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The Roads To Hyperbitcoinization

An examination of data that supports the increasingly discussed monetary replacement of the century — hyperbitcoinization.

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2 years ago

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An examination of data that supports the increasingly discussed monetary replacement of the century — hyperbitcoinization.

Introduction

The widespread adoption of bitcoin is a topic that has raised immense expectations for change to monetary systems, governments, and society in general. Over the years, bitcoiners have fiercely defended their belief that bitcoin represents a superior form of money and expressed a large number of hypotheses about possible pathways to the broader adoption of bitcoin. Over the years, Bitcoiners have fiercely defended their belief that bitcoin represents a superior form of money and expressed a large number of hypotheses about possible pathways to the broader adoption of bitcoin. In this article, we investigate the concept of hyperbitcoinization which represents one of the most promising potential developments of our time. By hyperbitcoinization, we mean the process of rapid and irreversible adoption of bitcoin as the primary global monetary reserve.

This article is part of a longer series wherein we outline the views and predictions made by the bitcoin community concerning the prospect of hyperbitcoinization. In our analysis we highlight "transition agents," i.e., main players, groups of players, or institutions that could accelerate the transition to a bitcoin world. For each topic, we base our arguments on the references collected, and if possible, present data that aims to verify the probability of this outcome. This first article describes top-down scenarios initiated by institutional agents or governments whose influence is expected to trickle down to a wider audience, while a second article will provide an understanding of bottom-up types of initiatives.

The views presented in this article are intended to capture the pulse of the Bitcoin community and remain hypothetical. This is an initial foray into analyzing hypothesized hyperbitcoinization scenarios; we expect that this area will require on-going investigation.

Methodology

The informational resources that most accurately reflect the extent of bitcoin adoption are often private and/or anonymous, but a significant part of the sentiment is publicly available. The methodology employed in this study can be broken down into four steps: collection, content analysis, validation/extrapolation, and convergence.

Step 1: Collection

With the aim of identifying agents of transition that may initiate a hyperbitcoinization scenario, we conducted online research of articles, blog posts, podcasts, videos, data sets, tweet samples and research papers from July 2013 to July 2021 that either contained the term “hyperbitcoinization” or referenced the rapid adoption of bitcoin:

Figure 1. Frequency of “hyperbitcoinization” in online materials.

Step 2: Analysis

Through analysis of the articles and transcripts of the videos/podcasts we identified recurring themes highlighting the current social, political, and monetary contexts, the agents or events engendering the transition to the bitcoin world, and only a few projections about the prospect of a hyperbitcoinized world.

Step 3: Validation/Extrapolation

Qualitative data collected in step 1 most often came in the form of predictions discussed within the bitcoin community that have yet to be subjected to critical examination by the wider financial and economic communities. In the following section we present a quantitative analysis that critically examines these hypothesized causal pathways by using micro and macroeconomic data from government, institutional, and public databases to extrapolate the feasibility of such scenarios.

Step 4: Convergence

In the last step, we coded each reference to hyperbitcoinization according to a descriptive theme so that we might present a coherent overview of the current discussion within the Bitcoin community. Despite the great diversity of authors, the analysis that follows shows that hyperbitcoinization predictions converge on a limited number of cases where the transition is triggered by four main groups of actors. These four groups who may influence hyperbitcoinization include central banks, governments, the private sphere, and the Bitcoin community.

Top-Down Scenarios

The financial and economic worlds, crystallized in the fiat system for the last several decades, are unable to perceive credible alternatives to their current reality. According to current economic and financial elites, a different monetary system based on the gold standard or the bitcoin standard would give rise to an anarchic and violent society wherein all concepts of law, economics, or civilization would disappear. Bitcoiners, on the other hand, offer a more optimistic narrative (Keiser and Seiche 2021). Inspired by libertarian thought, they see the government as a superfluous or useless element of society whose interventionism in the monetary field prevents the proper functioning of the market. In this view, the advent of bitcoin would restore monetary stability based on the fixed and transparent production of money.

Figure 2. Hyperbitcoinization scenarios driven by central banks. 

