With the public court of opinion having long ago convicted crypto fraudster Sam Bankman-Fried – even as several notable holdouts such as Bill Ackman  and Andrew Ross-Sorkin remain –  attention is now turning to his just as “effectively altruistic” parents. According to a court filing by bankrupt FTX, SBF’s parent should be forced to answer questions and provide financial documents about their personal wealth and any money they may have gotten from the 30-year-old scammer.

As Bloomberg notes, FTX asked a judge for permission to question under oath Bankman-Fried’s family and a handful of the company’s former top executives as part of a hunt for hidden assets that could be used to repay creditors owed billions of dollars. Or not so hidden: as a reminder in November it was revealed that SBF’s disgraced “progressive” parents – Stanford University law professors Joseph Bankman and Barbara Fried (who on her bio says she has “written extensively on questions of distributive justice, in the areas of tax policy, property theory and political theory” which apparently means using her son’s stolen money to buy herself beachfront mansions) – purchased at least one $16.4 million beachfront “vacation home” in the gated Bahamas community of Old Fort Bay.

The court filing shows “the aggressive approach that FTX advisers are taking to recover any money that Bankman-Fried may have inappropriately handed out.” The company was heavily involved in lobbying politicians and regulators and making campaign donations to Democrats and the White House. Federal prosecutors charged Bankman-Fried with fraud for his role in the collapse of FTX, which filed for bankruptcy in November.

Incidentally, when asked by Reuters in November why the couple decided to buy a vacation home in the Bahamas and how it was paid for, a spokesperson for the professors said only that Bankman and Fried had been trying to return the property to FTX. “Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions,” the spokesperson said.

They’ll now get their chance.

According to the court filing, Joseph Bankman and his wife, Barbara Fried, were actively involved in their son’s company. Joseph Bankman, a law professor at Stanford Law School, offered tax advice to FTX employees and helped recruit the company’s first lawyers, the court filing said, citing media reports. Menawhile, ultra-progressive liberal, Barbara Fried, founded a political action committee that got money from FTX and its top executives, according to the filing.

It gets better: the brother, Gabriel Bankman-Fried, founded an organization that lobbied members of the US Congress from a multimillion dollar property near the US Capitol, according to the filing.

Finally, for those wondering if the alleged criminal’s parents will be teaching at Stanford Law School next year (one really can’t make this up), the answer is no: apparently not even Stanford will sink that low.

Separately, FTX watchers will recall that early on, the now insolvent exchange asked the bankruptcy judge to keep the names of its thousands of creditors confidential and under seal. Well, we finally got a glimpse at some of the companies that provided money to fund Sam’s discretionary spending (i.e., theft of FTX funds). According to the latest bankruptcy court documents, FTX owes money to a dizzying assortment of firms including Goldman Sachs and JPMorgan.

The 116-page document filed on Wednesday detailing FTX’s creditors contains thousands of entries, and while the names of individuals are redacted, the list identifies heavyweights across Wall Street as holding some kind of claim against Sam Bankman-Fried’s once-giant exchange.

Oh well, time to crack down on the largest Wall Street banks  for enabling the biggest fraud in history.

Joking aside – because everyone knows nothing will ever happen to Goldman and JPM –  another interesting name in the creditor list stands out:

The full creditor list is below:

The disclosure doesn’t reveal the nature or size of the debts and inclusion on the list doesn’t mean a firm is highly exposed to FTX.

At a moment the NATO alliance is broadly pushing for its members to bolster defense readiness and spending, Denmark is planning to introduce compulsory military conscription for women in order to greatly boost the size of national armed forces.

Jakob Ellemann-Jensen, Denmark’s defense minister and deputy prime minister, announced his intent to introduce women’s conscription in an interview with broadcaster TV2, with Bloomberg subsequently reporting on the comments.

He stressed that at current levels, the Danish defense forces cannot really defend Denmark, and so the nation needs to tap more manpower.

“If we are to be able to strengthen our defense, we must have a basis from which to strengthen it. In public and private companies, you can grab employees from other places, but you can’t do that in the defense,” Ellemann-Jensen said. “In the future, women must be called up for military service in the same way as men.”

