Elmer's Excellent Economy

Forget about the worries on your mind
You can leave them all behind
--DeBarge

Former Fed chair Alan Greenspan tells Maria Bartiromo that he doesn't envision recession in the next couple of years. Not sure that should be comforting to the economy bulls. Elmer's track record on foreseeing recessions has not exactly been stellar--beginning with his poetic waxings just before the dot.com collapse.

Former Federal Reserve Chair Alan Greenspan to @MariaBartiromo when asked if he can envision a recession in the next couple of years: "I don't think so. At least as far as the data as far as we can see tell us." pic.twitter.com/zMOJTiXW7F

— FOX Business (@FoxBusiness) June 29, 2018

Central bankers generally create economic havoc far better than they can forecast it.

Fake News Bias

Shake it up is all we know
Using the bodies up as we go
I'm waking up to fantasy
The shades all around aren't the colors we used to see
--Hall & Oats

The most interesting part of these results is the breakdown by party affiliation. More than 9 of 10 Republicans think the media commonly reports fake news while only about half of Democrats do. Independents split the difference.

These differences are predictable by theory. Bias, in this case slanted media, should be most apparent to those in out-groups and least visible to those in in-groups. Collectivist tendency should accentuate the difference.

Kennedy to Retire

Jake Lo: What judge is going to believe that?
Agent Wesley: My judge.
--Rapid Fire

Yesterday, Supreme Court Justice Anthony Kennedy announced that he would retire. Kennedy has often played the role of swing or wildcard voter on high court rulings otherwise divided along predictable ideological lines given the makeup of the other eight supremes. Should his replacement carry more commitment to one of those competing ideologies, then the balance of justice, at least the current high court version, will tilt accordingly.

Because they currently hold enough executive and congressional power to get it done, many on the right are relishing at the spectre of such a rebalancing. Conversely, many on the left are cursing the process that permits a president that they did not support to nominate another judge who could move the court further from progressive sympathy.

The roles would be precisely reversed, of course, if the 2016 presidential election turned out differently.

The frenzy that Kennedy's announcement has already created is but a harbinger of the political theater that will take the stage as the nomination process for a replacement justice unfolds.

As the theater plays out, I will be remembering this. It is unlikely that our founding ancestors fought a bloody revolution to ultimately concentrate so much political power in the hands of nine (or really five) lawyers who are tenured for life.

Unfortunately, when positivism trumps the rule of law, the modern translation of the framer's original design should not be surprising.

Travel Ban Upheld

Judge McKay: Let's try and keep this from become a personal matter, please.
Ed Hucheson: Well, a newpaper's a very personal matter, sir. Ask the people who let us into their homes. 
Judge McKay: I've read The Day for more than 35 years. Before that, I sold it in the streets. However, here we're only concerned with the legal aspect of the sale and purchase of property.
--Deadline U.S.A.

In a 5-4 decision released yesterday, the Supreme Court upheld President Trump's 'travel ban' affecting several mostly Muslim countries. The ruling essentially reverses several lower court rulings opining that the ban unjustly discriminated on the basis of nationality and religion.

Those lower court opinions, and those among the four dissenting Supremes, are grounded in the argument that statements made by Trump, many of them during his presidential campaign, 'prove' that his motivations for the travel ban were bigoted and racist. However, it does not take a J.D. to sense that such an opinion rests on shaky legal footing.

After reading the Ninth Circuit opinion issued in early 2017, I wondered whether it was the court, not the president, that was overstepping bounds. The central legal issue is whether the president has the authority to issue such an executive order and whether the content of the order is consistent with the rule of law. As long as the order itself is valid, then the motivation behind it matters little.

Otherwise, what the dissenters in this case essentially argue is that the same executive order issued by a different president who used less inflammatory rhetoric would be ok.

