Per the relevant update in Franklin County, below is unemployment data since January 2008:

Month		Unemployment
2008	January	3.7
2008	February	3.7
2008	March	4.0
2008	April	4.0
2008	May	4.0
2008	June	4.4
2008	July	4.4
2008	August	4.2
2008	September	4.2
2008	October	4.0
2008	November	4.5
2008	December	5.2
2009	January	6.0
2009	February	6.5
2009	March	6.4
2009	April	6.5
2009	May	6.1
2009	June	5.8
2009	July	5.5
2009	August	5.0
2009	September	4.5
2009	October	4.4
2009	November	4.3
2009	December	4.2
2010	January	4.2
2010	February	4.2
2010	March	4.0
2010	April	3.9
2010	May	3.5
2010	June	3.2
2010	July	3.2

Per the relevant updates in Franklin County, below is a table of Franklinite inflation data since January 2008:

Month		Inflation
2008	January	+ 0.8
2008	February	+ 0.1
2008	March	- 0.2
2008	April	+ 1.1
2008	May	- 0.5
2008	June	+ 1.8
2008	July	+ 3.2
2008	August	- 0.5
2008	September	+ 2.3
2008	October	+ 4.5
2008	November	+ 2.0
2008	December	- 0.4
2009	January	+ 1.0
2009	February	- 0.9
2009	March	- 0.5
2009	April	+ 4.0
2009	May	+ 1.9
2009	June	+ 1.5
2009	July	+ 2.0
2009	August	+ 2.2
2009	September	+ 0.3
2009	October	- 1.2
2009	November	- 0.5
2009	December	- 0.2
2010	January	- 0.4
2010	February	- 0.3
2010	March	- 0.4
2010	April	- 0.2
2010	May	- 0.1
2010	June	- 0.2
2010	July	- 0.1

As promised, below is the historical series of Franklinite GDP growth. GDP growth first began to be tracked in 2008, and has been calculated for every month since January 2008. The numbers are adjusted for inflation, and are calculated at an annualized rate:

Month	GDP Growth
2008 January	+ 0.9
2008 February	+ 0.8
2008 March	+ 0.9
2008 April	+ 0.5
2008 May	+ 0.06
2008 June	+ 0.3
2008 July	+ 1.0
2008 August	+ 2.0
2008 September	+ 1.0
2008 October	+ 4.2
2008 November	- 0.5
2008 December	- 0.9
2009 January	- 2.5
2009 February	- 1.5
2009 March	- 0.5
2009 April	- 0.7
2009 May	+ 1.0
2009 June	+ 1.4
2009 July	+ 2.5
2009 August	+ 1.2
2009 September	+ 1.9
2009 October	+ 1.8
2009 November	+ 4.5
2009 December	+ 5.1
2010 January	+ 5.0
2010 February	+ 4.5
2010 March	+ 4.9
2010 April	+ 3.8
2010 May	+ 3.1
2010 June	+ 4.5
2010 July	+ 5.9

Below is the GDP per capita, which is the GDP divided by the number of residents:

Month	GDP per Capita
2008 January	40 190
2008 February	40 529
2008 March	40 917
2008 April	41 156
2008 May	41 183
2008 June	41 309
2008 July	41 998
2008 August	42 852
2008 September	43 285
2008 October	45 089
2008 November	44 863
2008 December	44 465
2009 January	43 354
2009 February	42 074
2009 March	41 569
2009 April	41 237
2009 May	41 649
2009 June	42 232
2009 July	43 287
2009 August	43 806
2009 September	44 638
2009 October	45 436
2009 November	46 899
2009 December	47 505
2010 January	47938
2010 February	48 225
2010 March	49 671
2010 April	48 667
2010 May	49 640
2010 June	50 385
2010 July	49 981

This will be updated as data is released every month.

Since the last economic report, both the US economy and stock market have weakened considerably. First I will cover the economy.