And responding to a question over whether conscription should apply equally to both sexes, he stressed that “the armed forces benefit from more women coming.”

As Bloomberg points out, the discussion and planning for the significant change comes as Denmark and others have been deepening their unprecedented support to Ukraine. In December, the small northern European country donated 300 million Danish crowns, the equivalent of $42.8 million, in military aid to Ukraine, and last week gifted 19 French-made Caesar howitzer artillery systems.

“Currently, women can join on a voluntary basis while men generally are required to serve if they are called on under a lottery system, for a duration of four months for most,” Bloomberg details of existing Danish military policies on women. Already the number of women recruits is on the rise.

“The new measure has the backing of several women’s organizations and comes as Denmark, like the rest of Europe, provides increasing levels of support to Ukraine in the war to oust Russia from the country,” the report adds.

Neighboring Norway already has conscription for women, having become the first NATO member to implement it, and as of 2021 20% of its armed forces were composed of women.

A mere hours after both Washington and Berlin confirmed they will be providing Western-made heavy battle tanks for Ukraine, reversing course on prior policy after intense inter-NATO debate, Ukraine said it is now pushing hard for 4th generation fighter jets.

That’s according to an adviser to Ukrainian defense minister Oleksiy Reznikov, who just told Reuters that Kiev will step up efforts to lobby for newer western aircraft to replace its small, aging Soviet fleet. “The next big hurdle will now be the fighter jets,” the defense ministry official, Yuriy Sak, said.

“Every type of weapon we request, we needed yesterday,” Sak added, expressing Ukrainian impatience as the Russians report fresh gains in the east and south, also after Ukrainian forces confirmed withdrawing completely from Soledar. “We will do everything possible to ensure Ukraine gets fourth-generation fighter jets as soon as possible.”

American F-16s have long been as the top of President Zelensky’s defense “shopping list” – especially following his first appearance before Congress. In a March 16 virtual address to US lawmakers he urged Washington to send jets along with anti-air defenses to help “close the sky”.

But his public calls for ‘closing the sky’ grew a bit quieter in the months that followed that initial March speech given it proved unpopular with the American public – because in essence this was an appeal for the US to impose a ‘no fly zone’ – and of course this would be a de facto act of war.

But with advanced tanks now in the bag, The Hill admits that “Western fighter jets and longer-range artillery units, which would allow Ukraine to strike Russian forces deeper in occupied territory, will likely be the next debate for NATO.”

Of course, those few public voices arguing against these iterative steps of pledging heavier and heavier weaponry have pointed out precisely that it only ensures a ladder of escalation leading to direct clash with Russia in a WW3 scenario, which some say we are already in the midst of.

The Ukrainian side is of course fully aware that its strategy to keep pressing the West for bigger and more advanced weapons at all costs is working. The aforementioned defense ministry adviser explained to Reuters further:

“They didn’t want to give us heavy artillery, then they did. They didn’t want to give us HIMARS systems, then they did. They didn’t want to give us tanks, now they’re giving us tanks,” Sak said.

“If we get them, the advantages on the battlefield will be just immense,” he added. “It’s not just F-16s: fourth generation aircraft, this is what we want.”

And then this amazing, brazen admission: “Apart from nuclear weapons, there is nothing left that we will not get,” Sak added.

What is the limiting principle at this point? Because all we ever hear is the robotic mantra, “whatever Ukraine needs.” Next week they may claim to “need” a nuclear warhead…?

— Michael Tracey (@mtracey) January 26, 2023

As for the Pentagon reaction to all this, spokesman John Kirby cited “constant discussions” with Ukrainian officials on what they need. “Can’t blame the Ukrainians for wanting more and more systems,” Kirby said. “It’s not the first time they’ve talked about fighter jets, but I don’t have any announcements to make on that front.”

Similar to when the tank issue was first introduced, likely it’ll take a mere few months or less for the West’s supposedly firm “no” to become “maybe…” to a supposedly reluctant, “OK, yes”. It’s only a matter of time, and yet few top officials are acknowledging the increasing speed at which they are running straight up the escalation ladder with Russia. As Glenn Greenwald aptly observed this week, “The more escalation there is, the less debate.”

