Tuesday, April 16, 2013

The Terrifying Reality of Long-Term Unemployment

It's an awful catch-22: employers won't hire you if you've been out of work for more than six months
 
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Close your eyes and picture the scariest thing you can think of. Maybe it's a giant spider or a giant Stay Puft marshmallow man or something that's not even giant at all. Well, whatever it is, I guarantee it's not nearly as scary as the real scariest thing in the world. That's long-term unemployment.

There are two labor markets nowadays. There's the market for people who have been out of work for less than six months, and the market for people who have been out of work longer. The former is working pretty normally, and the latter is horribly dysfunctional. That was the conclusion of recent research I highlighted a few months ago by Rand Ghayad, a visiting scholar at the Boston Fed and a PhD candidate in economics at Northeastern University, and William Dickens, a professor of economics at Northeastern University, that looked at Beveridge curves for different ages, industries, and education levels to see who the recovery is leaving behind.

Okay, so what is a Beveridge curve? Well, it just shows the relationship between job openings and unemployment. There should be a pretty stable relationship between the two, assuming the labor market isn't broken. The more openings there are, the less unemployment there should be. If that isn't true, if the Beveridge curve "shifts up" as more openings don't translate into less unemployment, then it might be a sign of "structural" unemployment. That is, the unemployed just might not have the right skills. Now, what Ghayad and Dickens found is that the Beveridge curves look normal across all ages, industries, and education levels, as long as you haven't been out of work for more than six months. But the curves shift up for everybody if you've been unemployed longer than six months. In other words, it doesn't matter whether you're young or old, a blue-collar or white-collar worker, or a high school or college grad; all that matters is how long you've been out of work.

Help Wanted -- If You've Been Out of Work for Less than Six Months

But just how bad is it for the long-term unemployed? Ghayad ran a follow-up field experiment to find out. In a new working paper, he sent out 4800 fictitious resumes to 600 job openings, with 3600 of them for fake unemployed people. Among those 3600, he varied how long they'd been out of work, how often they'd switched jobs, and whether they had any industry experience. Everything else was kept constant. The mocked-up resumes were all male, all had randomly-selected (and racially ambiguous) names, and all had similar education backgrounds. The question was which of them would get callbacks. 

It turns out long-term unemployment is much scarier than you could possibly imagine. 

The results are equal parts unsurprising and terrifying. Employers prefer applicants who haven't been out of work for very long, applicants who have industry experience, and applicants who haven't moved between jobs that much.But how long you've been out of work trumps those other factors. As you can see in the chart below from Ghayad's paper, people with relevant experience (red) who had been out of work for six months or longer got called back less than people without relevant experience (blue) who'd been out of work shorter. 

LongTermUnemploymentScary.png

Look at that again. As long as you've been out of work for less than six months, you can get called back even if you don't have experience. But after you've been out of work for six months, it doesn't matter what experience you have. Quite literally. There's only a 2.12 percentage point difference in callback rates for the long-term unemployed with or without industry experience. That's compared to a 7.13 and 8.95 percentage point difference for the short-and-medium-term unemployed. This is what screening out the long-term unemployed looks like. In other words, the first thing employers look at is how long you've been out of work, and that's the only thing they look at if it's been six months or longer.

This penalty for long-term unemployment is unlike any other. As you can see in the chart below, job churn is another red flag for employers, but not nearly to the same extent. Applicants who'd gone through five to six jobs but had relevant experience were still more likely to get called back than those who'd gone through three to four jobs but didn't. And they had about as good a chance as those who'd only held one or two jobs but weren't experienced. In other words, there is no job-switching cliff like there is an unemployment cliff.

LongTermUnemploymentChurn.png

Long-term unemployment is a terrifying trap. Once you've been out of work for six months, there's little you can do to find work. Employers put you at the back of the jobs line, regardless of how strong the rest of your resume is. After all, they usually don't even look at it. 

Let's be clear. Ghayad's field study shows employers discriminate against the long-term unemployed. All of the fake resumes he sent out were basically identical. But firms ignored the ones from people who'd been out of work for six months or longer -- even when they had better credentials. Employers look at how long you've been unemployed as a better proxy for skills than anything else on your resume. In other words, more jobs-training probably won't help the long-term unemployed all that much. Even a stronger economy will only help them years in the future, rather than many years in the future. 

It's time for the government to start hiring the long-term unemployed. Or, at the least, start giving employers tax incentives to hire the long-term unemployed. The worst possible outcome for all of us is if the long-term unemployed become unemployable. That would permanently reduce our productive capacity. 

We can do better, and we need to start doing so now. We can't afford long-term thinking in either the short or the long-term.

