Summary: November JOLTS was grim, everything beside job openings which, not surprisingly, everyone focused exclusively on. Hires way down, quits at a new low, layoffs on the rise. Worst of all, where the current JOLTS - including job openings - fits on the Beveridge Curve. This isn’t just an academic matter, the concept behind it will decide the biggest question of them all: where on the curve indicates which way the long run economic potential is most likely to be.

Summary: We have to question what the recession question even is before then asking the only question that gets to the root of the matter. First, the December CPI and an update from China with more money market turmoil. Afterward, getting to that potential unit question starting with Germany’s latest update then reviewing the history of “technical recession.” What we might call not-recovering is of secondary importance, at best, since what Germany shows is that whatever the labor it is indeed happening.

Summary: Why can’t Jay Powell and the FOMC seem to get a fix on “inflation.” Their entire recent hawkish stance is built on a single theory with an atrocious track record - even in Powell’s own experience. Today’s payroll report came in “hot”, yet, in truth, the labor market is under significant stress which is ironically illuminated by the very way in which the Fed considers it potentially inflationary. This whole discussion explains exactly why central bankers are doing what they’re doing, unable to make a determination on “inflation” pressures. Or labor strength. What’s the right comparison to make?

Daily Briefing 1/15/25 sections 1 and 4.

Summary: Just over an hour ago, the Bank of South Korea voted to reduce its policy rate for the second straight time, unexpected because of how rare this has been for BoK. All that does is underscore just how weak the economy there has become. Why? Globally synchronized. Yesterday, the FOMC released its minutes which were predicably conflicted. What South Korea just did - and why - should put any conflicts to rest at least for the rest of the world outside Fed policymakers. Even so, those at the FOMC do appear to realize just how precarious the position really is.

Summary: The Chinese did, indeed, cut rates - a lot of them and by a lot. Aside from that panicky confirmation, we turn our attention to Europe where various curves continue taking substantial twists. Interpreting them means considering possibilities only now being admitted by either central bankers or mainstream sources. Not just some macro, layoffs risk. Looking behind the last European rate cut also introduces something else.

Summary: This week is off to an auspicious start, rate cut hysteria in full bloom. Setting aside the ultimately irrelevant matter of fifty vs. twenty-five, what is a rate cut supposed to be? It sounds like a stupid question - the Fed lowers interest rates. Which one or ones? What, exactly, does that do? How is this supposed to work? No one ever thinks too much on it which is precisely the purpose. Here we'll answer those questions using their own words and studies, starting with Mr. Bernanke.

Summary: With central bank rate cuts about to be unleashed in widespread fashion, here we examine the origins behind them. They aren't what you'd think nor are rate policies themselves. The lack of explanation for their effectiveness is actually the reason why we're supposed to believe they work in the first place. It was this irrational rearrangement which made low rates always previously associated with depression into "stimulus" that to this day is never able to stimulate. And that includes an ongoing experiment delivering more devastating proof that won't matter to the believers.

Summary: Repo fails were lower for the second straight week. That means we can check the correlations with other indications like bills, Treasury and Japanese, going in the other direction. Maybe more importantly, TIC figures show a massive deposit of USTs in the Cayman Islands. When? July, August, and September, the very period in question. The question for today’s DDA is how to connect all these pieces. We do just that with a big assist from…the ECB.

Summary: There will not be a BRICS currency. And that’s first assuming any of its members want one (spoiler: they don’t). Contrary to every mainstream belief, money is not a government matter. It is instead driven entirely by commercial, free market interests. We have centuries of development and evolution which stand as an unchallenged testament. The whole thing comes down to one single factor, a modern “Gresham’s Law” which explains the entire way the world, not just the monetary world, really works - has for centuries.

Summary: Dollar doom-ism is everywhere even though those allegedly on the wrong side of it are complaining about something VERY different. The BRICS, for example, are right now struggling mightily with currencies. Those have nothing to do with money printing and a falling dollar. From rupee to real, they are hitting record lows. The dollar “bull” is being unleashed on the world to the point nations are purposefully trying to avoid the reserve currency system not replace it. That’s a far more profound result than just a global recession question because it means we already don’t really have a reserve currency any longer.

Summary: It’s not just that JOLTS hiring was weak again, very nearly matching June’s shocking low, the consequences of that are piling up again in all-too familiar ways. The reason why the economy never recovered from 2008 was the lack of hiring following the crisis. We had already seen that once before in the 21st century, following the dot-com recession. The hiring rate here in 2024 is already worse than that time, around the same as coming out of the 2010s.

Summary: The question everyone should be asking after yesterday’s Fed debacle isn’t about “hawkishness” at all. The real issue is why officials didn’t say the labor market was entirely out of the woods. In fact, we know from the dots as well as Powell’s statements no matter how much they’d like to declare a soft landing they know only too well they really can’t. The labor data is still coming up the wrong way, including several metrics and perspectives even inflation-ist officials are having a really hard time setting aside.

Summary: Canada’s CPI becomes the latest to drop into the “undershoot” category raising the dangers of becoming the “bad” kind of disinflation. Economists in the country are already calling for a more aggressive response. But who should it be who does respond? This sounds like an absurd question since Canada’s weakness is the Bank of Canada’s territory. The evidence instead importantly shows it doesn’t matter what the BoC does. On the contrary, bad disinflation in Canada is actually everyone’s problem.

Summary: It’s always dangerous to wade too far into equities looking for useful macro or money signals. There is far too much noise in share especially indexes. However, at certain times substantial and critical divergences invite some careful scrutiny. We have those here with two of them, a curious pair each with compelling stories. The one a big-cap index, the other related to a widely-recognized cyclical industry. And both breakdown coincident to a number of other real economy developments.

Summary: While everyone has been watching US labor data and now fixated on the election, there have been some major developments. Energy markets are bracing for a supply surplus in the world’s most critical fuel. And swap spreads absolutely plunged throughout last week’s critical macro gauntlet and up through yesterday. All three major maturities including the 5-year for the first time set more record negatives.

Summary: With the election quickly settled, attention now naturally turns to the biggest question facing the incoming administration: can Trump pull it off? However anyone might judge the first term, this second one facing even greater challenges. Making the comparisons you can easily see the difference. The new President and his government will definitely have its work cut out for it. Hopefully, Trump will look back on 2016 for the one thing that could really help this time around facing an entirely different cyclical environment.

Summary: China began the month with some mild good news on its housing condition. It hasn’t been able to follow that up, however, with the latest credit data again majorly underperforming. That, plus the slow response on the bank plan from authorities, brings up the possibility of the credit and balance sheet math being against them. Not quite insurmountable, just far more difficult and time-consuming than may are hoping for.

Summary: Stocks and gold have been on an incredible run, though mostly just coincidence. Only one of them has fundamental purposes and it is critical to get those right. To understand that significance, we have to detour back to the Great Collapse and the Crash of ‘29 to untangle misconceptions about gold, money, banks, and equities. The missing perspective is the blackhole. Bullion is hedged for the next one to come along, whenever it might and whatever it might be.

Summary: A bunch of Q3 GDP data, including the US. Germany’s has displayed a plainly unnatural oscillation that opens the door to a much wider and more profound set of questions. Are their unit roots? If so, could these lead to difficulties in data masking the consequences in the real economy? The evidence does point in that direction with each major and minor revisions. Conclusively proof is elusive primarily because these series would be that proof.