Central Banks

Inflation of Money Supply

Out of all the hypotheses made by Bitcoin community members, the most frequent reason cited as a possible trigger for hyperbitcoinization centers on money manipulation by central banks. At several points in history, monetary inflation set off a vicious cycle of decreased purchasing power that culminated in a complete loss of faith in the currency under inflationary pressure. In figure 3, we rank countries based on an annualized increase in broad money between the years 2015–2020.

Figure 3. Annualized monetary inflation (CAGR period 2015–2020). The World Bank. 2021. Broad Money (Current LCU). Washington, D.C.: The World Bank. https://data.worldbank.org/indicator/FM.LBL.BMNY.CN.

Unsurprisingly, figure 3 shows that a large number of countries from this sample suffer from aggressive interventionism with yearly increases of monetary supply higher than 10%. For instance, a 10% annual increase of the money supply implies a decrease in purchasing power of 40% after only five years. The stability and predictability of bitcoin supply has the potential to disrupt the vicious cycle of manipulated monies leading to the loss of faith in the manipulated currency, and elicit the interest of the general population in the hardest form of money ever invented.

Central Bank Digital Currencies

The imminent launch of CBDCs (Central Bank Digital Currencies) by several countries will undoubtedly impact the cryptocurrency industry, but it is not completely clear how this intervention will unravel. Initially we can expect central governments to nudge their populations toward CBDCs through large-scale educational campaigns that will likely have a collateral effect on bitcoin adoption. However, as the limits of centrally-governed monies emerge, we can predict this will push new users into Bitcoin’s arms for at least four of the following reasons:

  • The shadow economy is not comprised exclusively of black market trades of illegal substances and trafficking. It encompasses any economic activity or transaction that occurs without being declared to the government. Redman (2020) predicts that bitcoin could only be an alternative to a cashless society that wants to operate under the radar.
  • The emergence of CBDCs is raising serious concerns in many democratic countries. A survey conducted by the European Central Bank (ECB) highlighted that, for European citizens and merchants, the privacy of transactions was seen as the most important feature of digital currencies. Even if central banks defend themselves from surveillance, identity management based on “loosely coupled account links, can keep track of necessary data to implement prudent regulation and crack down on money laundering and other criminal offences, as well as easing the workload for commercial banks” (Fan, 2020).
  • Several central banks have already announced the development of their coins on public blockchains (South Korea on Klaytn, and the ECB most likely on either Ethereum or Tezos) or on state-controlled blockchain (e.g., China’s digital Yuan). Even if Ethereum is a blockchain with one of the largest ecosystems, its security and decentralization is questionable in comparison to the Bitcoin network. An upcoming shift from the proof-of-work to proof-of-stake consensus algorithm also involves several existential risks that should not be associated with the creation of a currency imposed upon a population.
  • The superiority of bitcoin over other currencies has long been argued by the Bitcoin community. Recently, several CBDC projects carried out by central banks confirmed this superiority and recalled the importance of a fixed monetary supply, a censorship-resistant protocol, or of pseudonymous transactions. The most advanced experiences in the field suggest that the notion of programmable money has already been tested in several forms. By issuing coupons whose use is limited to certain sectors, the local government of Chengdu (China) encourages its population to favor public transport. Even if at first glance this type of initiative seems laudable, it quickly gives a glimpse of the kinds of abuses that such a system could generate. In addition, another initiative deserving of attention allows the central government to increase money velocity by issuing e-CNYs whose validity is limited in time. Even if this feature seems to have been deployed only as a pilot project, it raises several questions about currency fungibility and, most importantly, on the immense controlling power that any central bank could have by despoiling the population.

Government

One of the most common hyperbitcoinization hypotheses is the adoption of bitcoin initiated by governments. Figure 4 describes several prospective scenarios hypothesized by the Bitcoin community that have yet to occur.

Figure 4. Hyperbitcoinization scenarios driven by governments.

State Hoarding Of Bitcoin Scenario

In this scenario, the transition toward a bitcoin standard unfolds in distinct ways whether we look at it from the angle of individuals or governments. In “Layered Money,” Nik Bhatia (2021) predicts that governments will progressively build a healthier monetary system on top of the hardest money ever created: bitcoin.

Figure 5. Nik Bhatia. 2021. “Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies.” Nikhil Bhatia.

