News From GodOfTrading

[godoftrading]

Goldman to make record bonus payout

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company's prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm's second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company's shares in January, has already made a $1bn gain on his investment.

Goldman is expected to be the biggest winner in the race for revenues that, in 2006, reached £186bn across the entire industry. While this figure is expected to fall to £160bn in 2009, it will be split among a smaller number of firms.

Barclays Capital, Credit Suisse and Deutsche Bank are among the European firms expected to register bumper profits, along with US banks JP Morgan and Morgan Stanley following the near collapse and government rescue of major trading houses including Citigroup, Merrill Lynch, UBS and Royal Bank of Scotland.

In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff, including about 5,400 in London.

Critics of the bonus culture in the City said the dominance of a few risk-taking investment banks is undermining the efforts of regulators to stabilise the financial system.

Vince Cable, the Liberal Democrat treasury spokesman, said: "The investment banks more than any other institutions created the culture of excessive leverage, excessive risk and excessive bonuses that led to the downfall of the financial system. Now they are cashing in and the same bonus culture has returned. The result must be that we are being pushed to the edge of another crash."

Goldman Sachs said it reviewed its bonus scheme last year and switched from a system of guaranteed rewards that were paid over three years to variable payments that tied staff to the firm. It told employees last year that profit-related bonuses would be delayed by 12 months.

Until the release of its first quarter profits in April, it seemed inconceivable that a firm owing the US government $10bn would be looking to break all-time records in 2009.

David Williams, an investment banking analyst at Fox Pitt Kelton, said: "This year is shaping up to be the best year ever for investment banks, or at least those that have emerged relatively unscathed from the credit crisis.

"These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money. There is also a lack of competition that means they can charge huge sums for doing business."

Last week, the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

http://www.guardian.co.uk/business/2009/jun/21/goldman-sachs-bonus-payments
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[godoftrading]

China Car Sales Jump 48%, Most Since 2006

July 9 (Bloomberg) -- China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006, as government stimulus spending spurred a revival in the world’s third-largest economy.

Chinese motorists bought 872,900 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall auto sales, including buses and trucks, rose 36 percent from a year earlier to 1.14 million.

A 4 trillion yuan ($585 billion) economic package has helped China surpass the U.S. as the world’s largest auto market this year and boosted sales for companies from General Motors Corp. to Alcoa Inc. The country is “a positive force” that will help drive growth as the world emerges from the global recession, billionaire George Soros said yesterday.

“China’s downward slide is clearly over,” said Wang Qingtao, an analyst at First Capital Securities Co. in Shenzhen. “There is also huge natural demand for vehicles, which will continue to drive the industry for years to come.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aitR1CpS3KT8
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[godoftrading]

Some foreign banks drop U.S. clients because of UBS flap

By Kevin McCoy, USA TODAY

The closely watched Justice Department court fight to get the names of 52,000 suspected American tax evaders from Swiss banking giant UBS has prompted some other foreign banks to drop U.S. clients they once welcomed, tax experts said Monday.
Eager to avoid a similar struggle with federal prosecutors, banks including Credit Suisse and HSBC in recent weeks have notified American clients they must close their offshore accounts or transfer them to the institutions' U.S.-based operations, where tax reporting requirements are far stricter.

"Overall, the international banking community, and particularly the offshore banking community, has been very friendly to American account holders," said William Sharp, a tax law specialist at the Sharp Kemm law firm in Tampa. "That changed in the past couple of months as a result of the UBS case."

U.S. District Judge Alan Gold in Miami on Monday granted an adjournment until Aug. 3 to enable federal prosecutors and attorneys for UBS and the Swiss government to continue negotiations toward a potential settlement. The Justice Department on Sunday said any deal must include data "on a significant number of individuals with UBS accounts."

The owner of an HSBC account in Jersey, one of the English Channel islands, recently received a 45-day notice to close the account, said Robert McKenzie, a tax law specialist at Arnstein & Lehr in Chicago. A client with an offshore Credit Suisse account got a similar notice, he said.

Credit Suisse said, "We strongly believe that we adhere to the highest compliance standards, applicable laws, regulations and policies."

