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Thursday, 14 September

21:48

Jobs explosion shatters forecasts "IndyWatch Feed Economics.au"

Jobs explosion

Employment growth shattered expectations with an 11th consecutive monthly gain, tearing up by +54,200 in August, including another +40,100 surge in full-time employment. 

It's a case of choose your favourite statistic here: more than quarter a million jobs created in six months would have to be one of the most impressive, while annual full-time employment growth is now at a scorching +3.1 per cent. Golly!


Over the past year employment has lifted by +325,600 or +2.73 per cent, and if rising job advertisements prove to be a worthy indicator, then calendar 2017 could yet be Australia's greatest ever year for employment growth. 


Most of the jobs have been created in New South Wales (+71,600 over the year to August 2017) and Victoria (+95,500) until lately. But after a protracted lull, Queensland is now the surprise package (+95,400), albeit largely driven by part-time employment. 


The detailed figures will confirm in due course, but infrastructure has been a likely creator of jobs, along with the tourism and education boom, and healthcare.&...

20:05

Making Money With Cryptocurrencies "IndyWatch Feed Economics.au"

Making Money With Cryptocurrencies

Dear Reader,

Yesterday, I attended a blockchain conference in Houston, Texas. Its focus was on how to implement blockchain technology into energy businesses.

I heard from data scientists and engineers from Exxon Mobile, Chevron, BHP Billiton, Halliburton, and Microsoft.

In 2012, we profiled Bitcoin at $13. I remember attending a few conferences that year. At the time, it was a bunch of geeks and libertarians, and here I was in 2017, surrounded by Fortune 500 companies talking about Bitcoin and Ethereum.

By the way, I should take a moment to address this Jamie Dimon (JP Morgan) comment yesterday. Him calling Bitcoin a fraud was hilarious to me, and it shows you just how ignorant the mainstream media is about this entire space.

Jamie Dimon has been hating on Bitcoin since it was $50 its now $4,000.

His company, JP Morgan, is one of the principal investors in Ethereum, so what you really have here is a competitor of Bitcoin doing some trash talking.

The blockchain is the most certain investment Ive ever been a part of, and people like Jamie Dimon know it, which is why they are heavily investing into it both through blockchain implementation and Ethereum.

As of June 2017, there is now more money heading into this space than there is venture capital thats invested in other non-blockchain tech companies.

The U.S. Department of Defense is planning to use blockchain technology for secure communications.

Homeland Security even helped seed four security companies that will be using blockchain technology.

In Australia, Japan, Germany, Canada, and even here in the U.S. with the NASDAQ, all are either running prototypes or trial runs to do commodity and stock trading using blockchain technology.

The blockchain reduces costs, self-validates, is unhackable, secure, and eliminates settlement risk.

Here is a screenshot of some of the companies that are using the Ethereum blockchain platform.

...

16:37

Billy liar "IndyWatch Feed Economics.au"

Liar loans bounce

I noted earlier in the week that, for all the outlandish headlines, the "liar loans" report seemed to lack any real 'oomph'.

The market seemingly thinks so too.

Commonwealth Bank shares (ASX: CBA) opened the week at $73.50.

Upon the release of the report in question the share price promptly zoomed +4.53 per cent higher to $76.83. 


The trust of the innocent, or the plunge protection team in action?

09:48

Hobart vacancies crash "IndyWatch Feed Economics.au"

Chronic rental shortage

Hobart has the lowest vacancy rate on record for any Aussie capital city on SQM Research's index.


Prices/rents/everything booming in the Tasmanian capital.

08:32

Trumps Five Biggest Moves Yet "IndyWatch Feed Economics.au"

The next six months will be the biggest of Trumps presidency.

He will have to make five decisions that determine the economic future of the global currency system, let alone Americas economy.

Australias wealth is driven by exports priced in dollars and on American markets.

The price of iron ore, coal, agricultural commodities and much more depend as much on the fate of the US dollar as their own supply and demand. Not to mention the profitability of our exporting companies swing with currencies too.

But what are these decisions Trump will make?

Prolific author Jim Rickards, of our own Strategic Intelligence newsletter, explains the situation below.

In short, there is an enormous personnel change coming up at the worlds most powerful institution.

The majority of control is up for grabs.

And Trump decides who gets nominated to what post

Trump Owns the Fed

Jim Rickards

Donald Trump has the opportunity to appoint a higher percentage of the Board of Governors of the Federal Reserve System at one time than any president since Woodrow Wilson.

President Wilson signed the Federal Reserve Act during the creation of the Fed in 1913 when it had a vacant board. At that time, the law said the Secretary of the Treasury and the Comptroller of the Currency were automatically on the Feds Board of Governors.

But besides that, President Wilson selected all five of the other participating members.

Now Trump has the opportunity to fill more seats on the Feds Board of Governors than any president since then.

Thats pretty amazing when you think about it.

To review, the Federal Reserves Board of Governors is made up of seven appointees. That means they can make a majority decision with four votes. If youre reading about the Fed, you might also see reference to regional reserve bank presidents. These are roles within the Federal Reserve System, but the real power is found on the seven-member Board of Governors.