Authored by Bill Blain via MorningPorridge.com,

“Gold is enough, Beautiful gold, Lovable gold, Spendable gold..….”

Gold – can’t eat it, can’t use it, but its everything crypto never was: tangible, exchangeable, a store of value, and a kitty for when things get tough. In uncertain markets…. Don’t forget the yellow stuff.

Writing the morning porridge after Burn’s Night, Scotland’s celebration of our acclaimed national poet, Robert Burns, following Whisky and Haggis is never easy… So in order to force my brain back into motion… let’s consider Gold!

Trying putting Gold in the context of today’s markets…. So foul and fair a market I have not seen. (Extra points if you know the reference from the Scottish Play – and what happens next!)

One hand we have a pandemic of optimism that inflation is broken, central banks are going to pivot and start cutting rates, thus its unbounded joy at the prospect of a minor downturn, recovery, growth and a swift rise in earnings pushing up stocks, while bonds rally into the ease. The China reopening will fuel global recovery. Put your buying boots on!

On the other hand are the ongoing portents of sticky inflation, central banks wanting to normalise positive interest rates around 2% inflation and 4% rates to promote functional capitalism (the end of the era of cheap money), and the shake-out in Zombie, over-levered companies and speculative hype that’s driven financial asset price inflation and now blocks growth and productivity gains. Stabilising the global economy will see rates and inflation higher for longer.

Then layer on the real-world challenges of War In Ukraine, Geopolitical threats, Energy Security, the consumer Cost of Living Crisis and Income Inequality, climate change, plus a host of immediate challenges emerging to the political order in the West; from failing services across health, housing, education to increased populist threats from Left and Right.

Pick yer poison and lay yer bets accordingly.

Markets work by reading the uncertain runes of unclear futures. There are threats out there – but outcomes probably fall into the middle. My classic mantra is: “Things are never as bad as you fear, but never as good as you hope.” I see markets as multi-dimensional and complex: a little bit of inflation here will have consequences way over there. Be aware of the complexity.

Many market participants tend to make the mistake of thinking price moves are determined by the linear cause and effect of events – this morning I read on Bloomberg: “High Equity Yields act as a better hedge against higher inflation than fixed income.” That is linearly true, but higher interest rates have consequential lateral effects; reducing consumption thus putting corporate earnings under stress and long-term less sustainable.

Nothing in markets is ever simple…. Think laterally. Which finally leads us to Gold and its place in uncertain markets.

According to the chart I was looking at, Gold prices peaked in 1980 at $2500 on an inflation adjusted basis. On a price basis the current price of Gild ($1945) is pretty close to the $1971 price seen during the depth of Covid.

My colleague Ashley Boolell, Shard’s head of commodities, reckons gold is going to a new record level this year, fuelled by a number of factors – not least being the ongoing market uncertainty. Each time we get another unexpected market number, or a corporate shock, it chips way confidence. In uncertain markets Gold is seen as the safe-haven investment – especially when there is the threat of the technical US default on the back of the debt-ceiling being blocked by the Alt-Right of the Republican Party.

Gold pays no interest. There is no return. It has no real use. Gold’s value is its scarcity.

It is formed in supernovas and neutron stars in Galaxies far, far away. All the gold on earth came arrived as space rubble and dust, absorbed as the planet coalesced in the clouds of material around the forming sun. All the gold that’s ever been mined would only just cover a football pitch to the depth of 1 meter. (205,238 tonnes over the entirety of human history according to the World Gold Council.) Aside from some very limited industrial catalyst applications, its not very useful, but because it does not react or tarnish – it’s been worshipped as a thing of value for millennia.

I was once told the prime driver of gold prices is the Monsoon. In wet years Indian farmers get rich on improved crop yields – meaning they buy their daughters more gold bangles for their wedding dowry. It’s a lovely thought – but apparently an exaggeration.

Unlike cryptocurrencies – which tried to push their way into finance as exchangeable stores of value despite their intangibility – gold’s tangibility as a store of value has made it the globally accepted token of wealth since year dot. Over the years it has morphed into a commodity in its own right – traded electronically and held as an investment because of its recognised store of value.

