The Frankenstein Economy

Friday’s Jobs Shocker

On Friday, the Labor Department released a shockingly weak March jobs report. The feds and their cronies on Wall Street spent the weekend trying to put a bag over its head.

Former Pimco CEO and Bloomberg columnist Mohamed El-Erian gave this quick reaction:

“The US employment machine notably lost momentum in March, with just 126,000 new jobs added – far fewer than the consensus expectation of around 250,000 – and with revisions erasing 69,000 from the previous two months’ total, according to the Labor Department. The lackluster result ends an impressive 12-month run of job gains in excess of 200,000.”

Yes, the employment numbers were ugly. They confirm the other evidence coming in from hill and dale, industry and commerce, households and homesteads all across the nation, and all the ships at sea: This is no ordinary recovery.

Dr. Larry’s monster – it lives! For the moment, anyway.

Photo credit: Universal Pictures

No ordinary recovery – non-farm payrolls shrink with unusual verve. This probably means the printing presses must be restarted again, otherwise the ghost of ’37 is going to kick us where it hurts! – via econbrowser.com

Nip and Tuck

In fact, it’s no recovery at all. It is strange and unnatural, like the victim of a quack plastic surgeon. But the damage was not an accident. No slip of the hand or equipment malfunction produced this horror. It was the result of economic grifters plying a fraudulent trade.

The Dow rose 118 points in Monday’s trading. A 0.7% increase, this was neither the result of honest investing nor any serious assessment of the economic future. Bloomberg attributed it to scammery from the Fed:

“New York Fed President William Dudley said the pace of rate increases is likely to be “shallow” once the Fed starts to tighten.

His comments were the first from the inner core of the Fed’s leadership since a government report showed payrolls expanded less than forecast in March.

While data signaling rates near zero for longer have previously been welcomed by American equity investors, concern is building that economic weakness will worsen the outlook for corporate profits.”

Get it? “Shallow” rate increases. Translation: Savers will get nothing for their forbearance and discipline for a long, long time. Instead, the money that should be rightfully theirs will be transferred to the rich … and to gamblers and speculators … as it has for the last six years.

William Dudley, one of the mountebanks who believe they can and should centrally plan the economy’s most important price ratio (no doubt well-meaning, but it is modern-day charlatanism of the highest order anyway). Here he somehow looks as if he’s expecting to receive a carrot or some other legume.

Photo credit: Brendan Smialowski / Getty Images

A Frankenstein Economy

Back to El-Erian who, having seen the evidence of this botched operation, then goes goofy on us. He calls upon the authorities to “do something.” As if they hadn’t done enough already!

The feds were the ones who injected the credit silicon, hardened the upper lip and created the Monster of 2008. And then, when the nearest of kin started retching into the hospital wastebaskets, they went back to work. Now, the economy is more grotesque than ever. But here’s El-Erian, asking for more:

“The report is a further reminder of how much more the US economy could – and should – achieve if it weren’t for political dysfunction in Washington and a “do little” Congress that preclude more comprehensive structural reforms, infrastructure spending and a more responsive fiscal policy.”

El-Erian is not the only one. One of our favorite knife men, Larry Summers, is suggesting more nip and tuck on the whole world economy. It was Summers, as secretary of the Treasury between 1999 and 2001, who helped stitch this Frankenstein economy together.

He and his fellow surgeons are responsible for its unsightly lumps and inhuman shape. Their trillions of dollars of EZ credit leaked all over, causing bulges almost everywhere.

Does China have too much industrial capacity? Does the world have a glut of energy? Are governments far too deep in debt? And corporations? And households? Didn’t nearly every central bank in the world try to stimulate demand with cheap credit… thus laying on a burden of debt so heavy that it now threatens the entire world economy?

Poor Larry Summers

Now, Summers waves his scalpel in the air and can’t wait to get the patient back on the table. He worries that the US should have given the International Monetary Fund more money, which would have “bolstered confidence in the global economy.”

He thinks the world’s problem is that “capital is abundant, deflationary pressures are substantial, and demand could be in short supply for quite some time.” Poor Larry can’t tell the difference between capital and credit.

Capital – what you get from saving money and investing it wisely – is an economy’s real muscle. EZ credit – what the quacks pump into flabby tissue to try to make things look more fetching – is what has turned the economy into such a freak.

Alas, failing to give more money to the IMF, says Summers, may mean “the US will not be in a position to shape the global economic system.” That would be a real pity.

Who can forget the one brief moment when it seemed the world was perfectly safe from the depredations of this charlatan-in-chief?

Photo credit: Chip Somodevilla / Getty Images

Image captions by PT

This article appeared originally as “The Scary Truth Behind Friday’s Jobs Shocker“ at the Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.