.@Judgenap: “Executive orders signed by Donald Trump and any subsequent president will be interpreted only on the basis of the words that are in the order." https://t.co/YJoYrCncJe @AmericaNewsroom pic.twitter.com/pULP5BryRV

— Fox News (@FoxNews) June 26, 2018

As Judge Nap recounts, this is what the majority SCOTUS opinion concluded. It is the text of the order that must be construed from a legal standpoint. The political or rhetorical backdrop have little standing. Stated differently, what matters under the law is what's in the law, not the personalities behind it.

Although it has been suggested that this sets an important legal precedent for interpreting executive orders, it is difficult to see how other approaches would be more consistent with the rule of law.

Tariff Tirade

When I'm far from home
Don't call me on the phone
To tell me you're alone
--Billy Idol

Donald Trump unleashed a tweetstorm against Harley Davidson this morning after the company announced that it will move some operations to Thailand in lieu of the president's tariff plans. Of course, Trump did not complain last year when South Korea-based Samsung announced that it would build a $10 billion factory in Wisconsin in part to front run pending tariffs.

To make the theater even more amusing, progressives have suddenly become free market advocates. They are decrying tariffs as taxes that kill jobs. This is, of course, true. But it comes from the same group of people that has no problem levying other forms of taxes that kill jobs. And that has no problem interfering with markets in other ways (e.g., minimum wage laws) that similarly drive jobs elsewhere.

Trump's tariff tirade and the associated hypocrisy of others once again demonstrate human tendency to recognize the negative effects of market intervention in the politics of others but not in their own.

Four Falsehoods

Second time around
I'm still believing
The words that you said
--Naked Eyes

Lawrence Reed discusses falsehoods conveyed by the school system (particularly public schools) about four historical events/people:

1) That the Industrial Revolution ushered in a dark era and exploitation of the working class. Children in particular were hapless victims.

2) That Upton Sinclair's The Jungle was a historically accurate account of unscrupulous capitalism in the early 20th century that was 'solved' by subsequent government regulation.

3) That the Great Depression was eliminated by government intervention, particularly FDR's New Deal programs.

4) That Jesus was a socialist.

If you believe that any or all of the above or true, Reed suggests that you ask for a tuition refund. Of course, many students who have been so indoctrinated paid no tuition. Which nicely validates the  adage that you get what you pay for...

I would suggest that if you believe any or all of the above, then you are not engaging your capacity for critical thought. If you are pursing truth, then you would ask questions and find answers that would steer you away from the above falsehoods.

Record Converts

Well I'm heavenly blessed and worldly wise
I'm a peeping tom techie with x-ray eyes
Things are going great
And they're only getting better
--Timbuk 3

Tech companies have been issuing convertible bonds at record rates. As indicated by the graph below, previous highs occurred in 2000 and 2007.

Implication: market demand for converts tends to be highest when stock prices are peaking.

position in SPX

Borderline Thoughts

Stop driving me away
I just want to stay
There's something I just got to say
--Madonna

Interesting questions raised by Pat Buchanan and other about US immigration policy have me thinking once again about the role of borders in society and government's role in maintaining them. Searching these pages for previous missives on the subject, I was surprised by how often, and how long ago, this topic has been on my mind.

This post serves as a lander page of sorts for these previous thoughts that might serve as a useful reference point in the future.

Role of borders in society. Boundaries have been drawn since the early days of civilized society--suggesting a natural tendency of human beings to do so. Possible reasons for doing so include selfishness (inappropriately possessive), security, economic (e.g., facilitate trade), or social (preference for living with similar individuals).

Desirability for borders as a means for creating political competition and choice. The idea is that differing political systems operating in each bordered society compete with each other for citizens. People will leave societies with less desirable political systems in favor of the better ones. Some believe this should benefit liberty over time.

An interesting thought experiment related to the 'borders as political competition' idea above is to imagine that the geography of the continental US is split at the Mississippi River into two countries. One side houses people who believe in liberty. On the other side are those who believe in state-sponsored 'equality.' Over time, the prosperity realized by Liberty will attract people who have become impoverished in Equality. At some point, Equality will have to erect exit barriers to stem the outflow--or, of course, throw off its totalitarian state. On the other hand, Liberty's destiny will depend on the extent to which its citizens can limit the scope of its government.