Several countries have reported possession of bitcoin after seizing it from criminal activities, but no country has announced a specific strategy for hoarding digital assets as a reserve currency. In this context, El Salvador is an outlier in adopting bitcoin. The acceptance of bitcoin as a legal tender in El Salvador could be interpreted as an isolated political decision, but the successive announcements by the government to first implement a national mining policy with the BigBlock Datacenter and subsequently to hoard BTC, confirm the execution of a broader bitcoin strategy in the country.

“Sputnik” Trade Scenario

For decades, the dollar's status as a global reserve currency has given the U.S. the privilege to impose sanctions on a global scale (figure 6).

Figure 6. Map of countries sanctioned by U.S. Wikimedia.org, JojotoRudess, CC BY-SA 4.0 , via Wikimedia Commons.

Predictions about the demise of the hegemonic dollar are not new, but recently new narratives have appeared speculating on how the adoption of bitcoin could contribute to the decline of the U.S. dollar (Clemente 2021). If two countries suffering under U.S. sanctions start using bitcoin as a settlement layer to circumvent these sanctions, doing so may provide the same kind of rude awakening for world governments as Sputnik had for U.S. space policy in the 1960s. From that point, it could set an alternative path for other countries to replicate. Iran, whose economy has been under embargo since 1979, sits on a large reserve of fossil fuel energy that could either be exported against a payment in bitcoin or by selling hashrate. The Iranian currency could become one of the most sought after global currencies and reposition the country on the pedestal of sound money (Keiser and Seiche 2021).

El Salvador Case

The announcement made by the president of El Salvador to accept Bitcoin as legal tender was greeted as a consecration by the Bitcoin community in the word. El Salvador, whose economy has been hit hard by the Covid-19 pandemic, has long dealt with high crime rates linked to drug trafficking. The country’s dependence on the U.S. is high both in terms of exports and expatriate remittances (figure 7).

Figure 7. Total cost of transaction for remittance of $200 based on World Bank data. World Bank, Remittance Prices Worldwide, available at remittanceprices.worldbank.org,

The bill proposed by President Nayib Bukele to the legislative assembly aims to position the country on the rails of prosperity by creating job opportunities, driving more inclusion, and boosting the economy. Even if this bill created a lot of excitement among Bitcoiners, forced money law — in this case bitcoin as a legal tender — diverges from the Bitcoin community’s central values of freedom, voluntarism, and free competition (Koning 2021).

This initiative provoked mixed reactions from global financial institutions. As expected, the International Monetary Fund expressed serious concern about the adoption of bitcoin as legal tender by the Central American country and pronounced that the bill presented a number of macroeconomic, financial, and legal risks. The Central American Bank for Economic Integration (CABEI), whose mission is to promote the economic integration and social development of the Central American region, took a more constructive and pragmatic approach. They offered technical assistance to the country to help with the implementation of the new system.

Since the announcement of the bill, officials from Paraguay, Panama, and Mexico have expressed their intentions to present crypto-related bills in the coming months to duplicate the process initiated by President Bukele.

If the experience in El Salvador, whose dependence on remittances is estimated at 24% of Gross Domestic Product, translates into an improvement in economic conditions, many countries beyond Central America could be incentivized to follow the same path as shown on the following map:

Figure 8. World Bank staff estimates of personal remittance received (% GDP) for Africa & Asia based on IMF balance of payments data, and World Bank and OECD GDP estimates.

On an exploratory basis, we estimated the impact on countries’ GDP if current remittance solutions are replaced by Lightning Network (LN) payments. As part of this estimate, we assumed a zero cost LN transaction and remittance cost equivalent to the average observed for transactions of $200 in each country. Figure 9 shows that the economic impact would be particularly beneficial for countries whose dependence on foreign capital inflows is greater than 20%.

Figure 9. World Bank staff estimates of the impact of zero-cost transactions on country GDP (%) based on IMF balance of payments data, and World Bank and OECD GDP estimates.

Conclusion

This study synthesized hyperbitcoinization scenarios and identified key agents that may initiate this transition. We categorized these scenarios into two groups: (1) top-down initiatives stemming from institutional actors such as central banks and governments, and (2) bottom-up initiatives emerging from the private sphere and Bitcoin communities. This first article presented an exhaustive analysis of the “top-down” scenarios, however the current state of adoption of Bitcoin technology does not permit drawing definitive conclusions about the influence of a particular agent. Rather this article serves as a foundational framework to continue our analysis of these prospective scenarios over time. The decentralized nature of Bitcoin is often in tension with the priorities of governments and financial organizations which are centralized, but this study shows how these institutions may play a major role — intentionally or unintentionally — in a mass adoption of bitcoin.

