Funny money not so funny
FRIDAY afternoon saw the market take yet another schizophrenic turn, with everything from stocks and bonds to gold and non-dollar currencies catching the mother of all clips across the ear.
The reason? A jobs report from the US that was surprisingly good — or was it bad? Good because the US economy added a stunning 204 000 jobs in October, double what analysts had forecast.
Bad because the unemployment rate ticked up to 7.3% and the participation rate in the jobs market fell to 62.8% from 63.2% — a statistic zerohedge.com noted was the lowest since 1978.
“More importantly, the number of people not in the labour force exploded by nearly 1 million in just the month of October, to a record 91.5 million Americans. This was the third-highest monthly increase in people falling out of the labour force in US history.”
Yet you are highly unlikely to read any major media report that will focus on the negative news, which includes the fact that the number of officially jobless in the US now numbers 11.27 million.
No, the hype will be all about the paltry few thousand jobs created in a country of 320 million people. The hoopla will be about how the “green shoots” of economic recovery have finally borne fruit.
So why the collapse in asset prices? Surely the “good” news should have attracted investors like bees to a blossom?
The reason for the carnage was because the “heartening” jobs report set in motion a chaotic game of second-guessing about
The markets fear a looming collapse in the whole stupid Fed-fed easy-money Ponzi scheme
how soon the Fed is likely to squeeze its supply of easy money. The frontrunners fled because they reckon the Fed will take the employment report as proof the economy can grow without its help.
Crazy. The few websites that cared to delve into the jobs stats came up with rather disheartening detail. Most of the new jobs created were “minimum-wage hotel workers and retailers”, many of them temporary positions.
Based on this brilliant information, the Fed, maybe as soon as December, will begin to “taper” its quantitative easing programme — which has seen the central bank spend billions buying its own government’s bonds in a ploy to artificially keep interest rates low and hence stimulate the borrow-and-spend economy that died some time around late 2007.
The markets, by Friday afternoon completely off their heads, now presumably fear rising interest rates and a looming collapse in the whole stupid Ponzi scheme and want to be first out the doors.
Daft beyond logic and, going by the sea of red on the JSE’s stocks and bonds indices (never mind the rand), about as funny as cancer.