That conclusion--i.e., the success of a society founded on the principles of liberty is dependent on limiting scope of government--has led to several posts (here, here, here, here) that essentially consider the 'open border' problem. The central conclusion is this. When property rights are well respected and not confiscated to fund welfare programs available to all, then open borders are preferred. Open borders create competition and mobilize labor seeking opportunity. Prosperity will increase. However, if property is being confiscated to fund welfare programs, then borders cannot be open. People seeking a free ride, as well as those ideologically opposed to the notion of liberty, will cross borders (and/or encourage others to cross borders) to consume resources that they did not earn. If borders are not secured, then the welfare state grows ever larger under such circumstances until it collapses under its own weight.

This leads to an issue that has sparked much public debate recently: the erection of physical barriers such as walls as deterrents to unwanted border crossing. One camp likes to argue that 'wall don't work.' Because people can climb, tunnel, fly over, go around them, wall don't keep people out. What this camp conveniently omits from its argument are the words 'all' and 'some.' While walls certainly don't keep all out, they certainly keep some out. We can be sure that most of the very same people who argue against building border walls have fences around their yards, security systems in their houses, and locks on their doors. Few of these people are naive enough to expect these security measures to keep out the most hardened and dedicated criminals. But they will slow some down and deter others. The more formidable the wall, the greater the deterrent to illegal border crossing.

That said, there is a very good case to be made for alternatives to walls. Reduce trade barriers. Barriers such as tariffs increase cost of doing business and motivate locals to cross borders in search of better opportunity. Existing laws that restrain illegal immigration could also be more fully enforced. Finally, reduce welfare state incentives that attract immigrants seeking to live off the production of others.

Most recently, these pages have considered how orchestrated efforts have magnified the border problem. Politically motivated groups are using children as pawns and a complicit media to capture emotional support for conditions that, as noted above, are certain to sink the system: porous borders in tandem with an inclusive welfare state.

Two Hundred Days Away

Close enough but not too far
Maybe you know where you are
Fighting fire with fire
--Talking Heads

How far away are major indexes from their respective 200 day moving averages? The COMP is farthest away, at about 9%:

The SPX is next at about 3%:

The Dow is closest to its 200 day. Already below its 50 day moving average, the DJI is only 1% from its 200 day.

How to interpret? In a trending market like we've had, moving below the 200 day moving average is one indicator of a technical breakdown. Viewed from this perspective, the Dow appears closest to breaking down and merits watching.

On the other hand, major reversals often begin with those groups that have been the object of the raciest speculation. The COMP has been that object and, as the relatively big distance between the index value and its 200 day moving average suggests, has thus far has shown little evidence of cracking.

Stated differently, the current COMP>SPX>DJI standing of the major indexes relative to their 200 day moving averages may need to reverse to DJI>SPX>COMP before we get a major trend reversal.

position in SPX

Orchestration

Borderline
Feels like I'm going to lose my mind
You just keep on pushing my love
Over the borderline
--Madonna

The recent hysteria involving separation of children from adults (not necessarily parents) seeking to cross the southern border illegally demonstrates once again that few social events with political overtones are random. Rather, they are premeditated. Planned and often funded by groups with political agendas to elicit a sympathetic response from onlookers--particularly those who vote.

Stated differently, most sociopolitical events that grab headlines are not spontaneous, but orchestrated. A primary goal of orchestration is emotional capture.

A complicit media fans the flames. And kids commonly serve as political pawns.

GE Delisted

After my picture fades
And darkness has turned to gray
Watching through windows
You're wondering if I'm ok
--Cyndi Lauper

Yesterday S&P Dow Jones Indices announced that General Electric (GE) will be removed from the renowned Dow Jones Industrial Index. GE had been the last remaining member of the original list created by Charles Dow in 1896.

Drugstore chain Walgreens will replace GE on the list.

The managing firm stated that adding Walgreens will make the index "more representative of the consumer and health-care sectors of the US economy."

