The Classic Liberal Blog

Jobless claims report points to long-term unemployment problem

The jobless claims series is the best real time dataset we have – and right now it is pointing to a weak and halting recovery. There are still 5.5 million people on the unemployment roles (4.6 using the seasonally-adjusted data). However, there are a record 5.8 million people collecting extended unemployment benefits as well. So, this brings us to a record 11.3 million people collecting some sort of unemployment insurance benefit in the United States.

Translation: long-term unemployment rates have skyrocketed. And since long-term unemployment equals loss of skills and employability, we are looking at statistics that will translate into a human tragedy for many Americans if and when the employment picture brightens.

Pension systems on the brink

A train wreck waiting to happen. That's the only way to describe the mess that state pension systems are in right now, according to a report published today by the Pew Center on the States. According to Pew, there's a $1 trillion gap between the $3.35 trillion in pension, health care and other retirement benefits states promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay them.

What's worse, the gap may be even higher given that the study was conducted prior to the market collapsing in 2008 and given the way most states allow for smoothing of investment gains and losses over time.

H/T - Zero Hedge!

China Dumping US Treasurys: What’s the Message?

The report that China is lightening its load of US treasury debt, open as it is to multiple interpretations, is the sort of thing that keeps markets interesting.

The $34 billion drop in its holdings is a substantial chunk of change by anybody’s reckoning and deserves to be taken seriously. At least it deserves to be taken more seriously than in the last administration when the prospect of Chinese dollar dumping was called “absurd” by Secretary Paulson and “foolhardy” by President Bush.

In reducing its portfolio – Japan is reported to once again be the biggest holder of US debt – perhaps China is firing a warning shot.

Or maybe there is no message intended at all.

Some have suggested that it’s just a function of the way the data is reported, that China could be buying from offshore locations, its holdings transactions simply not picked up and attributed to them. Or in the alternative, that China is just briefly on the sidelines, not replacing maturing instruments in the expectation of somewhat higher rates soon. In either case, goes the sanguine interpretation, the Chinese share of US debt funding is more or less secure.

But there may be a specific message behind the move.

If so it is unfortunate that the range of possible topics is so wide.

The $6.4 billion military package for Taiwan?

The Taiwan arms deal was in development late last year at the same time as the December change in China’s bond position.

A trade war of which tire tariffs are just the latest manifestation?

Push back on currency revaluation pressure?

Maybe it’s just a prudent demonstration of real Chinese concern about the dollar/debt train wreck that I have written about in The Dollar Meltdown.

One thing is certain: if China has intended a message with its treasury portfolio, it will have been made clear to the Obama administration exactly what is being warned about.

In the meantime it’s a precarious balance, the growing US dependency on foreign creditors alongside domestic industries that have learned to expect the government to guarantee and subsidize their markets, protect them from competition, and meddle with currencies to their special advantage.

This kind of governing cannot last forever and the longer it persists, the more destructive will be its inevitable toppling ...