Notes From Underground: What Does Friday’s Unemployment Mean, Mr. Natural?


Let’s put aisde all the nonsense. But I will offer this: The average hourly earnings are going to begin to take on increased significance as the energy sector begins a massive shedding of HIGH PRICED jobs. Also, many other high priced employees are going to be losing work so the data is going to reflect a hit to consumers not only through the loss of jobs but from the destruction of HOURS WORKED by high income earners.

The unemployment picture in Europe is turning negative very quickly as evidenced by Thursday’s Spanish data. The demand shock from the speed of declining employment is increasingly causing a cascading effect/negative feedback loop throughout the global economy. Europe needs to succumb to the inevitable and create a EUROBOND or end the EURO experiment. (I have included two podcasts recorded Wednesday and Thursday that hit on Europe because they are the most dangerous area as Covid-19 is causing major disruptions across all European nations.)

It is time to create a EUROBOND or end the illusion of a common currency. There cannot be an EU in good times but single nation states in bad times. You cannot be half pregnant: Either a viable entity is born or abort it now because the failure will bring financial dislocation and a massive debt deflation with European banks all failing.

ECB President Christine Lagarde is pursuing the goal of a coomon debt instrument but the Hanseatic League is pushing back and saying NEIN. It is too late for NEIN because to paraphrase Churchill, Merkel Slept while President Draghi built the edifice for the creation of a EUROBOND with his WHATEVER IT TAKES policy. Chancellor Merkel gave her authority to protect Draghi from the fiscal/monetary austerians and NOW GERMANY IS TRAPPED.

Lagarde will move faster on this fiscal/debt harmonization for if Germany says no the the world will turn on Germany for bringing ever more despair onto the global financial system. The fear of disunity in Europe is undermining the FED‘s effort to weaken the DOLLAR. Chairman Jerome Powell OUGHT TO DELIVER A STERN MESSAGE TO THE EUROPEANS BY BUYING MASSIVE AMOUNTS OF EUROS AS A SHOT ACROSS THE BOW. It is time for the world to support Lagarde in this effort. The Germans will run to Karlsruhe to say it is illegal but as the FED has shown (and the U.S. Treasury has supported) there are no rules in the time of TEGWAR.

***In Tuesday’s Financial Times there was an article by Sam Fleming titled, “Euro Bailout Chief Sees Hurdles to Quick ‘Coronabonds.'” Klaus Regling has overseen the European Stability Mechanism (ESM), which is supposed to be the lender of last resort to sovereign nations within the EU but only under very severe conditions.

The ESM is funded by a EUROBOND in principle as it has the lending authority of 500 billion euros. Not much has been borrowed for the conditions are difficult to meet. Regling said a new European institution could be set up to sell common bonds but it would need to be political agreement which would “take one, two or three years, and member states have to come up with capital guarantees, or assign future revenue. ONE CANNOT CREATE BONDS OUT OF NOTHING,” (emphasis mine).

Really, the entire ECB balance sheet, while adhering to the once-enforced CAPITAL KEY has been IMPLICITLY GUARANTEED BY THE GERMAN CREDIT CARD. How else can you justify ITALIAN two-year yields at 35 basis points?

This is not gloom and doom. I’m just laying out the reality of the situation. Lagarde, DAMN THE PRINTING PRESSES AND FULL SPEED AHEAD! As Powell maintained, the guarantor of the ECB’s balance sheet is the printing press: either currency or bonds will be printed.



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11 Responses to “Notes From Underground: What Does Friday’s Unemployment Mean, Mr. Natural?”

  1. The Bigman Says:

    So now tell us how you really feel……

  2. ShockedToFindGambling Says:

    Yra…..good post.

    Look, we are in the mess we are in today, because of the Bernanke policies which were designed to increase asset prices ( QE, ZIRP, NIRP), and which have had the effect of increasing debt to such levels, that much of it will never be repaid ( at least not in reasonably strong currency).

    We cannot just keep increasing debt, now exponentially……we need to start retiring debt.