Let's not kid ourselves. GE is a diversified conglomerate that operates in sectors far more representative of the US economy than a drug store retailer. This is about GE's poor stock price performance as of late which has served as a drag on the index.

We're certainly not there yet, but we're closer to the time when I'd consider going long GE shares.

position in SPX

Ultimate Learning Disability

"Why don't you do yourself a favor and go back to your white-bread, suburban, cesspool land while you still have a chance?"
--Victor Duncan (The Principal)

There are those who refuse to learn because an instructor (defined as anyone who has something useful to teach) is not like the student in some demographic way. The instructor might have a different skin color, gender, country of origin, social status, income level, et al.

Although social identity theory suggests we might expect as much, this is a foolish form of discrimination. Choosing not to learn because the teacher is not 'like me' may be the ultimate learning disability.

Doing so compromises the quest for knowledge and truth.

Cooperation vs Coercion

Arthur: What is this punishment for? Answer me!

Ganis: He defied our master, Marius. Most of the food we grow is sent out by sea to be sold. He asked that we keep a little more for ourselves, that's all. My ass has been snappin' at the grass I'm so hungry!

--King Arthur

The two general choices for organizing economically are capitalism and socialism. In capitalism, property is privately held. Producers decide what to produce based on customer preferences. Society alleviates scarcity thru voluntary cooperation and exchange.

In socialism, property is held in state hands. Central planners decide what gets produced and who gets it. Society attempts to alleviate scarcity thru edict and violent coercion.

However, Mises long ago argued that, in reality, society does not choose between two economic systems for the long haul. This is because attempts to alleviate scarcity thru socialism inevitably fail. When peaceful exchange is crowded out in favor of forceful command, society inevitably disintegrates into chaos.

Coney Island

The heat is on
On the street
Inside your head
On every beat
--Glenn Frey

On the southern most tip of Brooklyn a small peninsula juts west. For early explorers it was an intuitive place to set up camp as it sat at the opening of New York harbor. The Dutch called it Conyne Eylandt, meaning Rabbit Island. Subsequent English morphed it to Coney Island.

Its position on the water and sandy beaches made Coney Island a natural target for entrepreneurial development. By the mid-late 1800s, Coney was populated with hotels, amusement parks, and other resort structures.

Like magnets, Coney's beaches have attracted people on hot summer days. Circa 1924:

Circa 2016:

Years pass, but the need to beat the heat at Coney hasn't.

Stocks and Jobs

Things are going great
And they're only getting better
--Timbuk 3

Stephanie Pomboy posts the relationship between the headline unemployment number and the SPX since 1990. At best, job numbers are coincident, perhaps even slightly lagging, indicators of stock market performance.

Stated differently, it seems unwise to regard recent record low unemployment numbers to be a harbinger of higher stock prices--particularly with stock indexes already near all time highs.

position in SPX

Insidious Tax

At night
When you turn off all the lights
There's no place that you can hide
Oh no
The rhythm is gonna get you
--Miami Sound Machine

In this era of purportedly 'tame' inflation, the purchasing power of the dollar has declined about 20% in the past decade. Imagine what happens when inflation heats up...

Because we usually don't notice it until long after we've been fleeced, inflation functions as an insidious tax.

Flag Day

Gabriel Martin picks up tattered US flag off the ground.
Tired soldier: It's a lost cause.
Gabriel Martin folds up flag and puts it in his satchel.
--The Patriot

On this day in 1777, the Continental Congress adopted a national flag for the newly declared United States of America. The resolution stated that the US flag be "thirteen alternate stripes red and white" and that "the Union be thirteen stars. white in a blue field, representing a new Constellation."

The flag's design was subsequently modified as new states were added to the Union. In 1818, Congress enacted a law that locked in the 13 stripe portion of the design and permitted only the number of stars to change on the blue backdrop.

The first Flag Day was observed in 1877 on the 100th anniversary of congressional adoption. Afterwards, several states continued to celebrate Flag Day until it was declared a national day of observance in 1949.