Heres the remarkable part:

As of last week, four of the seven Fed board seats are now vacant.

In fact, Im describing a 72-hour span last week as the most momentous three-day period in the...

06:00

Australian Dollar and Bitcoin "IndyWatch Feed Economics.au"

1.00 AUD = 0.0002 BTC
0.0010 BTC = 4.20 AUD
Converter

05:03

Australian labour market a relatively stronger result for August 2017 "IndyWatch Feed Economics.au"

The latest labour force data released today by the Australian Bureau of Statistics Labour Force data for August 2017 shows that total employment growth was relatively robust (up 54,200) with full-time employment growth accounting for much of that increase. Unlike recent months, where if full-time growth was positive, part-time growth was negative (and vice versa), both components of employment rose. Further, the participation rate rose by 0.2 points as job opportunities expanded. Labour underutilisation overall (underemployment and unemployment) was at 14.1 per cent summing to 1,842.8 thousand persons. The teenage labour market showed further improvement but remains in a poor state. Overall, my assessment of the Australian labour market is that it still to early to conclude that the uncertainty of the last few years is giving way to sustained growth.

The summary ABS Labour Force (seasonally adjusted) estimates for August 2017 are:

  • Employment increased by 54,200 (0.5 per cent) full-time employment increased 40,100 and part-time employment increased 14,100.
  • Unemployment decreased 1,100 to 727,500.
  • The official unemployment rate remained steady at 5.6 per cent.
  • The participation rate increased by 0.2 pts to 65.3 per cent. It still remains below its December 2010 peak (recent) of 65.8 per cent.
  • Aggregate monthly hours worked increased 6.1 million hours (0.4 per cent).
  • Using the seasonally-unadjusted quarterly data, the total labour underutilisation rate (unemployment plus underemployment) was 14.1 per cent (1,812.6 thousand workers). Underemployment was 8.5 per cent and there were 1,101.3 thousand persons underemployed.

Employment growth stronger in August

Employment increased by 54,200 (0.5 per cent) full-time employment increased 40,100 and part-time employment increased 14,100.

This is a relatively strong result.

We have observed a zig-zag pattern in total employment growth over the last 36 months or so where the employment estimates have been switching back and forth regularly between negative employment growth and positive growth with the occasional spikes.

This month, the pattern where full-time or part-time would alternative with negative and positive growth changed with both recording positive movements.

The following graph shows the month by month growth in full-time (blue columns), part-time (grey columns) and total employment (green line) for the 24 months to August 2017 using seasonally adjusted data.

It gives you a good impression of just how flat employment growth has...

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Wednesday, 13 September

17:39

Pearls of wisdom "IndyWatch Feed Economics.au"

Podcast

Subscribe here for free, and you can hear me chatting with Michael on the latest episode.

We discuss the pension timebomb, while Michael delivers another mindset lesson.

To subscribe, click here, or click on the image below.

16:42

Rich get richer "IndyWatch Feed Economics.au"

KISS

The ABS released its household incomes and wealth figures for the 2016 financial year.

I'm going to keep this post very simple today - you could spend hours torturing these numbers to fit a preconceived viewpoint, and, alas, I've got better things to do.

Instead, just three observations.

Firstly, mean gross household incomes, after surging very hard through the mining boom, pulled back a bit last year. 

This has become a bit of a familiar theme in recent Aussie data. 


Income inequality generally trended a little higher through the mining boom too, but also fell last financial year, as higher income earners took a hit. 


And thirdly, mean household net worth, having been obliterated by the share market crash, has surged to a record high of just over $929,000.

If people are feeling that inequality is rising, it is - for wealth - if only marginally since 2009-10.

Household net worth increased by $94,000 since the 2014 financial year, with property and financial assets up by $78,000 an...

09:44

Paradigm shift not from the CORE Econ Project as mainstream as you will get "IndyWatch Feed Economics.au"

Next Friday (September 22, 2017), I will be presenting at a panel on developments associated with the proposed MMT University and our new MMT Macroeconomics textbook, which will be published by Macmillan in April 2018. The panel will present during the First International MMT Conference, to be held in Kansas City. In part, my contribution will be to discuss the general pedagogical concerns that we (Randy Wray, Martin Watts and myself) had as we wrote the textbook over what turned out to be several years. We were confronted with the situation that we want our textbook to be used as widely as possible in the first and second years of a typical undergraduate program, but also didnt want to fall into the trap of compromising what we considered to be a unified body of theory based upon Modern Monetary Theory (MMMT) for what other colleagues (particularly, mainstream academics) would claim to be necessary material to prepare a student for the labour market. We now have what we believe is a very strong two-year sequence in macroeconomics, firmly founded on MMT principles, with a good balance between discursive narrative, historical context, empirical challenge, and formal (mathematical) reasoning. When one compares it to other post-GFC developments in the pedagogy of macroeconomics, some of which have received the headlines in the past week, I think the curriculum embodied in our text is progressive, consistent, and doesnt fall into the typical neoliberal default regarding governments and the monetary system.

