Thursday, July 6, 2017


An aging society exhibits a strong preference for return on capital over return on labor. Unfortunately, one can't exist without the other, but we'll let Generation Madoff figure that out for themselves. For the first time in U.S. history, the economy is declining ahead of the stock market, amid every denialistic excuse conceivable...

When inner city youth are presented with the choice between a low wage McJob versus joining a gang or drug dealing operation, they are very often tempted towards the latter option, with the inevitable dire outcome. Many have questioned this preference for the fast life over no life, until they themselves are presented with the exact same option. I believe that this phenomenon of seeking to avoid a life sentence with zero upside, is what is depressing the Labor Participation Rate in the face of low official unemployment. Many people of all ages are dropping out of the workforce to find other pursuits, or otherwise live off of whatever resources they can cobble together. Most people could live off their Craigslist proceeds from what they already own in their basement for at least a couple of years. At the same time, household formation has collapsed, the U.S. birth rate is at an all time low, and the movement towards anti-immigration is growing globally - even Bill Gates is saying that it incentivizes unsustainable levels of human migration. Meaning that the size of the workforce is set to collapse and with it demand for everything will collapse at the same time - because it is already. It will be at that moment in history, when all of the free trade dunces learn what they should have already figured out - they didn't outsource supply, they outsourced demand. And that will be their last day in the sun. History will not be impressed.

America's free trade morons were no match for Asian mercantilists:

Tomorrow, we once again learn how many new McJobs were created in place of the good jobs that went out the door to make the quarter. We will also hear that the unemployment rate is at a cycle low because the labor market is "tight". Per usual script, next they will gloss over the fact that wage gains are non-existent. Because if they were existent, they would be cause for immediate massive rate hikes to instantly kill any reversal in the multi-decade decline in corporate labor costs before it got out of hand and possibly impacted the quarter. Because cost cuts and mass immigration are the ONLY way corporations increase their profits. Innovation is a relic of a bygone era. Meanwhile, all of those people who left the workforce will be considered "retired".

In the entire history of the U.S. only in the past eight years has unemployment and labor participation been directionally correlated: 

"And then they all retired at the exact same time"

Stocks (blue) versus labor participation rate