Affiliation Bias

Director Nicholas Spikings: You were in the Olympics. You know about being a team player?
Agent Nina Chance: Sharpshooting isn't a team sport.
Director Nicholas Spikings: This is.
--Murder at 1600

Collectivists are, by definition, prone to elevate the wishes of the group over their own. This makes collectivists particularly vulnerable to biases that accompany group affiliation. These include:

In-group favoritism. Affinity for people who belong to the same group. Special treatment is given to in-group members that is not afforded to outsiders.

Out-group derogation. Those in out-groups are seen as threating and inferior. Outsiders become targets of discrimination and ridicule.

In-group influence. In-group members will be prone to shift their personal views toward those of the group.

In-group extremity. Extreme behavior that individuals would never condone by themselves is endorsed when they are members of a group.

Group uniqueness and superiority. Belief that the in-group possesses characteristics that are unique and superior to those of other groups.

The higher a person rates on the collectivist scale, the greater the tendency that this person will display these affiliation biases.

Our Largest Threat

Wasted
Sacrificed for the new nirvana
Night time sends the sun away
--Icicle Works

What is the largest threat facing the United States? It isn't external. Not China, North Korea, Russia, Iran, nor ISIS.

It is internal, grounded in our proclivity to live beyond our means. As this congressman observes, the largest threat facing the US is our national debt.

A country that can't keep its fiscal house in order is destined for the scrap heap of history.

Meeting North Korea

"There is a saying in Korea. Saying something a hundred times is not as good as living it once."
--Kang (Olympus Has Fallen)

The finest achievements of Barack Obama's presidency were the reopening of friendly talks with Iran and Cuba. Naturally, he caught (and still catches) grief from his detractors for doing so.

Now it is Donald Trump's turn. Trump has been working on a historic meeting with the president of North Korea--something that any proponent of peace and prosperity should support. Unfortunately, but all too predictably, many of those who cheered President Obama's diplomatic efforts are condemning Trump's.

As Ron Paul observes, just as trading is always better than sanctioning, so is talking always better than threatening.

Any effort that gets adversaries together at a table for conversation should be encouraged.

Temporary Housing

Kumiko: My home is here.
Daniel LaRusso: Home is where you hang your hat. 
--Karate Kid II

Today, Paul (2 Corinthians 4:13-5:1) reminds us that although growing old or being gravely ill seems to signify the end, it is not. As long as we persevere in seeking God and pursuing truth, we should "not lose heart" when our health declines.

This is because "even though our outer self is wasting away, our inner self is being renewed day by day. For this slight momentary affliction is preparing us for an eternal weight of glory beyond all measure."

Rather than worrying about our physical deterioration too much, Paul suggests that "we look not at what can be seen but at what cannot be seen, for what can be seen is temporary, but what cannot be seen is eternal."

We should rest assured "that if the earthly tent we live in is destroyed, we have a building from God, a house not made with hands, eternal in heaven."

Human bodies are but temporary dwellings for people's spirits. God challenges each of us to strengthen our spirits in the face of declining physical capability. If we do so, then our spirits will ultimately vacate our temporary housing and travel to permanent digs.

And, unlike our earthly dwellings, God's house is built to last.

Discretionary Morality

Casey Ryback: I support women's lib. Don't you?
Jordan Tate: When it works in my favor.
--Under Seige

Interesting study by Uhlmann et al. (2009) demonstrating discretionary application of moral principles by politically motivated individuals. Their basic premise was that people will be more likely to employ moral principles when those principles are consistent with the preferred political narrative.

For example, the researchers hypothesized that progressives would be more prone to support the consequentialist outcome of the trolley problem when the victim to be sacrificed was white instead of black. Similarly, the researchers hypothesized that conservatives would be more prone to endorse the consequentialist outcome of collateral damage during wartime (e.g., accidental killing of innocent civilians) when the victims were Iraqis rather than Americans.

Five studies using 'what if' scenarios presented to college student and community respondents confirmed the hypotheses. The authors conclude that people appear to selectively draw from a 'moral toolbox' when those morals conveniently support a political argument.

These results are consistent with theoretical concepts of confirmation bias, selective reasoning, and cognitive dissonance.

