Post 224

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.


  • The US is still creating a lot of new jobs.
    • Many of them in government.
  • Job growth in Canada has flattened despite a still soaring population.
    • Government “administrative” job growth has gone through the roof over the last four years.
  • Core inflation in Europe slowed a bit, but headline inflation was up due to the ending of various government subsidies that lowered prices last year.
    • But food inflation remains elevated.
      • Thanks in part to Pepsi?
  • French food retailer giant Carrefour is removing some Pepsi products from their shelves to protest against Pepsi’s never-ending price increases.
  • Vittles is another word for food: you’ll see.
  • The UK will be short of the diabetes drug Ozempic until the end of 2024 as so many non-diabetic people are taking the drug for weight-loss.
  • In Financial Ructions:
    • Chinese shadow Bank Zhongzhi has filed for bankruptcy liquidation.
      • Liabilities exceed assets by around US$30 billion.
    • An FDIC board director cautions against the moral hazard they are creating with each taxpayer bailout of risky behaviour that goes awry.
    • A few notes from my Ivy Quarterly Report of June 2012


US Jobs

  • Oct: 105,000
  • Nov: 173,000
  • Dec: 216,000

Note that ten of the last eleven monthly jobs numbers have ultimately been revised lower by an average of 45,000 jobs per month.

Unemployment rate unchanged:

  • September: 3.8%
  • October: 3.8%
  • November: 3.7%
  • December: 3.7%

Sectors hiring the most people:

  • Government: 52,000
    • Quelle surprise
    • Average monthly government jobs created:
      • 2022: 23,000
      • 2023: 56,000
      • PM: Spoiler alert, this is not good for the productive capacity of the economy.
  • Leisure and hospitality: 40,000
  • Health care: 38,000
    • Average monthly health care jobs created:
      • 2022: 46,000
      • 2023: 55,000
  • Social assistance: 21,000
  • Construction: 17,000

Sectors firing the most people:

  • Transportation and Warehousing: -23,000
    • Of which, Couriers and Messengers were down 32,000 jobs.
  • Since October, Transportation and Warehousing is down 100,000 jobs.

Canada Jobs Growth Flat In December

Number of new jobs created:

  • Oct: 18,000
  • Nov: 25,000
  • Dec: 100
    • Down were:
      • Self-employed workers: -17,600
      • Goods producing workers: -42,900
        • Biggest of which was:
          • Manufacturing: -18,300
          • Construction: -13,900
    • Up were:
      • Service production workers: +43,100
      • Professional, Scientific and technical: +45,700
      • Wholesale and retail trade: -20,600
  • Ontario lost 48,000 jobs.

Meanwhile the population of those 15yrs and older keeps increasing.

  • Monthly increases:
    • Oct: 85,000
    • Nov: 78,000
    • Dec: 74,000
      • Average monthly increase for the year is 79,000.

Thus, the employment rate or the percentage of the population 15yrs and older that are employed fell:

Jan 2023: 62.5%

Dec 2023: 61.6%

Average hourly wage growth:

  • Nov: 4.8%
  • Dec: 5.4%

Canada Entering Administration

In the UK, when a company goes into bankruptcy protection it’s called “Administration”.

The two Canadian government departments that employ by far the most people:

  • “Administrative” Services: 45,514
    • Up 34% since 2019
  • Program “Administration”: 40,873
    • Up 60% since 2019.

Seems like the Canadian government is administering perhaps the most unproductive job growth in Canadian history.

Thanks to ES for putting me on to this.

Europe Core Inflation Ticking Down

Inflation in Eurozone (those using the Euro currency):

  • September: 4.3%
  • October: 2.9%
  • November: 2.4%
  • December: 2.9%
    • Note that part of the increase is a result of last year’s government subsidies for things like food and energy not being continued.

Core inflation excluding food and energy:

  • November: 3.6%
  • December: 3.4%

Food prices:

  • November: 6.3%
  • December: 6.7%


  • November: -11.5%
  • December: -6.7%

Inflation excluding energy:

  • September: 5.5%
  • October: 4.9%
  • November: 4.3%
  • December: 4.0%

Inflation by country:

  • Austria: 5.7%
  • France: 4.1%
  • Germany: 3.8%
  • Spain: 3.3%
  • Italy: 0.5%

Breaking (price) Point

Pepsi brands include:

  • Pepsi
  • Mountain Dew
  • Gatorade
  • Bubly
  • Tropicana
  • Lay’s
  • Doritos
  • Ruffles
  • Sun Chips
  • Cracker Jack
  • Cheetos (my favourite, but deadly)
  • Quaker Oats

The WSJ reports that French food retailer Carrefour will stop selling a number of Pepsi Co. products due to unacceptable price increases.

Pepsi Europe prices increases over the last few quarters:

  • 1Q/23: +23%
  • 2Q/23: +20%
  • 3Q/23: +13%

PM: I guess the French food retailer doesn’t Carrefour Pepsi’s pricing strategy.

Thanks to CH for putting me on to this.

Honey I Shrunk the Vitts

Shrinkflation is where companies shrink the amount of food in a container but charge the same price.