In times of uncertainty gold tends to rise. In times of market uncertainty it’s a very useful asset to hold. The trick to a market sell off is not being short equities when the stock crash comes, but being liquid enough to start buying after the crash or market correction. Analyse any great market tumble and its inevitably followed by a buying window – that delicious moment when the rest of the market is still panicked and fearful, but stock yields look cheap and bonds are selling for pennies because of weakness. That’s the moment to buy – but what with if your liquid bonds are in free-fall and offered only, and stocks are still in free-fall.

That’s when the liquidity of Gold is a marvellous thing. Going into market uncertainty with a nice little stash of gold to finance bottom fishing of distressed cheap assets is a marvellous thing!

Funny moment yesterday when I was chatting to Ashley about Gold y’day. Aside from being our commodities guru, he is also a published Science Fiction author. I asked him about the implications of space mining – which will be a very real thing in the next 50-years. What if a mission to the asteroid belt discovers a 10,000 tonne lump of orbiting gold? (I remember something like that from E Doc Smith’s Lensman series). Ashley told me that’s exactly what he’s writing about now!

The Biden admin has picked a “soft landing” narrative as the hill it will die on, and it will hold on to its until the last possible moment, damn it.

Moments ago, alongside other strong macro data, including blockbuster initial jobless claims which were driven by a Bizarro plunge in California initial claims, and stellar Durable goods propelled higher by a freak number of near-record non-def aircraft orders in December, the BEA reported that in Q4, US GDP rose by a stronger than expected 2.9% (or 2.880% to be precise), a modest drop from the 3.2% in Q3 and well above consensus estimates of 2.6% (where the range was from 1.2% to 3.9% from 73 economists).

The fourth-quarter increase in real GDP reflected increases in inventory investment, consumer spending, government spending, and business investment that were partly offset by decreases in housing investment and exports. Imports, which are a subtraction in the calculation of GDP, decreased.

• The increase in private inventory investment was led by manufacturing (mainly petroleum and coal products as well as chemicals) and mining, utilities, and construction industries (led by utilities). 
• The increase in consumer spending reflected an increase in services (led by health care, housing and utilities, and “other” services) and goods (led by motor vehicles and parts)
• The decrease in housing investment was led by new single-family housing construction and brokers’ commissions

Looking at a breakdown of components as a portion of the bottom line GDP number we get the following:

• Personal consumption accounted for 1.42% – or half – of the bottom line 2.880% GDP number; this was below last quarter’s 1.54% and came in below expectations; on an annualized basis PCE was 2.1%, well below the 2.9% expected, and down from 2.3% in Q3.

• Fixed Investment shrank by another 1.20%, continuing a trend started in Q2, when it shrank -0.92% and followed with a -0.62% drop in Q3. Nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 0.7% in 4Q after rising 6.2% prior quarter
• The change in private inventories was a surprising boost to the bottom line, adding 1.46%, a reversal from the declines in the prior three quarters (in Q3, it dropped -1.19%). It appears that the inventory destocking/liquidation is now over.

• Exports declined a modest -0.15%, a big drop from the 1.65% increase in Q3, while imports rose 0.71%, also below last quarter’s 1.21% increase.
• Finally, government consumption was unchanged Q/Q, and printed at 0.64% vs 0.65% in Q3.

And a visual summary of all the components:

On the other hand, just like economists ignored much of the weak H1 2022 GDP data they should also look at H2 GDP on the same basis, and here when one uses Real Final Sales to Private Domestic Purchasers – which strips out things like trade and inventories- we get a far worse number of just 0.2% in Q4. This was the lowest print since the covid crash!

Even Fed Mouthpiece Nick Timiraos is bringing attention to this series:

Looking under the hood of the Q4 GDP report:

A broad measure of U.S. economic demand—real final sales to private domestic purchasers, which excludes trade, inventories and government spending—increased at a 0.2% rate in the last quarter of 2022 https://t.co/gts5BFL9oT

— Nick Timiraos (@NickTimiraos) January 26, 2023

Elsewhere, real disposable personal income (DPI) – or personal income adjusted for taxes and inflation – increased 3.3% in the fourth quarter after increasing 1.0% in the third quarter. This is not to be confused with real weekly and hourly earnings which remain deeply negative as a result of wages rising far below the rate of inflation for a record 21 months.