Reference

Uhlmann, E.L., Pizarro, D.A., Tannenbaum, D. & Ditto, P.H. (2009). The motivated use of moral principles. Judgment and Decision Making, 4(6): 476-491.

FANGs on Summer Pay

I never will forget those nights
I wonder if it was a dream
Remember how you made me crazy
Remember how I made you scream
--Don Henley

During the dot.com run up the 'must have' stocks were known as the Four Horsemen. Owning Intel (INTC), Cisco (CSCO), Oracle (ORCL), and Microsoft (MSFT) were tickets to Easy Street.

This time around it's the FANGs. Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG) are supposed to promise riches.

To demonstrate, USA Today suggests that teens and college workers take half their summer job pay and roll it into the FANGs. It estimates that investing half of the average summer pay into these stocks over the past four years (about $6500 total) would have grown to nearly $20K today.

"Think about what you could do," the article beguiles, "with $20,000 in four years. Maybe buy a car or book a trip to Tahiti."

Whether its cab drivers buying dot.coms, bartenders buying houses, or teens buying FANGs, when media outlets capture (and promote) this degree of speculation, you know that we're late in the game.

position in SPX

Discrimination in Markets

"You tell the trucking company that we have to service our customers. If they're not gonna help us, we're gonna find somebody who will."
--Brantley Foster (The Secret of My Success)

Some people argue that a producer should not be able to discriminate between customers. A baker, for example, should not be able to make a wedding cake for one couple while refusing to make a wedding cake for another couple. If a customer is refused service, then the strong arm of government should be applied to force the issue.

Proponents of this approach face several questions. Why isn't this situation akin to slavery? Slavery involves forcing individuals to produce output for others.

Furthermore, if it should be illegal for producers to discriminate between customers, then why shouldn't the opposite be true? Shouldn't customers be barred from discriminating between producers? If, for example, a buyer does not care for a seller's policy on making bathrooms available to the public, then why should that buyer be allowed to discriminate by boycotting that seller and/or taking business elsewhere?

The solution on both the buyer and seller sides is to remove government intervention from the equation and permit peaceful discrimination of all types. Indeed, markets operate on the basis of peaceful discrimination. Economic actors must prioritize, choose between alternatives, and cope with trade offs. This can only be done effectively through processes of discrimination.

If those processes of discrimination lead to bad decisions, then no government force is necessary to correct them. Poor discriminatory processes are sanctioned naturally by economic forces. A baker who refuses a customer loses business. A customer that boycotts a producer foregoes valuable products.

Because poor discrimination dents people's wallets, it causes people to think twice about perpetuating those unwise decisions. It also creates opportunity for entrepreneurs to better satisfy needs that have gone unmet in the past.

When not subject to violent intervention, discrimination in markets facilitates natural learning and improvement.

Let Them Decide

"Their prophet says 'submit.' Jesus says 'decide.'"
--Sybilla (Kingdom of Heaven)

Am constantly amazed at statist propensity to forcibly interfere in the decision-making of others. Rather than employing peaceful persuasion, statists prefer the strong arm of government to force the issue.

Set an example, persuade, teach. Yes.

Force. No.

Let them decide.

Vicious Cycles of Statism

This is the world we live in
And these are the hands we're given
Use them and let's start trying
To make it a place worth living in
--Genesis

Ron Paul sketches various vicious cycles of statism. They include:

Invade country-->destroy-->occupy
Redistribute wealth-->increase poverty
Failed govt program-->increase program funding
GOP wins-->grow govt-->Dems win-->grow govt
Print money-->wreck economy

And, of course:

How to break these vicious cycles? With liberty, of course.

Liberty spawn voluntary cooperation and exchange. Sound money. Peace.

Paul asserts that these vicious cycles "will continue to squeeze the life" from citizens until "the desire for liberty dominates. And not a moment sooner."