HSBC stressed it doesn't comment on specific client matters, and said the bank "abides by the letter and spirit of the law in every country in which it operates."

Other Swiss banks initially welcomed clients who shifted assets from UBS as the legal fight began last year. The eager greeting turned to reluctance as the trial date loomed, said Charles Rettig, a tax expert at Hochman Salkin Rettig Toscher & Perez in Beverly Hills.

Some foreign banks elsewhere now avoid offshore business with Americans because they know the Justice Department plans "to extend this effort to other jurisdictions beyond Switzerland," said Martin Press, a tax expert at Gunster Yoakley Valdes-Fauli & Stewart in Fort Lauderdale.

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[godoftrading]

Verleger Sees $20 Oil This Year

http://www.bloomberg.com/apps/news?pid=20601109&sid=aQBXqFcd5gJo

July 16 (Bloomberg) -- Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.

“The economic situation is not getting better,” Verleger, 64, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”

Crude oil last traded at $20 a barrel in February 2002. Futures were at $61.18 today in New York, having recovered 89 percent from a four-year low reached last December. The Organization of Petroleum Exporting Countries is implementing record supply cuts announced last year in response to plunging consumption.

“OPEC don’t realize the magnitude of the cuts they need to make,” which would total about a further 2 million barrels a day, Verleger added. “Storage is going to become tight. It’s not clear if there’s going to be enough storage available.”

China, Inflation

Oil will average $63.91 in the fourth quarter, according to the median of analyst forecasts compiled by Bloomberg. Crude for December delivery traded at $65.61 today in New York. Prices have rebounded on expectations of a demand recovery, led by China and other developing economies, and concern expansionary monetary policy would stoke inflation and weaken the dollar.

At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011.

“China is in a real desperate situation,” said Verleger, who publishes the Petroleum Economics Monthly. “We’re in a situation where U.S. consumers aren’t consuming and Chinese manufacturers get hurt. Economists are looking for growth in all the wrong places.”

Forward contracts for oil have been higher than prices for immediate delivery this year, a situation known as contango, creating incentives to buy crude now and store it. That may end as growing stockpiles make storage more expensive.

“Prices would be much lower today, but for the very large incentive to build inventories,” Verleger said. “You need forward buyers, which we had when people were fearing inflation, but as concerns turn toward deflation” that will no longer be the case.

To contact the reporters on this story: Grant Smith in London at [email protected]
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[godoftrading]

Ten principles for a Black Swan-proof world

By Nassim Nicholas Taleb

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

 

[godoftrading]

Big Ben’s Dilemma

The Sovereign Society Offshore A-Letter
Monday, July 20, 2009

Financial “Hindsight” Set to Ruin Investors:
The Inconvenient Difference between
What the Fed Does and what the Media Says

Dear A-Letter Reader,

Hindsight’s a funny thing…

I mean now, today, it seems painfully obvious that the business of loaning money to people who can’t pay you back…well, that’s bound to fail. Today, it’s pretty obvious that auction-rate securities can be prone to the “stampede” effect. And it’s also pretty obvious that selling hundreds of trillions worth of Credit Default Swaps (bankruptcy bets) introduces serious systemic risk…

And yet, we did all these things for years.

Financial analysts toted the value of AAA-rated securities…Cramer & CNBC lauded bank stocks and REITs while the U.S. real estate market was clearly in bubble mode.

But then something funny happened…

When the bubbles came crashing down…when average investors like you and I pushed retirement back by another year…when the mom & pop pensioners went broke…it all became “clear as day” to the financial media.

In the heat of the moment, most commentators offered advice that was little better than a coin-flip (and often disastrously worse). But in hindsight, the pundits all really were the people their marketing promised to be.

They talked about the ‘bubble’ like scholars. As though it’d always been a fact of life…not a multi-trillion dollar booby trap that somehow suckered ‘em all in.

In the eyes of the uneducated observer – one that doesn’t remember Cramer’s Bear Stearns buy in early March of last year – this is where they get their credibility. They talk smart…they mention metrics and news that the professionals are keen on. And if you’ve got a short memory…well, they’ve got you hooked.