Current-dollar DPI increased 6.5% in the fourth quarter, following an increase of 5.4%. The increase in current-dollar DPI for the third quarter primarily reflected increases in compensation and personal current transfer receipts.  Personal saving as a percentage of DPI was 2.9 percent in the fourth quarter, compared with 2.7 percent in the third quarter

Finally, looking at what is arguably the most important number in today’s GDP print, gross domestic purchases prices, the prices of goods and services purchased by U.S. residents, increased 3.2% in the fourth quarter after increasing 4.8% in the third quarter. Excluding food and energy, prices increased 3.8% after increasing 5.0%.

And linked to this, the price index – closely watched by the Fed – rose 3.5% in 4Q after rising 4.4% prior quarter, while the core PCE rose 3.9%, in line with expectations and below the 4.7% in the prior quarter. In other words, inflation is no longer a factor for the Fed and is expected to slide sharply in the coming months as the Fed keeps rates around 5%.

Several observations from this data: despite some weakness in Q4, the data was generally of a soft-landing, or Goldilocks, nature. This is good news for markets and for Powell, who can continue taking the foot of the gas pedal as he is expected to do with a 25bps hike next week.

On the other hand, while US GDP exceeded expectations by growing 2.9%, underlying private domestic demand was quite weak, coming in below consensus at 2.1% which however is likely enough to delay recession expectations to the back half of the year, when employment will be the last economic metric to break. The combined contributions of household consumption, capex, and residential investment was just 0.22% — the lowest since the second quarter of 2020. At the same time, inventories and exports contributed a combined 2.2%, so this figure was essentially the negative image of the first half of the year, when strong demand was offset by those more ephemeral components.

Finally, talking of pivots: the inventory liquidation ended in Q3 and in Q4 inventories rose again. This means that in Q1 inventories will now slide again, pushing GDP negative. Here is CIBC economist Katherine Judge who sees the potential for a decline in GDP in the current quarter, partly thanks to the build-up in inventories:

“With inventories now elevated across many industries, and consumers running through excess savings, we see the potential for a contraction in the economy in the first quarter as the impact of past rate hikes materializes more fully, and consistent with a tapering off of momentum in recent monthly indicators.”

As Bloomberg summarizes, it paints a picture of an economy that is decelerating, but with firms (in aggregate) still hungry for labor as today’s claims number showed. This all sets up an interesting contrast, and raises the question of whether it will be underlying domestic demand or labor demand that eventually adjusts.

And while the GDP data was not too surprising, the sharp drop in the initial jobless claims number, which as noted was mostly due to a freak drop in Cali initial claims…

… puts the seasonally adjusted 4-week average less than 30,000 above April 2022 lows. That number was 80,000 in August. In some ways, we’re in a better position now employment-wise than we were five months ago. The Fed has to be worried about this turn of events unless inflation also slows dramatically, as the last thing Powell wants is to be seen doing is cutting rates with the next business cycle beginning with inflation at 3%. A tight labor market could mean inflation never gets down to the 2% target then. That’s exactly why it would take a deep recession to get the Fed to cut in 2023.

Commenting on the data, Stifel economist Lindsay Piegza said that “there was enough resilience in the US economy to maintain positive momentum in Q4. But the bigger question is, are we able to maintain that momentum as we turn the calendar page, and most of the data suggests that we do not.”

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

A San Francisco judge has ordered that evidence relating to the attack on Paul Pelosi must be released to the public, including police body camera footage that was reportedly played in court and showed the suspect striking Pelosi with a hammer.

The San Francisco District Attorney’s Office must release the 911 audio calls, home surveillance video, and police body camera footage from the attack on Pelosi after a judge on Wednesday rejected a request from prosecutors to keep it secret, CBS Sacramento reported.

San Francisco Superior Court Judge Stephen Murphy also ruled that audio recordings of a police interview with the suspected assailant, David DePape, must be made public. It is unclear when the evidence will be unsealed.