The unemployment rate for June (the U3 rate) was "officially" 9.5 percent, a decrease of 0.2 percentage points from May. However, this measure of unemployment is inaccurate because it excludes those who are unemployed but not looking for work, as well as those employed part-time for economic reasons. The U5 includes the U3 plus discouraged workers, and the U6 additionally includes people working part-time for economic reasons.

These rates show a lesser improvement than the U3. The U5 rate in June was 11.0 percent, unchanged from May. The U6 rate was 16.5 percent, down by 0.1 percentage points from May. These figures also include seasonal adjustments, which may distort the data, so for the sake of completeness, I'll include the non-adjusted data.

The rates not seasonally adjusted actually got worse in June. The U5 was at 11.1 percent, up from 10.6 percent in May. The U6 was 16.7 percent, up from 16.1 percent in May. Overall, the employment situation is not getting any better, and the separate payroll data show that non-census job growth continues to be extremely weak, and not sufficient to keep up with population growth. In other words, according to this survey unemployment is actually increasing, an even worse reading than the rates have.

Meanwhile, housing starts, sales, as well as mortgages have continued their decline, pumped up only by the expiration of the homebuyer tax credit in one month so far this year. This temporary boost was paid back in the form of a record pace of decline in housing the next month.

Just this morning retail sales data came in, showing the second consecutive monthly decrease. In June retail sales dropped by 0.5 percent, following a 1.1 percent drop in May. This is a significant decline in retail sales, and if this continues through the quarter, which it probably will, then the GDP for Q2 and especially Q3 will be dragged down, and might show a decrease in the official numbers.

Of course, the official numbers include a government understimation of real inflation on the order of 2.7 percent. Adjusting for this factor, the GDP was barely positive in the first quarter, even with stronger retail sales than what we have at the present time.

With weaker retail sales, which represent consumer spending, which is 70% of the economy, it seems unlikely that the GDP can remain positive. If the GDP goes negative, it will ignite calls of a double-dip recession. However, I think that it would be more accurately considered to be a singular depression, since the recovery was composed of a series of barely-positive numbers around late 2009 and early 2010. Also, the magnitude of the decline is such that it can be classified as a depression according to most figures.

The European debt crisis so far appears to not have caused a worldwide credit freeze and crash as initially feared, but as I have said, the Euro debt troubles are not the problem, they are the symptom of a problem with the credit markets. More specifically, there appears to be a stealth credit crunch at present, caused by key credit spreads widening, indicating that there may be trouble ahead much like there was in 2008.

The stock market has weakened as well, and several key bear-market signals have emerged. First up, a look at the S&P 500 Index over the past 3 months:



There have been ups and downs, but the trend is clearly downward. At the low in June (1010.91), the stock market was down by 17.1 percent from the April peak, which in market terminology relative to the April high is a severe correction. Of course, relative to the 2007 high, we've been in a bear market the whole time, even at the April peak.

Recently there has been a rally, but it seems to have halted right at the 50-day moving average, just like the last one, indicating that the downturn will in all likelihood continue.

Aside from this, there are other signs of a bear market. Look at the orange line -- that is the 200-day moving average. Then look at the green line -- that is the 50-day moving average. Notice that the 50-day crosses below the 200-day around the end of June. That is a "death cross", which is a classic bear market signal. Every bear market in history has been heralded with a death cross, although not every death cross has resulted in a bear market. This mainly covers shallow crosses of a lesser steepness than what we have had recently.



There is also another indicator which signals a downturn -- a head-and-shoulders pattern. Basically it is a top in a stock market rally (or bull market) which consists of a rally to a new peak, then a downturn, then a rally to a higher peak, and then another downturn, which is followed by another rally to about the point where the first peak was. The culmination of the top is when there is a downturn after the last peak below the "neckline", the line which connects the two lows.

