More and More Discouraged Workers

This following graph should be concerning. We have government statistics (grey and red chart) and we have the real SGS Shadowstats statistics (blue chart). The key statistic to look at is that of the discouraged worker.

Let's go over the definitions first. A discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment. This is usually because an individual has given up looking or has had no success in finding a job, hence the term "discouraged".

This discouraged worker includes two categories: short-term discouraged (less than 1 year) and long-term discouraged (more than 1 year). The government statistics only show the short-term discouraged workers (U6). Why do you ask? Political considerations, to improve the statistics and this is especially true after year 2009 as we will see below.

Since 1994 Shadowstats has included long-term discouraged workers. Long-term discouraged workers are those people that are out of a job more than 1 year and I don't see a reason why they aren't counted in the statistics.

Official unemployment rate (U3) is 7.8% right now. Unemployment rate including short-term discouraged workers (U6) is 15%. The real unemployment though (SGS), is 23% (Chart 1). This SGS unemployment counts in the long-term discouraged workers upon the U6 number.

Chart 1: SGS Unemployment Rate

Now, what concerns me a lot is that the blue chart has been doing something weird after year 2009. Previously, the blue chart always followed the U3 and U6 unemployment numbers. But since 2009 (after the economic crisis), the blue chart kept going up, while the other red and grey charts are going down. This is a serious deviation. It means that the class of long-term discouraged workers has been massively increasing. It also means that the short-term discouraged workers just can't find a job. That's why they are being added to the long-term discouraged worker category. This only started to happen after 2009. This is also the class of unemployed people that are most unlikely to find a new job due to the length of the unemployed period. The real unemployment rate is now almost on par with the unemployment rate of the Great Depression (25%).

You can be sure of this, the economy isn't doing as well as it seems.

More info here:
http://video.foxbusiness.com/v/1748956928001/the-real-unemployment-numbers/

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Non-Farm Payroll number Vs. Unemployment Rate

Non-Farm Payroll numbers came out at 113000 in September and the unemployment rate fell to 7.8%. Gold initially dropped as everyone thought that the decline in the unemployment rate was positive, but actually it is not. Peter Schiff mentions why in his update here.

As I mentioned before here, the non-farm payroll numbers are more important than the unemployment numbers. Especially when government is underreporting on the unemployment numbers as discouraged workers and part-time workers aren't counted in the unemployment numbers.

To get a higher employment in the U.S. industry we need to have at least 200000 for the non-farm payroll number, which we didn't get at all. We only got 113000, which is only half of the goal we need to achieve.

So the reality is: the unemployment rate went up, even though the government statistics say differently. The reason being that the population is growing faster than people are getting jobs.

Chart 1: Non-farm payroll

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Marc Faber Vs. Jim Rogers

Two of my favourite guru's against each other, that will be a fierce fight (and funny too). But it turned out to be not much of a fight as they agree with each other, except for stocks.

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Silver/Gold LCNS update

So far so good for the trend in LCNS for August 2012. As I mentioned before here and here, the LCNS is a leading indicator for the silver price. Once you see the LCNS go up, the silver price will go up a few weeks after it.

In an email update from Peter Schiff last week, he mentioned that silver would be the best commodity to buy these days. I agree, there is a very good chance that silver will blast through the resistance of $38/ounce.

Don't wait for a pullback.

Chart 1: LCNS Silver positions

Chart 2: Silver Price

As for gold we see the same happening (September 18th, 2012). LCNS is spiking upwards, so there is a good chance we will see gold higher the next few weeks. Once you see the LCNS go down, you start to see a pullback. I believe though, that the LCNS has already bottomed out and will continue higher.

Chart 3: LCNS Gold positions

Chart 4: Gold Price

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Marc Faber Interview OneRadioNetwork

It's been a long time since we had a long interview with Marc Faber.

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U.S. debt just jumped $100 billion

The total public debt stands at $16,171,037,343,408.57 right now, while it was $16,066,241,407,385.89 a few days ago. That's a major jump upwards...

Everyone thought the debt would flatten out, but everyone was wrong. At this pace we will rapidly go through the debt ceiling of $16.3 trillion.

This chart proves it:

Chart 1: Total Public Debt

You can anticipate a major announcement soon about the debt ceiling and maybe a downgrade of the U.S. treasury by Moody's...

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James Turk: Why you should own gold

Interesting presentation from James Turk. What keeps me bullish is his Gold Money Index which still indicates that gold is way undervalued at this time.

Another item mentioned in the video (an item I've talked about many times) is the deficit to outlay ratio. The U.S. is spending money which is borrowed for 40% on average from foreigners.

The latest data on deficit to outlay ratio in August 2012 shows that we borrowed 52% from foreigners to spend on our U.S. programs (medicare, social security, defence, pensions, education...):

Chart 1: Deficit to Outlay Ratio

If we keep going this way, hyperinflation is a certainty.

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