Assault On Gold

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NOTE: Gold weights are based on metric tons and Troy ounces. 500 metric tons of gold would be 16,075,000 troy ounces. This changes the arithmetic slightly but not the point
I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.
A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big too fail” balance sheets. The financial system would be in turmoil, and panic would reign.
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.
According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.
A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal.
In other words, with naked shorts, no physical metal is actually sold.
People ask me how I know that the Fed is rigging the bullion price and seem surprised that anyone would think the Fed and its bullion bank agents would do such a thing, despite the public knowledge that the Fed is rigging the bond market and the banks with the Fed’s knowledge rigged the Libor rate. The answer is that the circumstantial evidence is powerful.
Consider the 500 tons of paper gold sold on Friday. Begin with the question, how many ounces is 500 tons? There are 2,000 pounds to one ton. 500 tons equal 1,000,000 pounds. There are 16 ounces to one pound, which comes to 16 million ounces of short sales on Friday.
Who has 16 million ounces of gold? At the beginning gold price that day of about $1,550, that comes to $24,800,000,000. Who has that kind of money?
What happens when 500 tons of gold sales are dumped on the market at one time or on one day? Correct, it drives the price down. Investors who want to get out of large positions would spread sales out over time so as not to lower their sales proceeds. The sale took gold down by about $73 per ounce. That means the seller or sellers lost up to $73 dollars 16 million times, or $1,168,000,000.
Who can afford to lose that kind of money? Only a central bank that can print it.
I believe that the authorities would like to drive the gold price down further and will, if they can, hit the gold market twice more next week and put gold at $1,400 per ounce or lower. The successive declines could perhaps spook individual holders of physical gold and result in actual net sales of physical gold as people reduced their holdings of the metal.
However, bullion dealer Bill Haynes told kingworldnews.com that last Friday bullion purchasers among the public outpaced sellers by 50 to 1, and that the premiums over the spot price on gold and silver coins are the highest in decades. I myself checked with Gainesville Coins and was told that far more buyers than sellers had responded to the price drop.
Unless the authorities have the actual metal with which to back up the short selling, they could be met with demands for deliveries. Unable to cover the shorts with real metal, the scheme would be exposed.
Do the authorities have the metal with which to cover shorts? I do not know. However, knowledgeable dealers are suspicious. Some think that US physical stocks of gold were used up in sales in efforts to disrupt the rise in the gold price from $272 in December 2000 to $1,900 in 2011. They point to Germany’s recent request that the US return the German gold stored in the US, and to the US government’s reply that it would return the gold piecemeal over seven years. If the US has the gold, why not return it to Germany?
The clear implication is that the US cannot deliver the gold.
Andrew Maguire also reports that foreign central banks, especially China, are loading up on physical gold at the low prices made possible by the short selling. If central banks are using their dollar holdings to purchase bullion at bargain prices, the likely results will be pressure on the dollar’s exchange value and a declining market supply of physical bullion. In other words, by trying to protect the dollar from its quantitative easing policy, the Fed might be hastening the dollar’s demise.
Possibly the Fed fears a dollar crisis or derivative blowup is nearing and is trying to reset the gold/dollar price prior to the outbreak of trouble. If ill winds are forecast, the Fed might feel it is better positioned to deal with crisis if the price of bullion is lower and confidence in bullion as a refuge has been shaken.
In addition to short selling that is clearly intended to drive down the gold price, orchestration is also indicated by the advance announcements this month first from brokerage houses and then from Goldman Sachs that hedge funds and institutional investors would be selling their gold positions. The purpose of these announcements was to encourage individual investors to get out of gold before the big boys did. Does anyone believe that hedge funds and Wall Street would announce their sales in advance so the small fry can get out of gold at a higher price than they do?
If these advanced announcements are not orchestration, what are they?
I see the orchestrated effort to suppress the price of gold and silver as a sign that the authorities are frightened that trouble is brewing that they cannot control unless there is strong confidence in the dollar. Otherwise, what is the point of the heavy short selling and orchestrated announcements of gold sales in advance of the sales?

Is The Takedown Of Gold A Sign That The Entire Global Financial System Is About To Crash?

