Sunday, February 12, 2006


Markets don't lie

I tend to think that Paul Craig Roberts has a case of Jerusalem Syndrome and am more than a bit dismayed that his pronouncements get such ready acceptance on the left side of the aisle. But when it comes to money stuff, I am inclined to listen a little harder: Job growth over the last five years is the weakest on record. The US economy came up more than 7 million jobs short of keeping up with population growth.... Over the past five years the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities...US manufacturing lost 2.9 million jobs... Worst hit were the high tech end. Tobacco and booze did OK, but Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees.... [E]ngineering enrollments are shrinking. There are no jobs for graduates. ...There are several hundred thousand American engineers who are unemployed and have been for years. ...Offshore outsourcing and offshore production have left the US awash with unemployment among the highly educated. This is the point which has been guiding my view of investment: The economics profession has failed America. It touts a meaningless number while joblessness soars. Lazy journalists at the New York Times simply rewrite the Bush administration's press releases. On February 10 the Commerce Department released a record US trade deficit in goods and services for 2005--$726 billion. The US deficit in Advanced Technology Products reached a new high. Offshore production for home markets and jobs outsourcing has made the US highly dependent on foreign provided goods and services, while simultaneously reducing the export capability of the US economy. It is possible that there might be no exchange rate at which the US can balance its trade. Reluctantly, I agree. Bushco has been lying about everything else. Why not about employment statistics, or other basic economic facts? To summarize Roberts, a bet against the dollar and against the US consumer economy seems like a sure thing. Since the US consumer economy has been the engine for international growth, a world recession seems likely. But because they haven't run such massive deficits, they can print money to re-start their economies. I think that's what we are seeing in the explosion of foreign stock markets, oil, gold, and other hard assets. The worst is yet to come.
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