  • Effectively increasing the price of the product.
  • And usually keeping the container the same size and hoping people won’t realise they’ve just been screwed.
  • The WSJ reported that the above-mentioned Carrefour started marking products with a bright orange label that it believes represent shrinkflation.
    • And that the French government was proposing a law that would require companies to clearly mark when the content of a package had been reduced.
    • PM: I like it.

More Shrinkflation

More people are taking diabetes drug Ozempic in order to lose weight.

  • The UK government has warned that this is leading to shortages of the drug for those who have diabetes.
    • Shortages will last until the end of 2024.
  • As a result, The UK Department of Health and Social care has cautioned medical professionals to not prescribe the drug for non-diabetes indications.

Financial Ructions

Liquidation Sale

Nikkei Asia reports that the Chinese shadow Bank Zhongzhi has filed for bankruptcy liquidation.

  • According to the Beijing No.1 Intermediate People’s Court:
    • It was “already impossible to clear off debts that are reaching maturity.”
    • The court will look for a liquidator of Zhongzhi’s assets.
    • Assets: 200 billion Yuan
      • $US 28.1 billion
        • Note that their assets have gone down from when I last posted on this at the end of November when they were estimated at $US 38 billion.
    • Liabilities: 420-460 billion Yuan
      • $US 59 – 65 billion
  • Two executives linked to the company have disappeared.
  • Apparently, the company has apologized.

My post from November 28th, 2023

The BBC reports that Chinese shadow bank Zhongzhi Enterprise Group (ZEG) is being investigated for financial crimes.

  • The company has reported that it is “severely insolvent.”
    • Assets: $38 billion
    • Liabilities: $64 billion.
    • PM: That will do it.
  • Shadow banks are not subject to the same regulatory measures as traditional banks.
  • The estimated value of the Chinese shadow banking system is roughly $3 trillion.

According to Andrew Collier of Orient Capital Research, bank loans to troubled property developers amount to 30% of the banking system’s assets.

A few notes from a speech by FDIC (Federal Deposit Insurance Corporation) board director Jonathan McKernan on January 5, 2024 talking about actions taken by authorities on the banking failures last spring i.e. SVB and Signature bank:

  • One lesson of the events of last March is that, despite 15 years of reform efforts, we still have a system that privatizes gains while socializing losses.
  • Some argue there was no bailout. But private parties—namely the uninsured depositors—that were otherwise on the hook to absorb SVB and Signatures’ losses did not take those losses thanks to extraordinary action by the FDIC; instead, thanks to that extraordinary action, those losses were borne by others. That’s a bailout.
  • To be clear, I still believe our decision to invoke the “systemic risk exception” was the right decision given the apparent risks to financial stability and the economy at the time.16 Even if it was the lesser of two evils, we should be honest about what we did with SVB and Signature, and we should acknowledge that that bailout has not only fostered moral hazard but also has undermined public confidence in the basic fairness of our banking system.
  • No system is adequate if we ourselves do not have the courage and conviction to pull the trigger and impose losses on the private parties that are supposed to bear those losses. 
  • To actually end our bailout culture, we have to not only accept the inevitability of bank failures and implement strong capital requirements and an effective resolution framework, we also must summon our own conviction and courage to push forward and actually privatize the losses when the time comes, as someday it most surely will.

PM: Spoiler alert, authorities will not have the “courage to act” when that time “most surely” arrives.  They will always use the threat of “systemic risk” in order to socialise the losses.

  • In the case of SVB, Moody’s estimated that uninsured depositors would lose 10-20cents on the dollar.
    • Others had lower loss estimates.
  • Some companies had deposits of hundreds of millions of dollars or more:
    • Circle Internet Financial (stable coin firm): $3.3 billion
    • Roku: $420 million
  • And they would have recovered 80-90% of their deposits and they likely had deposits at other banks as well.
  • Regardless, those uninsured depositors were making the absurd threat that if they weren’t bailed-out that they wouldn’t be able to pay their employees.
  • Of course, this was the perfect excuse authorities needed to make them all whole.
  • The cost to the FDIC was over $16 billion, which it collects in fees from the banks.
    • Of course, that cost will then be passed-on to bank customers.

PM: I wrote for many years about the moral hazard engendered by the never-ending bail-out mentality of policymakers and as in the example above, they continue to revert to the Great Financial Crisis bail-out playbook.

  • Below are a couple of bits from my June 2012 Ivy Quarterly Report.

Ivy Quarterly Report: June 2012

We believe that policymaker actions, while well-intended, have only served to prolong and worsen the crisis. Many weak companies have been kept afloat with cheap financing, and investors have been repeatedly rescued from poor capital allocation decisions. With each bail out, policymakers encourage the very behaviour that caused the problems in the first place, as risk becomes increasingly ignored and, thus, mis-priced.

From F.A. Hayek:

“The first need is to free ourselves of that worst form of contemporary obscurantism, which tries to persuade us that what we have done in the recent past was either wise or inevitable. We shall not grow wiser before we learn that much that we have done was very foolish.”

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

Submit your email to get notifications about new Paulitical Economy™ posts and updates: