07/21/2016 - Mish Shedlock: KEY TAKE AWAY FROM BREXIT IS ONE THING, VOTERS ARE FED UP!
FRA Co-founder Gordon T. Long is joined by Mish Shedlock in discussing the details of Brexit, the BoJ, the current state of Illinois and much more.
Mike Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.
SOCIAL UNREST AND BREXIT
“Key take away from Brexit is one thing, voters are fed up.”
What’s unique about Italy is that it’s a lot of individual people buying bank bonds and they can literally lose everything. Furthermore social unrest in the US explains the rise of Donald Trump and the popularity of a socialist, Bernie Sanders. This explains why Clinton, Sanders, and Trump are all against the Trans-Pacific Trade Partnership. It is a 5500 page document, there is absolutely no way it is simply about free trade. Free trade can fit on a napkin; it doesn’t take 5500 pages to enforce a free trade agreement. Make no mistake the TPP is about much more.
“Brexit is not the cause, it is the symptom.”
Speaking of real household income, the top 5 % have done very well, the top 20% have done good, but the bottom 80% have done horribly in comparison and this all began in 1971 when Nixon took the US off the gold standard. This is the same time when you had an explosion in credit, an explosion in corporate profits; all of this began at the same time. People are not blaming the Fed or the public union, they are blaming free trade when in fact we started losing manufacturing jobs long before NAFTA. The number of people it takes to build anything is dramatically lower and this began well before any of the agreements happened. The politicians can’r make accurate decisions because they don’t get it, they are a part of the wealthy class; they are exempt from Obamacare and rules and regulations that the ordinary citizen abides to. They live in their own isolated world and they just don’t get it.
“The EU isn’t about free trade, just look at the carve outs they have on France for agriculture. Everyone in Europe pays more for agriculture just to protect the inefficient French market.”
Then we had all these warnings that the UK was still going to have to abide by the migration rules of the EU if the UK wanted to work out any trade agreement, don’t these arrogant politicians realize that this is exactly why the UK left? Then if you look at bilateral trade, the UK has most of its trade with the rest of the world; the UK runs a huge trade deficit with Europe and especially Germany. Because of this the UK has the upper hand in negotiations due the bilateral balance of trade it has with the rest of Europe.
LABOR REPORTS
There is certainly a story behind the numbers they are putting out. The household survey numbers have been bad for 4 straight months; meanwhile there is this volatility in the establishment survey. We need to see another month or two of both surveys and maybe we will see a new trend.
Throughout America, people are working multiple jobs because companies do not want to hire them full time and provide them full time benefits. Another example, New England nursing homes are facing problems keeping staff because of their 24/7 operations. Workers cannot live off of one salary and so they are working 2-3 jobs.
STATE OF ILLINOIS
“Every 5 mins somebody is leaving Illinois.”
The people leaving the most are the millennials and those a little bit older. It is a sad environment, property taxes here are totally out of this world, and in Illinois you down own your own home because of property taxes. The solution without a doubt is bankruptcy. The Chicago public school system is bankrupt, period. All that needs to happen is recognition of that fact but it is not even possible to declare bankruptcy because Illinois doesn’t allow it.
JAPAN STICKING WITH THE OLD
“Japan is a bug in search of a windshield.”
I believe people are increasingly questioning whether central banks have things under control. Japan just doesn’t get it; they are trying to work something that hasn’t worked for 30 years. The only thing they know how to do is print more money and push liquidity out. But the bigger problem is central banks can fix liquidity but they can’t fix solvency.