Adam Lipson, DePape’s defense attorney, objected to the release of the evidence, arguing that it might impair his client’s ability to get a fair trial, according to the San Francisco Chronicle.

DePape stands accused of breaking into Pelosi’s home on Oct. 28 and carrying out a brutal hammer attack against the 82-year-old husband of former House Speaker Nancy Pelosi (D-Calif.).

The 42-year-old DePape faces state and federal charges including attempted murder. If convicted, he could face life in prison. He has pleaded not guilty.

Coalition of News Outlets Request Release of Evidence

Wednesday’s ruling came in response to a request by a group of media outlets to gain access to the footage.

The coalition of news organizations filed a court motion in San Francisco earlier in January to get access to the evidence, with attorneys for the outlets arguing in the motion that “the public and press have standing to assert their rights of access to court records and proceedings.”

That came after the San Francisco District Attorney’s Office on Dec. 14 introduced audio and video evidence against DePape but refused to make it public.

The Dec. 14 preliminary hearing for DePape’s case featured audio from a 911 call made by Pelosi, body camera footage from responding officers, an interview with DePape, and footage from Capitol Police surveillance cameras as evidence.

The hammer DePape allegedly used in the attack was also displayed in court, while surveillance video played in court showed what is alleged to be DePape swinging the hammer over a dozen times to break the glass before gaining entry into Pelosi’s home.

DePape is accused of smashing the glass door of Pelosi’s home in Pacific Heights after 2 a.m. on Oct. 28 and later carrying out the brutal attack.

Graphic Testimony

After DePape allegedly gained entry into the home, he awakened Paul Pelosi, who was in bed asleep, according to court documents.

DePape then asked him where his wife, Nancy Pelosi, was. He replied he didn’t know Nancy Pelosi’s whereabouts so DePape said he’d wait, court documents show.

Police Lt. Carla Hurley, who interviewed DePape on the day of the attack, testified during the Dec. 14 hearing that DePape said he wanted to hold Nancy Pelosi hostage and that he wanted to use the hammer to smash her kneecaps and put her in a wheelchair.

DePape mentioned other targets besides Nancy Pelosi, including California Gov. Gavin Newsom, Hurley said.

In the interview recording that was played in court, DePape was heard saying that he hadn’t “specifically” chosen Nancy Pelosi, while condemning the entire political establishment in Washington, railing against “scandal after scandal,” and calling the political atmosphere in the country “[expletive] insane.”

“There is evil in Washington,” DePape told Hurley, according to her court testimony.

‘I Didn’t Come Here to Surrender’

During the hearing, the judge repeated a point made by prosecutor Phoebe Maffei that DePape had come “to the Pelosi house to wipe out and teach a lesson to the people that he believes are corrupt.”

“I didn’t come here to surrender. If you stop me, it’s like stopping me from going after evil and you will take the punishment,” DePape said, according to Maffei.

After Paul Pelosi told DePape he didn’t know where his wife was, he asked to use the bathroom, according to court documents. DePape let him and, from the bathroom, Pelosi called 911.

In the 911 call played back in court, Paul Pelosi could be heard saying that “someone’s in the home, don’t know who he is,” later telling the operator that “he told me to put the phone down.”

Police arrived within minutes and after entering, encountered the two men struggling for control of the hammer.

San Francisco Police officer Kyle Cagney testified at the Dec. 14 hearing that he witnessed the attack.

“My partner said, ‘Drop the weapon’ … He started to pull the hammer, Mr. Pelosi let go and the man lunged and hit Mr. Pelosi in the head,” Cagney said in court, describing the encounter that left Pelosi with a fractured skull.

Read more here…

Following November’s unexpected collapse, analysts expected a big rebound in US durable goods orders in preliminary December data (despite Manufacturing survey data dismally deep in contraction). They were right but the scale of the rebound was almost unprecedented as Durable Goods New Orders roared 5.6% MoM (more than double the +2.5% expected)

Source: Bloomberg

That is the biggest jump since July 2020.