A few years ago, I was invited to speak at a iNET (Institute for New Economic Thinking) in Toronto, Canada. iNET was a George Soros-funded initiative aimed at stimulating changes in the economic debate following the GFC, which left no reasonable person in doubt that the mainstream macroeconomic theory and practice was defunct (putting it mildly).

At the conference, one of the sessions focused on a new project designed to revise the introductory economics curriculum to incorporate new insights (allegedly) that were missing in the standard first-year programs at universities all around the world.

The Times article (September 12, 2017) The financial crisis demands a new type of economics writes that:

CORE promises to be the biggest shake-up since Paul Samuelsons Economics became the standard bearer for i...

09:21

Lending finance picks up "IndyWatch Feed Economics.au"

Having a lend

Lending finance was shaping higher again by July, back up to $71.6 billion in trend terms, to be +6.7 per cent higher than a year ago, and getting pretty close to the highs of 2015.


Commercial lending to businesses picked up, which is generally seen to be a good sign, while housing lending to owner-occupiers hit a record high. 


Personal lending commitments are tracking back down at levels not seen since 2002.

This was mirrored by data elsewhere, with the Reserve Bank's statistical tables showing average credit card balances at their lowest level in nearly a decade. 


This does not fit the stretched household budgets theme.

Investor juggernaut slowed

Property investment loans are being successfully slowed by regulatory measures, and this is now filtering through into the rolling annual data at the state level. 

Interestingly the credit squeeze may be impacting the state...

06:00

Australian Dollar and Bitcoin "IndyWatch Feed Economics.au"

1.00 AUD = 0.0002 BTC
0.0010 BTC = 4.90 AUD
Converter

05:03

The Tormented Bull Trade Were In Now "IndyWatch Feed Economics.au"

Bitcoin is showing some remarkable resilience right about now. Weve just come over the news that China is going to ban initial coin offerings.

Now comes the rumour that the head honchos in Beijing are going to ban crypto exchanges completely inside China.

In theory, this should be like a kick between the legs for the price. A lot of demand comes from here. Except bitcoin is holding up. Its still over US$4,000.

The news both good and bad just keeps flowing here. Major US bank chief Jamie Dimon, who heads up JP Morgan Chase, has come out and said bitcoin is a fraud and worse than tulips.

Then we have another report saying a Swiss town will accept bitcoin for tax payments.
Bitcoin is not for the unopinionated!

The developments in China might be overhyped.

As weve discussed before, China banned bitcoin in 2013 and the price tanked then. It came back. Some say the Chinese are merely giving themselves time to evaluate whats happening so they can put some rules down.

Can they even stop it? Im not sure.

Well see! But you have to agree the bitcoin story is not over yet by a long shot.

That reminds me

Crypto debate obscures trillion-dollar economy

Back in July, your Daily Reckoning service pointed out the hot market for Italian debt from private equity. We came to the conclusion: The EU is on the mend as we speak. Invest with this in mind.

The Financial Times reports that Italian banks are recovering. Italy is beginning to rev up.

Ive made the case that this was one of the biggest things holding back Europe. Thats because Italys previous problems has restricted the banks ability to extend credit to the private sector. The more this improves, the better!

Italy is a major economy. Its GDP is now growing at the fastest rate since 2011.

While bitcoin and cryptos hog the headlines, what happens to Italy matters more. Italys economy is over 10 times the size of the crypto market.

Thats another thing. Weve also been tracking how low energy prices, stemming from US shale, could benefit Europe.

We can add a little more to this, but closer to home. The Australian reported yesterday that ExxonMobil will cut the price of the LNG its selling to Indian energy company Petronet. This is gas that comes from the Gorgon project in Western Australia.

In 2009, Petronet signed a 20-year agreement to buy 1.4 million tonnes of the st...

Tuesday, 12 September

22:22

Liar loans "IndyWatch Feed Economics.au"

Mortgage survey

Let me say out the outset that I have a great deal of respect for banking giant UBS.

In fact, I have to say that, as I'm speaking at their flagship European Conference in London in November, on the subject of household debt no less. 

UBS Global Research put out a report this week stating it had undertaken a survey of 907 Aussies that had taken out over the past 12 months. 

UBS has an underweight or sell rating on Australian banks, according to ABC.

Not all that surprisingly, about a third noted that their application was not totally factually accurate.

In reality, almost all loan applications are not totally factually accurate, often being based on approximate estimates of household expenditure, while it's undoubtedly true that households tend to have an inflated view of what their own assets are worth.

The most common inaccuracies were under-representation of living costs, with a median response of 9.9 per cent understatement.

Verified

The most important thing, of course, is that brokers and lenders verify the key items, such as proof of income (2 or 3 payslips, PAYG summaries), cash in the bank, the asset being purchased, and so on.

Meanwhile lenders are now stress testing mortgages at a rate of 7.25 per cent, regardless of the mortgage rate actually being paid. 

Most mortgages are being written at very much lower levels than 7.25 per cent, and lenders also use benchmarks for household expenses to reduce risk. 
...

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