But what if this isn’t your first rodeo?

What if you know these guys are missing something…you just can’t put your finger on it. What if you don’t want their stupidity costing you in the long run? It’s only fair.

Well if that’s what you’re looking for, then you need to understand…
Big Ben’s Dilemma…

The realization first struck me when I read about Big Ben Bernanke’s photo-op today, and what’s expected of him…

To bring you up to speed; remember that Ben needs low interest rates. Why? Because the mortgage market is still garbage, and an impending wave of resets and recasts could send defaults through the roof and torpedo any chance of recovery. The higher the rates, the more intense the damage.

So Ben pulled every last rabbit out of the hat when it came to keeping rates low…even going to the extent of printing money to buy government debt (something like Weimar Germany did in the '20’s and Japan did in the '90’s).

But this puts Ben in a tight spot…

Think about it; he could open up the printing press and literally flood the world with dollars. This would cure any mortgage problems in the U.S., but it would also avail us of meaningful economic activity. In other words; this option is kind of fixing a broken leg by chopping it off.

But – if he’s mindful of inflation…and he keeps his printing to a minimum – then all his effort so far could become worthless. As an academic, he insists that this very reluctance to print money was what made the Great Depression of the 1930’s so brutally intense.

In the short-term, Bernanke’s actions saved us from wholesale failure of the U.S. financial sector last year.

But at what cost?
The Difference between Stabilization and Recovery

That very question is on the tip of everyone’s tongue here lately; how much is this going to cost us in the long run?

Ultimately, concern over the answer served to lengthen the Great Depression of the 1930’s. These days, it’s on the brink of forcing Bernanke to show his hand…namely; whether he’s playing toward stabilization…or he’s playing toward recovery.

To calm fears about what Bloomberg calls, “the biggest monetary expansion in history,” Ben is prepared to tighten the belt on his pool of funny money. One of the most prominent options for making that happen would be, “establishing term deposits at the Fed designed to induce banks to keep money there rather than lending it out.”

Wait a second. Hit the brakes…

Did he say that he was going to incentivize banks not to lend out money?

That’s curious.

I mean; hasn’t the general party line – the phrase spouted so often by Obama and his posse – that we need to “get lending going again,” that we need to “spur on lending…”

Then there’s my personal favorite… “Credit is the lifeblood of our economy.”

So let’s work this out practically; if credit is the lifeblood of our economy…and the forces of bankruptcy and default are slowly causing us to bleed out…then doesn’t recovery necessitate growth in credit?

You just got it. Right there…Ben’s not talking about recovery.

Obama and Bernanke aren’t saying the same thing. Bernanke and CNBC aren’t saying the same thing. Obama and CNBC are the only two out of the three that actually agree…

Bernanke – through his cautious actions and statements – is acting in the interest of stabilizing the U.S. financial system. Even after spending so many billions, bailing out so many slimy bankers…the man’s still got a full plate. He’s “monkey-in-the-middle” between the threat of inflation and a rapidly deteriorating U.S. housing market.

Obama and CNBC – on the other hand – apparently missed the memo…because they skipped ahead to “hindsight” on the stabilization bit.

After saving a handful of prominent campaign contributors like Goldman and AIG, both seemed to take the optimistic tack, sometimes declaring “the worst is over,” or even declaring an outright end to recession.

Why they would think to do this is beyond me and the page I have left for today’s A-Letter. Call it a matter of vested interest…an occasion of “say it ain’t so”…or a repeat of the early days of the Great Depression.

Some might even observe the fact that if you and I buy into this recovery – with what’s left of our portfolios – then it will be more likely to succeed; that there’s something vaguely conspiratorial about this whole arrangement. To that I shrug…and remind you of Clark’s law (Never assume malice where sufficiently advanced incompetence will do).

Instead, the most important thing for you to remember now is this; if you’re out there investing today, you’re investing amid active stabilization of the economy—and not during a recovery.