That is the bear market signal, and it is usually correct, especially when the neckline slopes downward. It so happens that this neckline slopes downward, making the bear market signal stronger.

All of these events lead to my prediction that the downturn in the stock market will progress to a bear market relative to the April high, and the end of the little bull market which began in March 2009 and topped in April 2010.

This is only the second chapter in the Crash of 2010 series, but a lot has happened over the past month. The stock market and economic situation is deteriorating, but there are a few bright spots.

First, the U3 unemployment rate dropped by 0.2 percentage points to 9.7 percent, but this does not tell the whole story, because the U3 excludes those who are discouraged or employed part-time for economic reasons. U6 includes these people, and that measure dropped by 0.5 percentage points, declining to a seasonally adjusted 16.6 percent or 16.1 percent not seasonally adjusted.

This is good news, but it remains stuck about where it was in October 2009, over 9 months ago. Also, the other side of the employment report, payrolls, showed an increase of 430 000 jobs, but 411 000 were temporary Census workers, meaning that less than 20 000 jobs were really created. This indicates that the small rebound in the employment situation may be withering.

Meanwhile, the European debt situation continues to get worse. Hungary is on the verge of a financial collapse due to crushing debt. If Hungary collapses, it probably will not in itself affect the world economy.

However, these impending defaults and debt crises, combined with the widening of credit default spreads generally, plus the steady increase in the LIBOR rate, point to a broader trend of an impending credit crunch, of which Hungary, Greece, Spain, Portugal, and so many others including Portugal and Dubai.

This credit crunch will affect the wider world economy in the future, likely this year or possibly next year. This time, however, it is not the banks alone which are overburdened with debt, it is the governments of the world. The governments now are in the same situation as the banks were in 2008, and when they fail, there will be no bailouts. Without government support and constant infusions of cash, bailout money, and special favors, the banks will go down with the governments, because the banks are now dependent on governments.

However, there may be a bailout in the end. Governments do not have the government to bail them out, but they have one tool -- it is called the printing press. The central banks have the ability to create new money to buy up government bonds, thus they can keep governments afloat in a credit crisis when no one will be willing to buy government bonds. However, there is a side effect of money-printing -- price inflation. The more money is printed, the more inflation there will be, and this will increase the cost of government operations, thus precipitating more money creation, and a vicious cycle initiates which results in hyperinflation.

Both hyperinflation and credit crises result in depressions, but hyperinflation results in inflation, and credit crises result in deflation, a seemingly contradictory indication. This is reflected in gold rising and oil falling, two commodities that usually move in the same general direction.

Since the central banks around the world have already printed money in huge quantities and creating a "recovery" with no employment gains driven by inflation, debt-laden zombie banks, and government spending, hyperinflation could strike any time between now and 2013. In the classic case of Germany in the early 1920's, the time between seeming recovery and outright hyperinflationary depression was only a few months.

Meanwhile, the stock market is deteriorating markedly. After an initial crash, the stock market rebounded tremendously, but failed at the 50-day moving average. The market then took a downturn (not sharp enough to be a crash) below the 200-day moving average. The S&P 500 Index has not moved above the 200-day moving average since May 20, and has attempted to move above it twice since then, but failed both times.

On top of that, the 50-day moving average is falling rather rapidly, and if the current situation continues, will cross below the 200-day moving average. Additionally, the number of shares traded is generally lower on upswings than downswings. This all portends bad news. Below is a 3-month chart of the S&P 500 index:



A move below the 200-day moving average of this magnitude is indicative of a bear market, and the one we are currently in (2007-2010) has resumed. The 2009-2010 little bull market was more akin to a bear market rally than a cyclical bull market, but didn't really meet the qualifications for either (like the original 1929-1930 little bull market).

In short, the saga of the Crash of 2010 continues, and the situation is looking worse.

