Registered Investment Adviser Caleb Lawrence
The major averages struggled in late trade on little real news. Since Monday the Standard and Poor’s 500 Index is up 11 points or .4% while the NASDAQ has gained 58 points or .9%.
Bankruptcy filings stopped shrinking on a year ago basis in the 2nd quarter and started increasing again for the first time since 2010 with a .8% advance. Large gains in business bankruptcies and to a much lesser extent personal bankruptcy pushed the advance.
Unemployment fell in 10 states during June, increased in 2 while the rest were unchanged. North Dakota, Colorado, and Hawaii had the lowest rates of unemployment. At the other end of the scale Alaska, New Mexico and the District of Columbia had the highest levels of unemployment. California was number 12 at just under 5%.
A lot of ink has been spilled in the post bust period since 2007 regarding the Fed’s supposedly highly inflationary money printing. Balanced by the countervailing force of credit collapse brought on by the inherently deflationary aspects of the post crisis period and the various inflation measuring metrics have struggled to stay above the Fed’s desired 2% target. With four surprises to the downside in a row for the Consumer Price Index outright deflation is rearing its head once again as we continue to follow in Japan’s footsteps who have seen nearly 3-decades of deflationary bust brought on by their own credit bubble. With the credit bust largely a global phenomenon deflation is also largely a global problem as well with a record number of OECD or Organization for Economic Co-operation and Development states struggling to maintain 2% inflation or better. Leveraged debtors and the government rightly fear deflation as it often proves financially ruinous. The BIS or Bank of International Settlements did a study and found that routine deflation was beneficial as it improves the purchasing power of your average person and helps to increase output. The Fed has blown 3 huge asset bubbles in the last 20-years, 2 have blown up spectacularly resulting in millions of bankruptcies and foreclosures. With a 3rd bubble on deck another economically and socially disastrous collapse is highly likely. Yet the Fed persists with the same failed debt based strategies expecting a different outcome. Let’s hope it really is different this time.