For a few words on what that means to you, I talked to our Chief of Research, Andrew Packer…
Stabilization & Your Portfolio

“Stabilization is the renunciation of a process known as ‘creative destruction’ – something seen today in the form of bankruptcies and defaults. On a deeper level though, creative destruction is what allows economies to succeed over time…

“Defaults may be bad…even punitive to the parties involved. But they’re the penalty in a free-market system for poor choices. Those who correctly recognized the risk and shorted were rewarded. It’s all part of the profit system as defined by a system of capitalism (as opposed to the profit system as defined by investment banks).

“At first, creative destruction might seem painful or even unfair. But in the long run it opens up an economy for innovation and new industries…contributing to greater efficiency and an economy better fit to serve a changing populace.

“The renunciation of creative destruction – often euphemized as ‘stabilization’ – tends to correspond to a shift toward state intervention…one which destroys capital, innovation, and freedom.

“It’s the process by which bad loans are kept on the books of banks that should be bankrupt. It’s the process that keeps things frozen, or moving at such a slow pace that true recovery is delayed—potentially for years.

“Ultimately, the only thing that’s being stabilized here is failure.

“For the sovereign investor, the implications are clear: stabilized markets make for poor investment returns. Since that can happen at any time, diversification and liquidity remain your best defense against this type of market performance. Markets that involve physical ownership, such as silver and gold, offer slightly more safety from stabilization than paper markets—including debt and equities.”

Yours in Personal Sovereignty,

Matthew Collins

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[godoftrading]

Call for Rapid Recovery Is Bubble All Its Own

July 27 (Bloomberg) -- Hats off to officials in Seoul.

South Korea’s ability to expand at the fastest pace in almost six years is some of the best news Asia has had in a long while. It’s a sign that even with the $14 trillion U.S. economy in chaos, Asia is beating the odds and holding its own.

For now, at least. The region can’t be complacent for two reasons. One, increased spending and low interest rates are fine for the moment, yet they don’t replace a return of global demand. Two, loose policies may be doing more to fuel bubbles that merely provide the illusion of economic recovery, leaving Asia even more vulnerable to further problems in markets.

The 2.3 percent growth Korea generated in the second quarter dovetails with optimism that East Asia’s rebound from the global crisis may be “V-shaped,” not U-shaped or W-shaped. The Asian Development Bank said just that in a report last week. It recommended that central bankers retain expansionary monetary policies even as risks to recovery dissipate.

http://www.bloomberg.com/apps/news?pid=20601039&sid=awbeFpo0K1kw
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[godoftrading]

Toyota’s domestic output down over 40%

TOKYO -- Toyota Motor Corp. posted its steepest domestic output drop for November in 30 years, with sales and exports tumbling to decade lows while local rivals cut production to counter dwindling auto demand world-wide.

Toyota said Wednesday that its domestic production dropped 27.2% in November from a year earlier to 288,138 vehicles -- the firm's sharpest November fall since 1978 from when its historical output data are available.

The announcement comes two days after Japan's largest car maker by volume forecast its first-ever operating loss in the current fiscal year through March, hurt by falling demand and the yen's strength, which is cutting into its profits more sharply than expected.

Some analysts warn that its earnings could get worse further down the road, indicating more output drops may come.

"We still cannot see an earnings bottom," Kota Yuzawa, analyst at Goldman Sachs, said.

Toyota's output in Japan declined as domestic sales skidded 27.6% and exports sagged 23.9% in that month. The sales fall is the biggest for November at least since 1966, and the export drop is the largest for the month since 1978 when exports sank 24.8%, a Toyota spokeswoman said.

For 2008, the automobile maker said Monday that its domestic production will fall 5% as sales at home and in overseas markets will drop, though it declined to provide an output outlook for 2009.

http://online.wsj.com/article/SB123011725097232599.html
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[godoftrading]

Goldman downgrades Morgan Stanley

NEW YORK (MarketWatch) -- Shares of Morgan Stanley fell about 1.5% Wednesday after analysts at Goldman Sachs trimmed their rating on the stock to neutral from buy.

GS cautioned on MS trading and wealth-management businesses, but did say that several ongoing programs at Morgan Stanley are likely to create shareholder value.