The big driver of the headline surge was a massive surge in non-defense aircraft orders (the biggest monthly jump since Boeing’s rip in Oct 2014)…

Source: Bloomberg

December’s durable-goods orders was boosted by aircraft after Boeing received 250 orders – up from 21 in November and 122 in October – according to data compiled by Bloomberg Intelligence. That was the largest monthly gross order since December 2017.

Source: Bloomberg

Dow that look sustainable?

Which explains why the Durable Goods Orders Ex-Transports was so weak (down 0.1% MoM) and non-defense, ex-air orders tumbled 0.2% MoM…

Source: Bloomberg

Which left the YoY rise in Core Durable Goods Orders up only 3.33% (well below inflation) – the weakest since Jan 2021.

A mixed picture for hawks and doves, and remember, December’s ISM manufacturing survey showed factories facing weak demand. Most respondents in the survey were pessimistic, reporting that their companies and suppliers are uncertain about the course of the economy and are lowering forecasts for 2023.

Following last week’s unexpected plunge in initial and continuing claims – despite numerous layoff announcements – analysts expected a small rebound this week but they were wrong as the number of American filing for unemployment benefits for the first time tumbled to 186k (205k exp). Unadjusted claims crashed back to earth…

Source: Bloomberg

That is the lowest level for initial claims since April 2022.

Last week we saw an unusually large plunge in claims in NY state. This week the massive outlier is California…

While initial claims continued to slide, continuing claims rebounded (for the second week in a row) the prior week to 1.675mm…

Source: Bloomberg

This is not the picture that Powell is hoping for given the unprecedented tightening of monetary policy he has unleashed over the last year. There is nothing in this data that warrants a ‘pause’ by The Fed.

The headline claims data is completely decoupled from ISM Surveys’ jobs components…

Source: Bloomberg

Interestingly, however, the aggregate composite number of Americans claiming benefits is rising…

Source: Bloomberg

This looks a lot more like reality we would expected after 100bps of bps of rate-hikes.

Authored by Charles Hugh Smith via OfTwoMinds blog,

If we don’t bother measuring national well-being, the health of the nation’s commons and resources and advances in the public’s interests, then we foolishly call a decade of tremendous advancement “stagflation.”

Correspondent J.D. read The Forgotten History of the 1970s and kindly added a graphic example of the remarkable transformation wrought by the federal Clean Water Act and other environmental regulations mandating the clean-up of the nation’s air and other public “commons”–the nation’s biosphere and resources that we all share as an essential part of the common good and the public trust.

The point of my previous post was to explain that measuring the economy by narrow measures of “growth” and “profits” grossly distorts what’s actually happening and what’s actually valuable–and despite economists’ delusional obsession with “growth” and “profits,” it isn’t “growth” or “profits.”

What’s actually valuable are advances in national well-being and security and the common good. These may be advanced by “growth” and “profits,” but they can also be diminished by “growth” and “profits.”

As Adam Smith took great pains to explain, open-market Capitalism can only function within a moral and ethical social structure. Stripped of moral constraints, “growth” and “profits” become fatal cancers in the economy and society. In and of themselves, “growth” and “profits” have no moral or ethical center; if those benefiting from “growth” and “profits” destroy the public commons and diminish the common good, those costs are ignored.

That’s the problem with proclaiming “markets solve all problems.” They don’t; in fact, left to their no-moral-compass ways, they create horrendous problems for the many subjected to the profiteering of the few, problems that destroy public “commons,” the common good and the public trust.

What better way to foster “growth” and boost “profits” than dump offal and carcasses in the public’s rivers, rather than bear the costs of proper disposal? This is one manifestation of The Tragedy of the Commons, a concept clarified by Garrett Hardin in his seminal 1968 essay of the same name: if a for-profit private enterprise can offload costs of its own production onto the public, that cost savings enables faster growth and higher profits.

But who benefits from this growth and higher profits? The few who own the private enterprise. Who bears the destruction and costs? The public. Laying waste to public resources is the “market solution,” and any corporate manager who dared slash profits and growth to fund proper disposal of offal will be quickly fired and sent to Corporate Siberia, as the howls of outrage from “shareholders” (a.k.a. the top 0.1%) deafen the ears of the management.