    We are in danger of destroying almost every major currency.

    If the major currencies are extremely debased, it will take decades for the world economy to recover, IMO.

  3. Tinky Says:

    Couldn’t resist, Yra (though the image may not load, in which case, copy and paste the URL):


  4. asherz Says:

    There is very little chance that Nein is anything but the first word but not the last which will be Ya, bitte, Naturlich. Germany will continue to be the Automatic Teller Machine for the rest of Europe. As you pointed out it is long past the point of no return.
    How far will these Central Bank bailouts go? The place to look is the BOJ. They have been leading the other banks in their innovative aggressive policies. They started low rates, QE, and purchases of whatever paper it takes. They own almost half of government debt, 70% of ETFs, and the largest shareholder in many of Japan’s top companies.
    Is there any doubt that the ECB, BOE and the Fed will follow down this road, all expanding their balance sheets to unimagined levels.
    The implication for their currencies and precious metals is plain for the investor’s eyes to see.

  5. msvceo Says:

    Greetings to you all! A couple of weeks ago Yra let you all know about our work here at Marillac St. Vincent Family Services (MSV) in Chicago and encouraged you to support our CIVID-19 Relief Fund (Please put a reference to Yra in the comment box at the bottom of the donation page.). Checks and on-line donations have come in every day since.

    Yra and Janice are matching the first $5,000 in donations. I am happy to report that with the three checks I received today, we have surpassed $3K toward the $5K match!

    Here is an example of a family we helped this week through your generosity:
    Ashleigh is a parent to three children in our Early Childhood Education program. Her husband went into the hospital this week with complications from pulmonary heart disease. Ashleigh is a medical assistant and was laid off from a hospital that recent closed. Her hospital is trying to reopen in preparation for the anticipated peak in Coronavirus cases coming in the next two weeks. Knowing the medical bills that are coming due to her husband’s hospitalization, the financial stress of him being out of work, and her waiting on the call to go back to work, Ashleigh has been wondering how she is going to make ends meet. Thankfully, our COVID-19 relief fund, which many of you have contributed to, has allowed us to support Ashleigh and her family through this time that is wrought with anxiety for them. YOU have given her some relief and peace of mind. Because of new restrictions in the hospital only she can make limited visits. Their three kids visit only by phone. Ashleigh used the gift from all of you to pay her cell phone bill so the kids can keep visiting with Dad and bought groceries, too. The whole family is truly grateful.

    Some of you asked about PayPal donations. We hit a snag in the set up and are working with customer service to get that resolved. Sorry for the delay.

    Thanks again to all of you “Friends of Yra” and “Friends of “Santa Mike” Sturch!

  6. Trader 1 Says:


    With the entire world in a massive GDP contraction — how much time do you think Lagarde has to get a Eurobond issued before “Rotten Heart of Europe” fully takes hold??

    • yraharris Says:

      Trader–the doors are closing and Lagarde knows it—and don’t forget the political situations in all of these countries—Italy Salvini/Germany not sure of anything/France/Le Pen—dangerous clouds on the horizon

  7. Pierre C Says:

    From my limited view,several different thoughts come to mind.

    Germany and Japan are the countries with the biggest surpluses. How ironic that the two countries that were destroyed in WW 2 are now poised to destroy the world, (economically that is) if they are not willing to help re-balance trade.

    Correct me if i am not looking at this correctly, please.

    Saudi Arabia and Russia are also two countries that run surpluses. With oil prices dropping, they are BOTH being squeezed. This has led to the “oil price wars” between them.

    From this perspective I will try to extrapolate to our bigger problem with Germany, Japan and China’s surplus problem.
    Wouldn’t in the end this be between Germany, Japan and (possibly China) trying to keep their share of the pie?
    Don’t those countries have the most to lose as demand (FOR NOW) falls off?

    As assets keep selling off, being exchanged for dollars and making the dollar stronger. Isn’t the American consumer protected from inflation (FOR NOW) as this all plays out?

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