Here is a fascinating chart, from “The Haves and the Have-Nots,” a new book by Branko Milanovic about inequality around the world. The population of each country is divided into twenty household per-capita income groups, each including 5% of the population – hence “ventile.” Nothing to do with Starbucks. Income is adjusted to comparable purchasing power. So one can easily see that, for example, the poorest 5% of the U.S. population have about the same standard of living as the top 5% of Indians. Or that if we thought income distribution was uneven in the U.S., Brazil is far worse.

But according to Gallup, unemployment is up to 9.9%. Unlike the BLS, which takes a 1-week “snapshot” poll, Gallup polls daily and reports a 30-day average. Both methods introduce substantial but different lag, the BLS because it doesn’t report until the following month and Gallup because of the averaging. So it is hard to tell what this means for Friday’s employment report. But it is an interesting counterpoint to the “green shoots” that are being spotted everywhere. Also according to Gallup, consumer spending fell off a cliff after the holiday season was over.

I’m just interested at this point to see when the economy starts to need even more cocaine and Bernanke is forced to go to the next step, whatever that is. Just buying S&P futures, perhaps? Many suspect that is being done already on his behalf, with a nod and a wink to the PDs. In the meantime, employment (or, the lack of it) is the real story.

Obama said with the benefit of his stimulus measures, the US economy would create three million jobs in 2010. The actual number of jobs created in 2011 was 1.12 million (before final benchmark revisions). Now, the CBO is projecting 2.5 million jobs will be created annually from 2011 to 2015. From the CBO: “As the recovery continues, the economy will add roughly 2.5 million jobs per year over the 2011–2016 period.”

That is more than 200,000 jobs being created per month every month for the next 5 yrs. Moody’s economists actually estimate 270,000 jobs will be created per month on average in 2011. Yet peak annual job growth ranged from 154,000 to 178,000 during the housing boom era circa 2004-2006.

But there can and will be no housing boom in the US over the next five years that will possibly match the housing boom of the previous decade. Just the excess supply of homes alone will take to 2013 to absorb, according to JPM. With no housing related jobs to create at least until 2013, there is simply no way the US can create 2.5 million or 200,000+ jobs per month on average in 2011-2012.

Faith in the US gov’t’s ability to create 2.5 million jobs for the next 5 yrs (one of the several silly and preposterous CBO projections) is sorely misplaced. The CBO has sugarplums dancing in their heads. Their 2011-2016 forecast for the US jobs market is disingenuous, misleading poppycock. Optimists making bets in the stock market based on a huge recovery in the jobs market spurring consumer demand had better think twice (and check The Hackett Group research below).

Egypt is apparently a non-event already, just like the ongoing sovereign debt struggle in Euro-land. And the sliding real estate market.

Home values are falling at an accelerating rate in many cities across the U.S.

The Wall Street Journal’s latest quarterly survey of housing-market conditions found that prices declined in all of the 28 major metropolitan areas tracked during the fourth quarter when compared to a year earlier.

The size of the year-to-year price declines was greater than the previous quarter’s in all but three of the markets, the latest indication that the housing market faces considerable challenges.

Inventory levels, meanwhile, are rising in many markets as the number of unsold homes piles up.

No matter how much money you have, government can spend more than you have.

A state oversight board on Wednesday seized control of Nassau County’s finances, saying the county, one of the nation’s wealthiest and most heavily taxed, had nonetheless failed to balance its $2.7 billion budget.

The Social Security Ponzi has begun to unravel. Disregard any comments about the “trust fund” – there is none, it is an accounting fiction. Starting now, the Social Security deficit is a charge against general revenues and must be paid out of general revenues or new Treasury borrowings.

This year alone, Social Security will pay out $45 billion more in retirement, disability and survivors’ benefits than it collects in payroll taxes, the nonpartisan Congressional Budget Office said. That figure nearly triples – to $130 billion – when the new one-year cut in payroll taxes is included.

The U.S. Treasury is far worse off than statements about the supposed deficit would have you believe. The actual deficit is running at a rate of well over 20% of GDP. And this is supposed to be a recovery?

The following tables from the US Treasury for January 21, 2011 (Friday) and January 22, 2010 (Saturday) show the public debt of the US Treasury has increased from $17.422 trillion to $20.713 trillion, a surge of almost $3.3 trillion in one year. So, the official budget deficit doesn’t tell the real US debt story. Please note that the current US ‘Public Debt Issues’ is 44.75% higher than the $14.3 trillion debt limit because it includes bailouts, Fannie Mae, Freddie Mac, student loans and other off-balance sheet funding.

When does the string run out? Inquiring minds want to know…

The Federal Reserve Open Market Committee met today and voted to continue destroying the U.S. economy by discouraging savings and investment, encouraging government spending and other wasteful consumption, raising mortgage rates, inflating commodity prices, increasing the concentration of wealth and, oh yes,  debasing the currency.

I keep seeing stuff from supposedly knowledgeable people that suddenly exposes that they really don’t have a clue. The latest one is forecasts of inflation that will occur when “banks start using their reserves to make loans.”

Aaah, excuse me. Banks don’t need reserves to make loans. Banks need reserves for two reasons only – primarily, to provide the means to settle transactions, and secondarily to meet regulatory requirements. Banks represent to depositors that they have “money in the bank.” Which is not actually true, they have the bank’s promise to provide them with money – liquidity – when it is needed to make a payment. That is what the reserves are for – they are that liquidity. These days, regulatory requirements are almost non-existent and certainly irrelevant so I really only mention them for the sake of completeness.

It is critical to understand that the Federal Reserve is a bank with a balance sheet like any other bank. The Fed has acquired a staggering pile of securities – agencies, Treasuries and miscellaneous garbage it has picked up in the course of various rescues, bailouts, special deals, subsidies and favors. These assets must be matched by liabilities, which are made up of the Fed’s capital (tiny), deposits from member banks (reserves) and notes – Federal Reserve notes printed on little pieces of green paper.  Unless and until the bank stops buying new assets, bank reserves must of necessity continue to increase since capital and currency issuance will change only slowly. However, they far exceed any reasonable need for liquidity, or statutory requirement, and so will have no effect on lending or deposit taking. Eventually, one hopes, the Fed will reduce its securities holdings and at that time bank reserves will be reduced.

The reason that bank credit is tight is because bank capital is impaired. We are not permitted to know how badly it is impaired because the FASB has granted the banks permission to conceal their unrealized loan losses. Only the banks have any real idea of how bust they are, and whatever that idea is hopefully informs their risk-taking and lending policies. The Fed is trying to make the banks profitable enough to replenish their capital fast enough to offset the realization of those losses. The Fed does this by keeping a steep yield curve, so banks can borrow for nothing or next to it, and earn a 4+% interest margin on risk-free securities like 30-year Treasuries. It also allows them big markups and commissions on the Treasuries that they buy and resell to the Fed in POMOs. These actions rob taxpayers and savers to subsidize bank losses. Nifty, eh?

And look, POMOs are a big success, according to Chairman Bernanke on CNBC:

“Policies have contributed to a stronger stock market just as they did in March 2009, when we did the last iteration of this. The S&P 500 is up 20%-plus and the Russell 2000, which is about small cap stocks, is up 30%-plus.”

I’m sure the unemployed and the homeowners who are watching the value of their property decline in the face of rising interest rates are impressed with his achievement. MBA reported this morning that mortgage applications are pretty much falling off a cliff and Case-Shiller yesterday noted another in a chain of price declines. Well done, Mr. B.