This is why America’s air and water became increasingly polluted, unhealthy and ugly: dumping private-sector waste into the nation’s air and water boosted “growth” and “profits.” I’ve put these words in quotes to denote that they aren’t actually expansions of anything remotely beneficial to the national interest or the American public; they were only beneficial to the few who owned and managed the for-profit private enterprises.

There are many ways for-profit private enterprises dump costs onto the public: profits are private but costs are public. Corporations can pay such low wages that their employees need publicly funded food stamps to get by. Financial companies take extraordinary risks to reap immense profits, knowing they’ll get to keep the profits and the Federal Reserve and Treasury will bail them out at the public’s expense.

Stripped of ethics enforced to defend the public’s interests, corporations routinely lie, cheat, defraud and embezzle to boost profits, knowing the fine will be modest: just the cost of boosting profits by any means available. Consider this data base of 6,300 major corporate fines and settlements from the early 1990s to 2015 compiled by Jon Morse. No CEO or other manager paid any personal fines or served any prison time for any of these thousands of violations.

So let’s be clear: the “market solution” without any regulations to defend the public’s interests is rotting carcasses floating in America’s rivers. The public’s interests–the nation’s commons and the common good–are defended by its representational government. To the degree this government is corrupted by private wealth, it fails its sacred duty to defend the public’s interests. When it does its job, then the meaning of growth and profit change.

When the public’s interests are defended, “growth” that benefits the few is redefined as advances in public well-being. “Profit” that benefits the few at the expense of the many is redefined as the public commons and resources profiting from wise management for the good of all rather than the few.

If we don’t bother measuring national well-being, the health of the nation’s commons and resources and advances in the public’s interests, then we foolishly call a decade of tremendous advancement “stagflation.” This “stagflation” was the direct result of the diversion of hundreds of billions of dollars (in today’s money) of private profits and government tax revenues to clean up the wanton destruction of the public commons.

As I pointed out in The Forgotten History of the 1970s, additional vast, sustained investments in re-engineering the nation’s industrial base to become more efficient and globally competitive eventually boosted the economy and private-sector profits.

The point here is structural transformations take time and require immense investments, time and investments that demand sacrifices of everyone–including the top 0.1% and “shareholders.” If we fail to undertake needed transformations, the result is stagnation and a death-spiral down the black hole of sclerosis, corruption, greed and exploitation.

Here are J.D.’s comments and the photos he submitted:

“Your article on the role of 70s rebuild in Stagflation really hit a note with me. I was born in ’58 and watched, and participated in, the transformation. I am a biologist and an environmental engineer and have worked over 34 years for a federal agency in Water Pollution.

You’re right, the unmeasured wealth of a cleaner environment is huge. Allow me a single example. Here in Kansas City, the Kansas River flows into the Missouri River draining a huge watershed. For nearly 100 years the slaughter houses of the “East Bottoms” in KSMO discharged with no treatment into the two rivers. KCMO and KCK had no treatment of municipal waste. The Missouri river was foul and had fish kills.

In the 70s and 80s treatment was brought online. I came on board in ’88 and have contributed to the rest of the work. Last fall we celebrated the 50th anniversary of the Clean Water Act at Kaw Point, where the two rivers meet. Now a park. We showed a picture of the site from the Nov. 1971 issue of National Geographic. Yep, that is blood, floating fat, and a cow carcass.

For the past 15 years I have worked in a 340 mile kayak race (MR340) that starts at the point. We are up to 450 boats now and thousands participate.

KCMO is now building apartments and a huge women’s soccer stadium on the riverfront. None of that would have been considered before.”

Thank you, J.D. for the striking example. Somehow I doubt there would hundreds of kayakers and spectators anxious to participate in the Dead Carcass and Putrid Offal Regatta, nor many buyers for the Stench of Offal Condominiums.

What’s more valuable in the long run? Putrid offal in the river to boost private “profits” by offloading costs onto the public commons, or a clean river? In the long run, the clean river is more valuable by any measure.

Kansas City Sewer History (video presentation, 44 min)

*  *  *

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.  Read the first chapter for free (PDF)

Become a $1/month patron of my work via patreon.com.