May 6, 2022

• It crashed, but as per usual, none of the neoclassical economists know why. Of course, they all have a theory, but they are all different theories.
• This shows you how completely not a science neoclassical theory is. If a ball dropped and all the physicists had a different "theory" of why, you might say that they don't know what they are talking about.

• The interesting thing is that the pet theories have nothing to do with the broader economy (you know, the reasons that professional investors usually make decisions in the first place).
• Instead, it is all about reading the tea leaves and relating it back to a single macro event: The Fed's interest rates.

1. Recession is on its way. That hurts stock prices.
2. Inflation is here. That hurts stock prices

But, here is the real reason: profits are expected to be down. There are a lot of intertwined reasons for this, but it is profit expectations that drives individual stock prices in a situation where price of debt matters.

Just look at the price of an electric car inputs:

The price of lithium has gained more than 60 per cent since the start of the year, while nickel is up almost 50 per cent.

This is not inflation so much as it is that almost all the lithium that is known to be extracted in the next few years is already purchased. The price has gone up because finding and digging-out new lithium is going to cost more.

It is driving-up the costs of a lot of things that a market response to climate changes "needs" because they all rely on batteries.

The response to costs going up is going to have to involved multiple new strategies, not just the implementation of new technology. But, the "market" doesn't work this way. So, while it is figuring things out, people are going to be put out of jobs, money is going to be "lost" through collapsing financial markets, and we are going to be years behind actually solving our problems.

• Labour won in some seats that were traditionally Tory strongholds in London, but its vote was down from 2018.
• LibDems did better than the Tories in affluent neighbourhoods.
• Labour continues to do poorly in traditional working class strongholds in northern England.

• Labour's Keir Starmer continues to claim that he has changed Labour, but the results are anything but conclusive that was a good change.
• The disaster that has been the Boris years for the UK are finally landing and that probably has more to with any shift to Labour and LibDems than their leadership or policies.

• New found love for all things extractive means that Canada's economy will be doing quite well in the short term
• Of course, this is just borrowing from everyone's future climate budget, but that's capitalism for you.
• And, to be fair, the eventual price increase is being priced-in – not because of climate change, but because production increases are coming:

These graphs are of the US oil market, but Canada's oil is more expensive than these producers and relies on a higher oil price. A higher price is not sustainable as these new producers start pumping more oil.

• I always make the prediction that housing is on the verge of slower growth (because it always is but is always saved by the state).
• However, we might actually be witnessing a situation that is being caused by that price growth subsidy unravelling.

• The Liberals like to say that they are socially minded, but the spending as a share of production on public services betrays that lie.

Canadian job numbers show some contradictions stand out for me around part-time work:

Average hourly wages were up 3.3% from a year earlier, little changed from 3.4% in February. For permanent employees, wages were up 3.4%

The nation lost 31,600 full-time jobs last month, which was more than offset by a 47,100 increase in part-time employment

Construction led declines with employment down by 20,700 in April. Services-related industries posted a 31,400 gain for the month

Adding to evidence of a tightening market, involuntary part-time employment reached 15.7%, a record low.

These are not really interesting fluctuations by themselves, of course. Job numbers go up and down like waves in a bathtub, the question is about is the water flowing in faster than draining out. The answer seems to be no, but wait until the TFWP kicks into gear this month.

• Currencies are falling
• This is bad for the ability for these countries (or, more accurately, the firms in those countries) to pay their increasingly large debts.

• A couple of days ago I said that Hungary is not going along with the EU on the Russia fuel energy embargo because no one was offering it money.
• That was finally acknowledged last night:

Josep Borrell, high representative for foreign policy, told the Financial Times that he understood why Hungary, Slovakia and the Czech Republic were resisting European Commission plans for the EU’s sixth sanctions package on Moscow. The three countries rely on the Druzhba pipeline bringing heavy crude from Russia.

“It’s not because Hungary is closer to Moscow,” he said. “We have to take into account the specific situation of each country. Hungary is a landlocked country. There is no other pipe bringing oil to Hungary but the one coming from Russia and going directly to their refinery, which is created for the physical characteristics of the Russian oil.”

While most countries would have to ban Russian crude within six months, Hungary and Slovakia would have until the end of 2024. The Czech Republic would be offered until June 2024, which should satisfy Prague.

• It is unclear where this goes for now.

The union representing dockworkers across 29 West Coast ports reached a collective-bargaining agreement with a grain terminal in Washington state after four years of negotiations, a week before a separate process for labor talks with other employers start.

The International Longshore and Warehouse Union reached the accord over grain handling at Washington’s Port of Vancouver with United Grain Corp., which employs more than 100 people

• The agreement comes week before other talks affecting 22,000 workers.

• Stopped rising, but for how long?
• It doesn't look like this is going to come down any time soon as input prices keep going up.

• High food prices are not just about farmers, of course:

• There is a mission to slam a satellite into an asteroid.
• It is sold as trying to stop an asteroid from hitting Earth (if that becomes something we see is about to happen)
• My conspiracy hat says the real reason is to see if we can mine asteroids as they fly by Earth.
• I think that nudging asteroids with satellites is a great idea. Mining them? Seems we have bigger issues to solve.

• Either way, watching what happens here will be interesting.

• Party of unity is call: "Social and Ecological People’s Union"

France’s four largest left-wing parties overcame rivalries to form a united front ahead of legislative elections next month as opposition mobilizes against newly re-elected President Emmanuel Macron.

The alliance also stands ready to disobey some European Union rules, especially those related to fiscal discipline, competition and agriculture, according to the text of the agreement. That was a particularly difficult concession for the Socialists and the pro-Europe Greens, but important to Jean-Luc Melenchon, the leader of France Unbowed.

The combined left would win fewer than 100 seats, according to the survey released on Tuesday by Harris Interactive-Toluna for Challenges magazine. A total of 289 seats are needed to form an absolute majority.