called for a new reserve currency, again. This killed the dollar, again. One can assume that China is unhappy with Bernanke and the status quo FOMC Communiqué.
Income increased 0.3% due to tax rebates and increased entitlements, including unemployment pay. Most economists and pundits trumpeted the income gains as sign of economic recovery, green shoots.
They are remiss or deceitful. Wages & salaries DECLINED 0.1% in May. Personal income
increased $167.1B but ‘private wage and salaries’ DECLINED $12.4B in May (-$0.7B in April).
The BEA: Personal current transfer receipts increased $162.6 billion in May, compared with an increase of $59.1 billion in April. The American Recovery and Reinvestment Act of 2009 provides for one-time payments of $250 to eligible individuals receiving social security, supplemental security income, veterans benefits, and railroad retirement benefits. These benefits boosted the level of personal current transfer receipts by $157.6 billions at an annual rate in May. These payments are classified in “other” personal current transfer receipts rather than in old-age, survivors, disability, and health insurance benefits because they are not benefits paid from the social security trust fund.
Ergo, 97% of the income gain in May is due to government largesse/welfare. Is this the sign of economic rebounding, or green shoots?
The saving rate jumped 6.9%, the highest rate since Dec 1993, but the gain is a temporary event unless Obama administers more welfare.
Let’s have some fun with Keynesians! For decades, the Fed and academicians have believed and taught the wage growth is the number 1 fuel for inflation – the old ‘sticky wages’ concept. If income surges, isn’t it inflationary, no matter how it is derived? If wages growth is inflationary, so is income growth from government largesse…Isn’t Obama practicing ‘trickle down’ from the government economics?
CNBC: Mounting Jobless Claims Force States To Borrow Funds Fifteen states have depleted their unemployment insurance funds so far, forcing them to borrow from the U.S. Treasury. A record 30 of the country’s 50 states are expected to have to borrow up to $17 billion by next year, said Rick McHugh of the National Employment Law Project, a nonpartisan advocacy group. “We are setting the stage for big pressures for states to restrict eligibility and benefit levels,” McHugh said. “Those type of restrictive actions undercut the (Depression-era program’s) economic and social stability purposes.” [This would kill part of the welfare state.]
The LA Times: Personal bankruptcies surge in Southern California The region had the nation’s biggest percentage jump in 2008, and the number this year through April is up 75% despite a 2005 rule overhaul aimed at curbing filings by those who would benefit unfairly.
The Great American Bubble Machine; Goldman Sachs: “Engineering Every Major Market Manipulation Since The Great Depression” With a subtitle like “From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they’re about to do it again” run, don’t walk, to your nearest kiosk and buy Matt Taibbi’s latest piece in Rolling Stone magazine. One of the best comprehensive profiles of Government Sachs done to date. Speaking of GS, they sure must be busy today, now that Bernanke is about to be impeached and take the fall for all their machinations.
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they’re about to do it again
Zero Hedge: Goldman Sachs Principal Transactions Update: Back With A Vengeance
Just released NYSE data indicate a 50% ramp up by Goldman’s principal Program Trading unit. Whereas the prior week saw Goldman trading only 631 million principal shares on the NYSE, the most recent data indicate a massive rise to 977.8 million. Also notable is Credit Suisse’s doubling in principal program trades to 586 million from 245 million. Zero Hedge is compiling materials to demonstrate the phenomenal gamble CS is taking by being the largest holder of the ETF-underlying pair trade. The ensuing implosion, once the market loses the invisible futures bid, will likely destroy Switzerland’s second biggest bank and likely take down the country with it.
Probably most notable is the screaming increase in overall program trading, from 30.7% of all NYSE volume to 40.4%! Virtually every broker saw their Principal PT operations double week over week: seems like everyone is brokering those ETF trades now. Poor SPY and IWM are being mangled 10 ways from Sunday nowadays.
Ambrose Evans-Pritchard, Telegraph: China’s banks are an accident waiting to happen to every one of us China’s banks are veering out of control. The half-reformed economy of the People’s Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December. Money is leaking instead into Shanghai’s stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump…
The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a “massive lending spree”. Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.