Consumer Discretionary vs Staples

We got to move those microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these color TVs
--Dire Straits

Sector-specific SPDRs for the consumer discretionary (XLY) and consumer staples (XLP) began trading in the late 1990s. XLY can be seen as a more aggressive market bet on economic strength while XLP is more conservative.

Currently the XLY:XLP ratio has never been higher. Since the beginning of the year, it has spiked into uncharted territory.

I continue to sense that, on a relative basis, many consumer staple stocks (e.g., PG) constitute the best value in the market. On a relative basis...

no positions

Who Has Benefited?

Papers in the roadside 
Tell of suffering and greed
Fear today
Forgot tomorrow
--Duran Duran

Charlie Bilello observes that since the Affordable Care Act was enacted in 2010, average family health care premiums are up over 200%. Meanwhile, big health insurance stocks, such as United Health Care, are up over 700%.

Since the "Affordable" Care Act was signed into law in March '10...
United Health Group (Largest US Insurer): +732%
Avg Family Health Insurance Premium: +233% pic.twitter.com/kOL6P4FtoN

— Charlie Bilello (@charliebilello) May 31, 2018

Who precisely has benefited from this 'affordable' law?

no positions?

Easy Money and Jobs

Why in the world would anybody put chains on me?
I've paid my dues to make it
Everybody wants me to be what they want me to be
I'm not happy when I try to fake it
--Commodores

Like his predecessors, President Trump is not shy about taking credit for positive economic news reported on his administration's watch. Yesterday's job report was no exception.

Record JOBS DAY!! 223K jobs added. Unemployment is 3.8%, lowest in 50 yrs. Black and Asian unemployment hit historic new lows. Adult men and women, and teenagers, are at lowest since 2000. Hourly earnings are up! Tax CUTS are working. America is WINNING BIG under President Trump!

— President Trump (@POTUS) June 1, 2018

Yet any reasoned mind merely looking at the data must question what is truly different under the Trump administration when it comes to jobs. After all, the record low unemployment number reported yesterday marks the continuation of a downtrend that commenced early in the Obama administration:

When viewed in this manner, even the widely touted Trump tax cuts haven't changed the trend in unemployment. The trend has clearly been down for nine years with little change in the rate of decline (as reflected by the slope).

What policy has been consistent across these two administrations? Ultra easy monetary policy. Easy money in the form of cheap credit, quantitative easing (QE), and like-minded programs were initiated during the credit crisis under Fed chair Ben Bernanke and perpetuated by his predecessor Janet Yellen. It remains to be seen precisely how new Fed head Jerome Powell will uphold this approach but early indications are that he is no different from previous chairs.

How does easy money policy influence jobs? Cheap credit drives businesses to invest more today than they would otherwise, and consumers to spend more today than they would otherwise. Stated differently, artificially low credit pushes spending from the future into the present. The increased economic activity serves to improve employment in the near term.

Unfortunately, the artificially driven boom inevitably leads to a bust. Projects that never should have seen the light of day do not pay off. Shutting them down pushes people who found jobs during the upswing to head to the unemployment line once again. Moreover, less economic resources (read: savings) are available in the future that can be applied toward capital projects since they have been consumed in the present. This prolongs economic malaise during the depression.

Although the timing of the bust is difficult to predict, the outcome is as predictable as night following day. And, given the degree of money, credit, and debt created during this most recent interventionary cycle, a large, deep period of darkness almost certainly awaits.

The other thing that is completely predictable is that, if the darkness happens to commence during his watch, then Donald Trump, once again following his predecessors, will assume no responsibility for the bust.

Strong Jobs, Recessionary Monetary Policy

They think they're so cute 
When they got you in that condition
Well I think
It's a total disgrace
--John Mellancamp

Another strong jobs report puts the headline unemployment number at 3.8%--lowest since 1969.

This puts the number of consecutive months with job growth at 92--by far the longest streak in history.

Yet, despite these historically positive job numbers, the Fed Funds Rate remains at recessionary levels. The negative real interest rate situation is something that is usually associated with only the worst economic conditions.

When will people start questioning what is going on here? With such historic job numbers, why are policymakers maintaining recessionary monetary policy?