Goldman lowered Morgan's price target to $32 a share from $34. Morgan Stanley was lately trading at $27.01.

http://www.marketwatch.com/story/downgrade-clips-morgan-stanley-as-financials-fall-2009-07-29-10300
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[godoftrading]

Great Depression II Is Here

A Scary Reality

By BOB HERBERT
Published: August 10, 2009

http://www.nytimes.com/2009/08/11/opinion/11herbert.html?_r=2&hp

Last week was a pretty good one for President Obama. Bill Clinton helped out big time when he returned from North Korea with the American journalists Laura Ling and Euna Lee. Sonia Sotomayor was elevated to the Supreme Court. And Friday’s unemployment report registered a tiny downward tick in the jobless rate.

But for American workers peering anxiously through their family portholes, the economic ship is still sinking. You can put whatever kind of gloss you want on last week’s jobs numbers, but the truth is that while they may have been a bit better than most economists were expecting, they were still bad, bad, bad.

Some 247,000 jobs were lost in July, a number that under ordinary circumstances would send a shudder through the country. It was the smallest monthly loss of jobs since last summer. And for that reason, it was seen as a hopeful sign. The official monthly unemployment rate ticked down from 9.5 percent to 9.4 percent.

But behind the official numbers is a scary story that illustrates the single biggest challenge facing the United States today. The American economy does not seem able to provide enough jobs — and nowhere near enough good jobs — to maintain the standard of living that most Americans have come to expect.

The country has lost a crippling 6.7 million jobs since the Great Recession began in December 2007. No one is predicting a recovery in the foreseeable future powerful enough to replace the millions of jobs that have vanished in this historic downturn.

Analysts at the Economic Policy Institute noted that the economy has fewer jobs now than it had in 2000, “even though the labor force has grown by around 12 million workers since then.”

Two issues that absolutely undermine any rosy assessment of last week’s employment report are the swelling ranks of the long-term unemployed and the crushing levels of joblessness among young Americans. More than five million workers — about a third of the unemployed — have been jobless for more than six months. That’s the highest number recorded since accurate records have been kept.

For those concerned with the economic viability of the American family going forward, the plight of young workers, especially young men, is particularly frightening. The percentage of young American men who are actually working is the lowest it has been in the 61 years of record-keeping, according to the Center for Labor Market Studies at Northeastern University in Boston.

Only 65 of every 100 men aged 20 through 24 years old were working on any given day in the first six months of this year. In the age group 25 through 34 years old, traditionally a prime age range for getting married and starting a family, just 81 of 100 men were employed.

For male teenagers, the numbers were disastrous: only 28 of every 100 males were employed in the 16- through 19-year-old age group. For minority teenagers, forget about it. The numbers are beyond scary; they’re catastrophic.

This should be the biggest story in the United States. When joblessness reaches these kinds of extremes, it doesn’t just damage individual families; it corrodes entire communities, fosters a sense of hopelessness and leads to disorder.

The unemployment that has wrought such devastation in black communities for decades is now being experienced by a much wider swath of the population. We’ve been in deep denial about this. Way back in March 2007, when the official unemployment rate was a wildly deceptive 4.5 percent and the Bush crowd was crowing about the alleged strength of the economy, I wrote:

“People can howl all they want about how well the economy is doing. The simple truth is that millions of ordinary American workers are in an employment bind. Steady jobs with good benefits are going the way of Ozzie and Harriet. Young workers, especially, are hurting, which diminishes the prospects for the American family. And blacks, particularly black males, are in a deep danger zone.”

The official jobless rate is now more than twice as high — 9.4 percent — and even more wildly deceptive. It ticked down by 0.1 percent last month not because more people found jobs, but because 450,000 people withdrew from the labor market. They stopped looking, so they weren’t counted as unemployed.

A truer picture of the employment crisis emerges when you combine the number of people who are officially counted as jobless with those who are working part time because they can’t find full-time work and those in the so-called labor market reserve — people who are not actively looking for work (because they have become discouraged, for example) but would take a job if one became available.

The tally from those three categories is a mind-boggling 30 million Americans — 19 percent of the overall work force.

This is, by far, the nation’s biggest problem and should be its No. 1 priority.
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