In a second article, we will present bottom-up scenarios driven by private and individual actors as a comparison to the top-down pathways.

This is a guest post by Alexandre Bussutil. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Bibliography

Alden, L., & Posch, A. (Aug 6, 2020). Lyn Alden “Bullish On Bitcoin – A Strategic Value Investors View” https://www.youtube.com/watch?v=_D-11qqH4cM

Clemente III, W. (Jan 24, 2021). “Hyperbitcoinization. The Path To Becoming The World’s Dominant Form Of Money” https://www.bitrawr.com/hyperbitcoinization

Fan, Y. (April 1, 2020). “Some Thoughts On CBDC Operations In China” https://www.centralbanking.com/fintech/cbdc/7511376/some-thoughts-on-cbdc-operations-in-china

Keiser, M., & Seiche, L. (Jan 8, 2021). ES MCCVR 2020: Max Keiser & Lina Seiche - “Hyperbitcoinization: Maximalist Utopia or Inevitable Endgame?” https://www.youtube.com/watch?v=kese9tMFgvc

Koning, J. (June 16, 2021). “Hyperbitcoinization: By Choice or by Force?” American Research for Economic Research. https://www.aier.org/article/hyperbitcoinization-by-choice-or-by-force/

Minting Coins. (Sept 9, 2017) #88 “Hyperbitcoinization + SEC Meeting, Overstock, Google, & Byzantium Metropolis” youtube.com. https://www.youtube.com/watch?v=PgjmSGjjRvo

Redman, J. (April 6, 2020). “Hyperbitcoinization: Visions of Bitcoin Fueling the Post Covid-19 Shadow Economy” https://news.bitcoin.com/hyperbitcoinization-post-covid-19-shadow-economy/

Suberg, W., & Draper, T. (March 3, 2021). “Netflix 'Might' Be Next Fortune 100 Firm To Buy Bitcoin — Tim Draper”https://cointelegraph.com/news/netflix-might-be-next-fortune-100-firm-to-buy-bitcoin-tim-draper

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Economic Earthquake Ahead? The Cracks Are Spreading Fast

Economic Earthquake Ahead? The Cracks Are Spreading Fast

Authored by Brandon Smith via Alt-Market.us,

One of my favorite false narratives…

Published

27 mins ago

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March 8, 2024

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Economic Earthquake Ahead? The Cracks Are Spreading Fast

Authored by Brandon Smith via Alt-Market.us,

One of my favorite false narratives floating around corporate media platforms has been the argument that the American people “just don’t seem to understand how good the economy really is right now.” If only they would look at the stats, they would realize that we are in the middle of a financial renaissance, right? It must be that people have been brainwashed by negative press from conservative sources…

I have to laugh at this notion because it’s a very common one throughout history – it’s an assertion made by almost every single political regime right before a major collapse. These people always say the same things, and when you study economics as long as I have you can’t help but throw up your hands and marvel at their dedication to the propaganda.

One example that comes to mind immediately is the delusional optimism of the “roaring” 1920s and the lead up to the Great Depression. At the time around 60% of the U.S. population was living in poverty conditions (according to the metrics of the decade) earning less than $2000 a year. However, in the years after WWI ravaged Europe, America’s economic power was considered unrivaled.

The 1920s was an era of mass production and rampant consumerism but it was all fueled by easy access to debt, a condition which had not really existed before in America. It was this illusion of prosperity created by the unchecked application of credit that eventually led to the massive stock market bubble and the crash of 1929. This implosion, along with the Federal Reserve’s policy of raising interest rates into economic weakness, created a black hole in the U.S. financial system for over a decade.

There are two primary tools that various failing regimes will often use to distort the true conditions of the economy: Debt and inflation. In the case of America today, we are experiencing BOTH problems simultaneously and this has made certain economic indicators appear healthy when they are, in fact, highly unstable. The average American knows this is the case because they see the effects everyday. They see the damage to their wallets, to their buying power, in the jobs market and in their quality of life. This is why public faith in the economy has been stuck in the dregs since 2021.