June 1 marks the start of the designated hurricane season in the North Atlantic Ocean. The conditions in this upcoming season are perhaps the most favorable for hurricane formation in recorded history -- there is a weakening El Nino event and possible La Nina developing, wind shear is at low levels, and sea surface temperatures are the highest ever recorded for this time of year.

These conditions are even more favorable than the conditions preceding the infamous 2005 hurricane season by a large margin. The 2005 season was so infamous because it produced a record 28 tropical storms, including a record 4 Category 5 hurricanes (the highest possible category). The season produced numerous monster storms which devastated large parts of the Atlantic coastline.

Forecasts are calling for 14 to 23 tropical storms in this season, and conditions are steadily getting more favorable, so it is possible that there could be more storms than in this range.

In honor of the extremely active season which is upcoming, I have changed my desktop wallpaper to this:



It is a picture of 2007's Category 5 Hurricane Felix, as seen from the ISS. I think this is one of the best hurricane pictures ever taken, and that is why I selected that one.

(Excerpted from The New Patrician Showcase Update 17: Halter's Coastline and Impending Redevelopment)

Yes, you read that title correctly. We are currently in the midst of a stock market crash, tentatively named the Crash of 2010. Since peaking on April 26, 2010, the stock market has entered into a downtrend.

This downtrend accelerated into a stock market crash on May 6, 2010. On this day, the Dow Jones Industrial Average at one point was down by 998.5 points, or 9.19 percent, down to 9869. The Dow rebounded off of that low, but remained sharply downward for May 6, closing down by 348 points at 10 520. This was in addition to losses the previous two days, and on May 7, 2010, the losses continued, with the Dow currently standing at 10 380.43.

The consensus definition of a stock market crash is a steep double-digit percentage loss over a period of several days. This downturn meets that definition.

On April 26, 2010, the Dow Jones Industrial Average reached a high of 11258.01, and the S&P 500 reached a high of 1219.80. These levels marked a gain of 74 percent from the low on March 6, 2009 on the Dow, and 82.94 percent on the S&P.

At the low of May 6, 2010, the Dow stood at 9869.62 and the S&P at 1065.79. These two figures represented a 12 percent decline from the peak. In a three-day period between May 3 and the low of May 6, the Dow dropped by more than 11 percent. This meets the most common definition of a stock market crash.

There's more.

All three major indices are now down for the year 2010. What took months to gain was lost in three days.

Below is a 1-year chart of the S&P 500 index, showing the huge gash in the chart the likes of which has not been seen since 2008:


The chart picture is also deteriorating fairly rapidly. Look below:



As foretold by this blog since December, the rising wedge pattern has long been broken, and the stock market attempted a final push to new highs on very low volume, highlited in the lower graph. The gap between the 200-day and 50-day moving averages has also narrowed.

Since the peak on April 26, volume has shot up, with more shares trading hands on down days than up days. The index has also broken below the 50-day moving average, and during May 6, went below the 200-day moving average.

If the S&P moves below the 200-day moving average in the near future, the future for the market is bleak to say the least. Moves below this line is considered indicative of a bear market. Also, if this downturn continues, the 50-day moving average may move below the 200-day moving average, which has occurred in every single bear market in history.

What is the cause of this historic crash? It is mainly driven by troubles in Europe. The Greek Debt Crisis is spreading throughout the region, with one country after another moving closer to default due to huge debts and insufficient revenue. This situation is occuring throughout the world due to the interconnected financial system, and also because of many countries, including the US, facing the same situation as Greece.

What is feared is a domino effect which could tip the world into another economic depression. If this indeed happens, which in my opinion is likely, then the same problems which faced the world in 2008 will return.

This is due to the fact that the underlying problems in 2008 have not been corrected. What the bailouts and inflationary measures did was merely prolong the inevitable correction, and indeed will end up magnifying it. The underlying problem was a collapse of the inflationary credit boom which was created by the Fed, as well as the collapse of the housing boom. This collapse, if allowed to take place, would have resulted in a short, deep depression in which there would have been massive bankruptcies, bank failures, and a great liquidation of the bad asset, such as subprime mortgages and toxic CDOs. After this was all cleaned out, the economy would have quickly recovered.