Somebody out there is sure getting prepared for something really big.  We have just witnessed a takedown of gold and silver unlike anything that we have witnessed in decades.  On Monday, the price of gold had fallen by more than 10 percent at one point.  It shocked investors all over the globe, and overall what we have just seen was the largest two day decline in the price of gold in 30 years.  The price of silver dropped even more rapidly on Monday.  It was down more than 14 percent at one point.  There was an atmosphere of "panic selling" as investors and financial institutions raced to liquidate their holdings of silver and gold.  But was this exactly what someone out there wanted?  As I wrote about the other day, big banks and news outlets all over the world have been boldly proclaiming for weeks that gold is entering a "bear market" and that now is the time for all of us to sell our gold.  In particular, Goldman Sachs reportedly told their clients earlier this month that they "recommend initiating a short COMEX gold position".  Was that just a "good guess" on their part, or was something else going on?  Were they actually trying to help create a "selling frenzy" that would drive the price of gold much lower?
What we witnessed on Monday was absolutely jaw-dropping.  Just check out this chart of the price of gold over the past 10 years.  The takedown of gold on Monday sticks out like a sore thumb...
The Price Of Gold
And that chart does not even show the full extent of the collapse.  As I write this, the price of gold is sitting at $1355.20.
But this is just the beginning for gold and silver.  As I have warned repeatedly, the price of gold and the price of silver will experience wild swings in the years ahead.
For example, the following is what I wrote about gold and silver on August 7th, 2012...
I like precious metals myself, but if you are going to invest you need to get educated so that you know what you are doing.  If you go in blindly you are likely to get burned at some point.
In addition, you need to be prepared for wildfluctuations in price over the coming years.  There will be times when gold and silver absolutely soar and there will be times when they drop like a rock.
So if you are going to play the game you need to be able to handle the ride.
Monday was an example of what I meant when I said that "you need to be able to handle the ride".  There are going to be a lot more days like Monday (both up and down) for gold and silver in the years ahead.
The foolish people are those that are scared out of their wits and that are selling off all of their gold and silver right now.
Sadly, there was reportedly a tremendous amount of panic selling of gold and silver during this collapse.  The following is what Dennis Gartman told CNBC on Monday...
"There are a lot of people throwing up their hands. Throwing positions overboard. Panic is everywhere," Gartman said in a "Squawk Box" interview on Monday. "I've never seen anything like this. I mean it."
It just shows that there are a lot of stupid people out there.  The following is an excerpt from another CNBC report about the panic selling that was happening on Monday...
"I think the last $20 has been margin selling. The market is falling like a knife. People are saying, 'Get me out now,' " Phoenix Futures President Kevin Grady said. "You're also seeing people selling energy profits to pay for metals losses. You're seeing a tremendous amount of gold liquidation today."
According to Dr. Paul Craig Roberts, Assistant Secretary of the Treasury under President Ronald Reagan, all of this panic selling is the result ofan orchestrated takedown of gold and silver...
This is an orchestration (the smash in gold). It’s been going on now from the beginning of April. Brokerage houses told their individual clients the word was out that hedge funds and institutional investors were going to be dumping gold and that they should get out in advance.
Then, a couple of days ago, Goldman Sachs announced there would be further departures from gold. So what they are trying to do is scare the individual investor out of bullion. Clearly there is something desperate going on...
So who is behind all of this orchestration?  Well, according to Dr. Paul Craig Roberts, it is actually the Federal Reserve...
The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.
In fact, Dr. Roberts says that former Goldman Sachs trader Andrew Maguire is reporting that the Fed orchestrated the dumping of 500 tons of naked gold shorts into the market on Friday...
According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.
As Dr. Roberts noted, this represents an absolutely massive amount of gold...
Consider the 500 tons of paper gold sold on Friday. Begin with the question, how many ounces is 500 tons? There are 2,000 pounds to one ton. 500 tons equal 1,000,000 pounds. There are 16 ounces to one pound, which comes to 16 million ounces of short sales on Friday.
Who has 16 million ounces of gold? At the beginning gold price that day of about $1,550, that comes to $24,800,000,000. Who has that kind of money?
If any of the allegations above are even remotely true, then a whole lot of people need to be criminally investigated.
Meanwhile, many are considering this takedown of gold to be an ominous sign that another major financial crisis may be heading our way.
Just remember what happened back in 2008.  As Zero Hedge noted on Monday, the price of gold suddenly plunged 21 percent in July 2008.  That was just a couple of months before the U.S. stock market crashed in the fall...
The rapidity of gold's drop is impressive, concerning, and disorderly. We have seen two other such instances of disorderly 'hurried' selling in the last five years. In July 2008, gold quickly dropped 21% - seemingly pre-empting the Lehman debacle and the collapse of the western banking system.
Is this collapse in the price of gold a harbinger of another major stock market crash?
Time will tell.
Meanwhile, many average Americans are wondering if they should dump their gold and silver while they still can.
As I mentioned above, gold and silver are going to experience wild fluctuations over the next few years.  When the next stock market crash comes, gold and silver are probably going to go even lower than they are today for a short time.  But in the long run gold and silver are going to soar to unprecedented heights.
Investing in gold and silver is not for the faint of heart.  If you cannot handle the ride, you should sit on the sidelines.  We are entering a period of tremendous financial instability, and holding gold and silver is going to be like riding a roller coaster.  The ups and downs are going to shake a lot of people up, but the rewards are going to be great for those that stick with it the entire time.

The Propaganda System That Has Helped Create a Permanent Overclass Is Over a Century in the Making

Pulling back the curtain on how intent the wealthiest Americans have been on establishing a propaganda tool to subvert democracy

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The War You Don't See

"The War You Don't See" is a 2010 documentary film written, produced and directed by John Pilger.

"If the people really knew the truth, the war would be stopped tomorrow." - British Prime Minister David Lloyd George's comment to Guardian editor C. P. Scott

A powerful and timely investigation into the media’s role in war, tracing the history of embedded and independent reporting from the carnage of World War One to the destruction of Hiroshima, and from the invasion of Vietnam to the current war in Afghanistan and disaster in Iraq.