The establishment can flash out-of-context stats in people’s faces, but they can’t force the populace to see a recovery that simply does not exist. Let’s go through a short list of the most faulty indicators and the real reasons why the fiscal picture is not a rosy as the media would like us to believe…

The “miracle” labor market recovery

In the case of the U.S. labor market, we have a clear example of distortion through inflation. The $8 trillion+ dropped on the economy in the first 18 months of the pandemic response sent the system over the edge into stagflation land. Helicopter money has a habit of doing two things very well: Blowing up a bubble in stock markets and blowing up a bubble in retail. Hence, the massive rush by Americans to go out and buy, followed by the sudden labor shortage and the race to hire (mostly for low wage part-time jobs).

The problem with this “miracle” is that inflation leads to price explosions, which we have already experienced. The average American is spending around 30% more for goods, services and housing compared to what they were spending in 2020. This is what happens when you have too much money chasing too few goods and limited production.

The jobs market looks great on paper, but the majority of jobs generated in the past few years are jobs that returned after the covid lockdowns ended. The rest are jobs created through monetary stimulus and the artificial retail rush. Part time low wage service sector jobs are not going to keep the country rolling for very long in a stagflation environment. The question is, what happens now that the stimulus punch bowl has been removed?

Just as we witnessed in the 1920s, Americans have turned to debt to make up for higher prices and stagnant wages by maxing out their credit cards. With the central bank keeping interest rates high, the credit safety net will soon falter. This condition also goes for businesses; the same businesses that will jump headlong into mass layoffs when they realize the party is over. It happened during the Great Depression and it will happen again today.

Cracks in the foundation

We saw cracks in the narrative of the financial structure in 2023 with the banking crisis, and without the Federal Reserve backstop policy many more small and medium banks would have dropped dead. The weakness of U.S. banks is offset by the relative strength of the U.S. dollar, which lures in foreign investors hoping to protect their wealth using dollar denominated assets.

But something is amiss. Gold and bitcoin have rocketed higher along with economically sensitive assets and the dollar. This is the opposite of what’s supposed to happen. Gold and BTC are supposed to be hedges against a weak dollar and a weak economy, right? If global faith in the dollar and in the U.S. economy is so high, why are investors diving into protective assets like gold?

Again, as noted above, inflation distorts everything.

Tens of trillions of extra dollars printed by the Fed are floating around and it’s no surprise that much of that cash is flooding into the economy which simply pushes higher right along with prices on the shelf. But, gold and bitcoin are telling us a more honest story about what’s really happening.

Right now, the U.S. government is adding around $600 billion per month to the national debt as the Fed holds rates higher to fight inflation. This debt is going to crush America’s financial standing for global investors who will eventually ask HOW the U.S. is going to handle that growing millstone? As I predicted years ago, the Fed has created a perfect Catch-22 scenario in which the U.S. must either return to rampant inflation, or, face a debt crisis. In either case, U.S. dollar-denominated assets will lose their appeal and their prices will plummet.

“Healthy” GDP is a complete farce

GDP is the most common out-of-context stat used by governments to convince the citizenry that all is well. It is yet another stat that is entirely manipulated by inflation. It is also manipulated by the way in which modern governments define “economic activity.”

GDP is primarily driven by spending. Meaning, the higher inflation goes, the higher prices go, and the higher GDP climbs (to a point). Eventually prices go too high, credit cards tap out and spending ceases. But, for a short time inflation makes GDP (as well as retail sales) look good.

Another factor that creates a bubble is the fact that government spending is actually included in the calculation of GDP. That’s right, every dollar of your tax money that the government wastes helps the establishment by propping up GDP numbers. This is why government spending increases will never stop – It’s too valuable for them to spend as a way to make the economy appear healthier than it is.

The REAL economy is eclipsing the fake economy

The bottom line is that Americans used to be able to ignore the warning signs because their bank accounts were not being directly affected. This is over. Now, every person in the country is dealing with a massive decline in buying power and higher prices across the board on everything – from food and fuel to housing and financial assets alike. Even the wealthy are seeing a compression to their profit and many are struggling to keep their businesses in the black.

The unfortunate truth is that the elections of 2024 will probably be the turning point at which the whole edifice comes tumbling down. Even if the public votes for change, the system is already broken and cannot be repaired without a complete overhaul.