Instead of doing this, governments worldwide masked the problem by bailing out banks, buying up their bad debt and assets, and instituting inflationary money-pumping on a scale unprecedented in the history of mankind. This produced an unsustainable inflation-driven dead cat bounce off the lows of the 2008 depression.

However, now that the governments have assumed the problems of the banks, the governments are now facing the exact same problems the banks did in 2008. When these governments collapse, there will be no one to bail them out, and this will produce another economic depression.

Furthermore, to stem the collapse of the government, central banks will print even more money than they have to buy up the government's bad debt. This massive inflation will lead to a massive depreciation in the value of currencies worldwide, plunging the world into a hyperinflationary depression.

The European debt crisis is but the first sign of what is to come, and this reality is now bearing out in the markets. While the stock market crashed, along with oil and other commodities, as well as every major currency in the world, gold was up. In fact, the price of gold is skyrocketing to over $1210 per ounce. This is despite the fact that relative to other crashing currencies, the dollar is stronger.

In other words, everything is crashing except gold. Why gold? Because gold is the ultimate safe-haven investment, and it will come out on top during either a debt default crisis or, especially, a hyperinflationary depression.

Collapses such as this usually have a deflationary effect, and indeed the 2008 one did have a deflationary effect, but this was and is more than made up for by inflationary effects from money-pumping worldwide.

The reality of the worldwide situation in the future is upon us now. The Crash of 2010 will be as remembered and feared as the three famous crashes throughout history: 1929, 1987, and 2008.

The next economic report will come when it is merited, as current events make a monthly schedule imprudent.

Below is the text of the Franklinite Military Reorganization Act of 2010, as referenced in Update 305 of Franklin County.

Franklinite Military Reorganization Act of 2010

Section I

The Franklin Military Council is hereby dissolved upon the appointment of the Commander-in-Chief under Section III, and each member of the Council shall resume their previous commands within the Franklinite military, provided the member in question does not choose to retire if eligible.

Section II

The entirety of the functions of the Franklin Military Council shall be transferred to the new office of Commander-in-Chief of the Franklin County Military.

Section III

The Commander-in-Chief shall be appointed by the Assembly for a term of 1 year, among eligible candidates who have submitted a statement of candidacy by the Judiciary on or before the day prior to the appointment vote, as scheduled by the Assembly. The appointment vote shall be taken by preferential ballot. Every voting Assemblyman shall be required to rank all the candidates.

Section IV

To be eligible as a candidate for the Commander-in-Chief, the person must:

1) Be a citizen of Franklin County not serving a sentence for a crime
2) Be a current or retired member of the Military

The second requirement may be overridden by unanimous vote of the Assembly.

Section V

In the case of death, resignation, or sentencing of the Commander-in-Chief, the Assembly shall appoint a new Commander-in-Chief within 5 days of such death, resignation, or sentencing, to serve for the duration of the previous Commander-in-Chief's term. In the time between these two events, the member of the Military possessing the highest rank with the most time in such rank shall act as Commander-in-Chief.

Section VI

Incapacity of the Commander-in-Chief shall be determined by a special assembly of members of the Military with the highest, second-highest, and third-highest rank. To convene the assembly requires the concurrence of three members of the Military eligible to participate that the Commander-in-Chief is incapacitated. The special assembly shall then make the determination of capacity by majority vote. If the Commander-in-Chief is found to be incapacitated, the procedure of Section V shall be followed.

Section VII

This act shall take effect on May 1, 2010.

Although I usually end up putting a bearish spin on the economy and stock market, I for once have good news to report in the April 2010 Economic Report.

