Centrist Macron beats far-right Le Pen in French election; US jobs data gives Fed ammo for rate hike; McClay to talk TPP with Vietnam; UST 10yr yield up to 2.35%; oil and gold remain low; NZ$1 = 69 US¢, TWI-5 = 73.8

While Macron appears to have won convincingly, 65% to 35%, the far right has received a record amount of support. At 39, Macron will be France’s youngest president.

~35% of voters could not bring themselves to commit to either candidate. Read more

No surprises in the French election, the Banker won. The venerable French investor Charles Gave:
Macron is a big, empty suit. That’s what he is. You did the right curriculum vitae, he went to the right schools. And you have the feeling that the guy never had an original idea in his life. He was always a good student.

And moreover, there is a strong suspicion that he’s a kind of golem created by Hollande and all these guys. So since they knew they were going to lose the election, they created a guy in a hologram that would run for them and prevent them from losing power. So to a certain extent, the French political system has been captured by what you can call the Technocratic class. And whether from the left or the right, it didn’t make any difference. And this Technocratic class is presenting Macron as a brand new fellow. He is nothing brand new. These guys have been in power for 50 years for God’s sakes. So this is basically nothing.

If Le Pen wins, it’s pretty simple. The bond market in France, Italy, Spain cannot open on Monday morning. And I suppose the euro is dead in the following week. And then you have to buy Europe like crazy. Southern Europe. Why Southern Europe? Because it is Germany’s markets that would bear the brunt of the selloff, as the dissolution of the euro and European Union would effectively bring about the end of Germany’s economic hegemony (while at the same time benefitting France). The Germans have made a colossal mistake, which is that they have all the production in Germany. So they’re extremely efficient, well-organized, and they have developed massive current account surpluses. Half of that surplus is in cars. The margin on cars is around 4%. Imagine that the euro breaks down.

The deutschmark comes back. The deutschmark goes up 15, 20%. And the whole German industry, all the production base in Germany, becomes bankrupt in no time at all.
https://www.theautomaticearth.com/2017/05/debt-rattle-may-7-2017/

The US job market has rebounded more than expected, supporting the Federal Reserve’s call that weak first quarter results were just “transitionary”.

Hmmmmmm...

And yet, there is no magic anywhere, as wage growth remains as subdued as the economy is.

The Fed seems still in a rush to “raise rates”, though for what it can’t really be sure. As of their latest projections, released coincident to the last RHINO in March 2017, the range for “full employment” is now figured to be between 4.3% and 4.7%; a materially different forecast than in December 2012 when it was thought inflation might start with an unemployment rate as high as 6.0%.

What this history shows for those unencumbered by the ideology of the Phillips Curve is that they really have no idea what is going on, or why. This cannot be a scientific pursuit, for they have simply followed the unemployment rate with their projections, leaving them utterly meaningless. The lower it goes, the lower they have to go because even at 4.4%, as currently figured, there is neither inflation (that isn’t insultingly due to oil) nor wage acceleration; therefore, there just cannot be the magic “full employment.”

The latest payroll report simply advances the contradiction for still another month. The unemployment rate falls a little further, closer again to the hugely reduced lower bound, and all the while the labor force refuses to expand and wages remain just as they were throughout these past few years of “full employment” games quite against all historical experience. Read more

(Friedman via Jeff Snider!)
" People have a great misconception... that the way you solve things is by electing the right people. It’s nice to elect the right people, but that isn’t the way you solve it. The way you solve things is by making it politically profitable for the wrong people to do the right things."
http://www.alhambrapartners.com/2017/05/05/the-wrong-people-have-an-inn…

Frexit delayed a little, it seems. France is still tearing itself apart and despite the media preoccupation with Presidents, France, like America, is actually a democracy, with the lower house (roughly equivalent to the House of Commons), being the most powerful institution. So that is where the battles really take place.

The Euro is destroying Europe and turning it into a German colony. This is NOT the fault of the mislead German people, they just want a currency that can be trusted. It is the result of the Imperial Policy of the French enarques who dominate the thinking in France and Brussels. The German people had to give up their beloved Deutschmark as the price of French approval for re-unification.

There is a lot of noise around the annual wage growth falling to 2.5% from 3+% level a year ago in the US. Economists dread the economic impact of this would be a drop in private consumption and anemic future GDP growth.
We, however, seem to be morbidly comfortable at consistent all-time low wage growth levels of 1.5-1.6%.