We have consistently avoided taking our medicine and our disease has gotten worse and worse.

People have lost faith in the economy because they have not faced this kind of uncertainty since the 1930s. Even the stagflation crisis of the 1970s will likely pale in comparison to what is about to happen. On the bright side, at least a large number of Americans are aware of the threat, as opposed to the 1920s when the vast majority of people were utterly conned by the government, the banks and the media into thinking all was well. Knowing is the first step to preparing.

The second step is securing your own financial future – that’s where physical precious metals can play a role. Diversifying your savings with inflation-resistant, uninflatable assets whose intrinsic value doesn’t rely on a counterparty’s promise to pay adds resilience to your savings. That’s the main reason physical gold and silver have been the safe haven store-of-value assets of choice for centuries (among both the elite and the everyday citizen).

*  *  *

As the world moves away from dollars and toward Central Bank Digital Currencies (CBDCs), is your 401(k) or IRA really safe? A smart and conservative move is to diversify into a physical gold IRA. That way your savings will be in something solid and enduring. Get your FREE info kit on Gold IRAs from Birch Gold Group. No strings attached, just peace of mind. Click here to secure your future today.

Tyler Durden Fri, 03/08/2024 - 17:00

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Wendy’s teases new $3 offer for upcoming holiday

The Daylight Savings Time promotion slashes prices on breakfast.

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March 8, 2024

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Daylight Savings Time, or the practice of advancing clocks an hour in the spring to maximize natural daylight, is a controversial practice because of the way it leaves many feeling off-sync and tired on the second Sunday in March when the change is made and one has one less hour to sleep in.

Despite annual "Abolish Daylight Savings Time" think pieces and online arguments that crop up with unwavering regularity, Daylight Savings in North America begins on March 10 this year.

Related: Coca-Cola has a new soda for Diet Coke fans

Tapping into some people's very vocal dislike of Daylight Savings Time, fast-food chain Wendy's  (WEN)  is launching a daylight savings promotion that is jokingly designed to make losing an hour of sleep less painful and encourage fans to order breakfast anyway.

Wendy's has recently made a big push to expand its breakfast menu.

Image source: Wendy's.

Promotion wants you to compensate for lost sleep with cheaper breakfast

As it is also meant to drive traffic to the Wendy's app, the promotion allows anyone who makes a purchase of $3 or more through the platform to get a free hot coffee, cold coffee or Frosty Cream Cold Brew.

More Food + Dining:

Available during the Wendy's breakfast hours of 6 a.m. and 10:30 a.m. (which, naturally, will feel even earlier due to Daylight Savings), the deal also allows customers to buy any of its breakfast sandwiches for $3. Items like the Sausage, Egg and Cheese Biscuit, Breakfast Baconator and Maple Bacon Chicken Croissant normally range in price between $4.50 and $7.

The choice of the latter is quite wide since, in the years following the pandemic, Wendy's has made a concerted effort to expand its breakfast menu with a range of new sandwiches with egg in them and sweet items such as the French Toast Sticks. The goal was both to stand out from competitors with a wider breakfast menu and increase traffic to its stores during early-morning hours.

Wendy's deal comes after controversy over 'dynamic pricing'

But last month, the chain known for the square shape of its burger patties ignited controversy after saying that it wanted to introduce "dynamic pricing" in which the cost of many of the items on its menu will vary depending on the time of day. In an earnings call, chief executive Kirk Tanner said that electronic billboards would allow restaurants to display various deals and promotions during slower times in the early morning and late at night.

Outcry was swift and Wendy's ended up walking back its plans with words that they were "misconstrued" as an intent to surge prices during its most popular periods.

While the company issued a statement saying that any changes were meant as "discounts and value offers" during quiet periods rather than raised prices during busy ones, the reputational damage was already done since many saw the clarification as another way to obfuscate its pricing model.

"We said these menuboards would give us more flexibility to change the display of featured items," Wendy's said in its statement. "This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants."

The Daylight Savings Time promotion, in turn, is also a way to demonstrate the kinds of deals Wendy's wants to promote in its stores without putting up full-sized advertising or posters for what is only relevant for a few days.

Related: Veteran fund manager picks favorite stocks for 2024

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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