On net, in the month of March 2010, more people were hired than fired. Yes, there is net job growth, and on top of that, it is marginally good job growth. Payrolls for the month of March rose by 162 000. This is more than the 150 000  or so needed to keep up with population growth, so even with that taken into consideration, there was a net gain of 12 000.

But here is the flipside of this bright story in the payrolls -- 48 000 of these new jobs were temporary hires for the 2010 census, and these jobs will disappear in a few months without any question. Therefore, it is questionable whether these 48 000 should be considered as real job growth. Discounting census workers, it rachets the figures back below the level needed to keep up with population growth.

However, even if the job growth is not keeping up with population growth, it is still good news, as it is growth, and it is the best growth in 3 years. There are still 8 million jobs which were lost during the depression, and a 120 000 job growth blip in one month will barely put a dent in this number. It should be closely watched in the next few months to see if it is sustainable.

There is also the payroll number's twin, the unemployment and underemployment rate. The unemployment rates have not budged despite the better payroll number. The official rate (U3) is steady at 9.7 percent on a seasonally adjusted basis, and it actually went down by 0.2 points without a seasonal adjustment (to 10.2 percent), but this does not tell the whole story, as it excludes discouraged workers and those working part-time for economic reasons.

U5 takes into account the discouraged workers, and this showed, on a seasonally adjusted basis, no change, holding steady at 11.1 percent. On a non seasonally adjusted basis, it showed a big improvement of 0.4 points, registering at 11.5 percent.

U6 takes into account discouraged workers and those working part-time for economic reasons, and that showed a slight worsening, up by 0.1 points on a seasonally adjusted basis, registering at 16.9 percent. On a non seasonally adjusted basis, it showed an identical improvement to the U5 rate, of 0.4 points, registering at 17.5 percent.

The unemployment rate is still telling things are flat to slightly worse, whereas the payroll numbers are getting flat to slightly better. This does not tell a tale of recovery, since in every single actual recovery there ever was:

- GDP will show real and sustained growth
- Payrolls will show real and sustained growth
- Unemployment and underemployment will steadily go down
- There won't be large inflation or deflation

The only criterion satisfied thus far is the last one, inflation. It has remained officially at around zero, but the official inflation underestimates real inflation by 2.7 percent (possibly more), so inflation has actually maintained a 3 percent increase since the end of the January-March 2009 downleg in the market.

That said, there are huge inflationary pressures coming to bear on the economy, due to the extraordinary interest-rate lowering and money-printing of the Federal Reserve. The money supply had doubled, but most of it is in bank reserves. As soon as that money filters out into the economy when banks start lending (only a perception of a recovery is needed for this), then expect a huge spike in inflation, which will snuff out any recovery, and lead to a hyperinflationary depression.

We may have already seen a taste of this, as after the inflationary money-pumping, banks started to lend more, and as a result, inflation went from 0 after the crash (where it ideally should be), to 3 percent, in less than a year. And that was the result of consumer credit declining more slowly, not growth.

Meanwhile, the stock market has gotten a boost out of the good news, although looking at the charts, the current position of the market is precarious to say the least:



In the 53 trading days since the bottom of the January downturn, the market has been up 39 days, and down only 14. Half of these down days occured before March, and since then, it has been a nearly nonstop upward climb.

On top of this, it has been on low volume, meaning that the rally is more anemic than it ever was. Also notice that volume is much higher on the down days than the up days, which means that when investors decide to trade, they do not buy, they sell.

The lack of buying pressure makes this rally unsustainable. On top of that, the rising wedge pattern, which supported the little bull market since its inception, collapsed last January.

Also note this chart of the 50 and 200 day moving averages:



Since reaching a maximum separation last October, they have steadily been closing in on each other, and especially so since January.

All these factors combined tell me, as they did last month, that the little bull market is entering its death throes, a last low-volume push higher (a la Summer 2007), before resuming the bear market. This will still hold true in the absence of any real recovery, but if and when a real recovery arrives, the picture might look different.