Thursday, November 3, 2011

A Triple Whammy for Keynesians; Better Than Expected Numbers Across the Board

Weekly jobless claims fell below 400,000 for the first time in over a month, suggesting a slight improvement in the labor market. Claims for unemployment benefits dropped by 9,000 to a seasonally adjusted 397,000, according to the Labor Department. Keynesians had expected claims edging down to 400,000, according to a Reuters poll.

Productivity rose at a 3.1 percent annual rate, the biggest jump since the first quarter of 2010, according to the Labor Department. Keynesians had expected an increase of 2.8 percent.

New orders for factory goods gained 0.3 percent in September, according to the Commerce Department, pointing to underlying strength in manufacturing. Keynesians had expected orders to slip 0.1 percent.

Bottom line: You have to take a lot of these numbers with a grain of salt as to their overall detailed accuracy. But their is some value in recognizing an overall trend, which clearly continues to show developing upticks in the economy. The Keynesians are missing these upticks in their forecasts, almost across-the-board they are missing by underestimating the strength in the economy. The recent Keynesian forecasts for a double dip will soon be a distant memory.

Here's what the Citigroup Economic Surprise Index currently looks like. It measures whether economic forecasts (almost all Keynesian forecasts) are overestimating or underestimating economic data that is being released. It is really quite interesting to note that the misses started to occur as underestimations at roughly the same time Bernanke started accelerating money printing. Keynesians simply don't get the influence of money on the economy. This is why they are also missing the developing increase in price inflation. They are stuck in a crazed belief that consumer demand and "animal spirits" drive the economy. They don't realize that money printing distorts the capital structure, ultimately puts more money in consumers pockets, which increases nominal demand, and that it fuels aggressive investing, aka "animal spirits," to beat climbing inflation

1 comment:

  1. Thanks for your excellent advice during the last 2-3 months. I cannot think of anyone who has a better batting average in this period.

    Keep it up and keep notifying the Keynesian misses. It will be saved in the cloud for all to see.

    2. One caution. China is not crashing.