http://www.usdebtclock.org/
Friday 29 May 2009
Thursday 28 May 2009
Pyramid, egg, diamond, or onion?
According to a report by the Trades Union Congres, Britain is now an onion-shaped society – with a few at the top, a bulge of people below the middle and fewer at the bottom.
Bascially, during the last 40 years, two trends are identified: the rise of a small group of super-rich and a greater concentration of the population in the bottom half of the income distribution range.
Specifically, the income distribution has become increasingly positively skewed, as the mean net household income in 2007 stood at £463 a week, 23 per cent higher than the median (£377 a week).
It has long been argued that the globalization has promoted the the shift to outsourcing. The low cost of offshore workers have enticed corporations to buy goods and services from foreign countries. The laid off manufacturing sector workers are forced into the service sector where wages and benefits are low, but turnover is high . This has contributed to the deterioration of the middle class which is a major factor in the increasing economic inequality in the western countries. Families that were once part of the middle class are forced into lower positions by massive layoffs and outsourcing to another country. This also means that people in the lower class have a much harder time climbing out of poverty because of the absence of the middle class as a stepping stone.
The primary beneficiary of globalization was the developed countries Consumer with lower prices. It is now apparent that the lower prices came at the cost of a deteriorating standard of living and middle class. The rotation of jobs into “new and better jobs” has not materialized and is not apparent.
This will certainly have important implications for the evolution of the international trade policy in western countries, especially during the downturn of global economy. The historically strong development pace of globalization in the past 60 years might moderate or even decelerate in the near future as a result of the deteriorating economy conditions in the western countries and the driving forces of the uncomfortable middle class, who might now stand up to claim back their lost benefits...
Bascially, during the last 40 years, two trends are identified: the rise of a small group of super-rich and a greater concentration of the population in the bottom half of the income distribution range.
Specifically, the income distribution has become increasingly positively skewed, as the mean net household income in 2007 stood at £463 a week, 23 per cent higher than the median (£377 a week).
It has long been argued that the globalization has promoted the the shift to outsourcing. The low cost of offshore workers have enticed corporations to buy goods and services from foreign countries. The laid off manufacturing sector workers are forced into the service sector where wages and benefits are low, but turnover is high . This has contributed to the deterioration of the middle class which is a major factor in the increasing economic inequality in the western countries. Families that were once part of the middle class are forced into lower positions by massive layoffs and outsourcing to another country. This also means that people in the lower class have a much harder time climbing out of poverty because of the absence of the middle class as a stepping stone.
The primary beneficiary of globalization was the developed countries Consumer with lower prices. It is now apparent that the lower prices came at the cost of a deteriorating standard of living and middle class. The rotation of jobs into “new and better jobs” has not materialized and is not apparent.
This will certainly have important implications for the evolution of the international trade policy in western countries, especially during the downturn of global economy. The historically strong development pace of globalization in the past 60 years might moderate or even decelerate in the near future as a result of the deteriorating economy conditions in the western countries and the driving forces of the uncomfortable middle class, who might now stand up to claim back their lost benefits...
Wednesday 27 May 2009
The Non-Sense of Non-Sense?
"According to an overwhelming majority of economists surveyed by the National Association for Business Economics, The recession in the U.S. will end this year, and joblessness will average 9.1%, More than 90% of the respondents expect the recession to end sometime this year, while 74% expect it to end in the third quarter."
Of course, these are the same folks who said there would not be a recession two years ago. Given their "excellent" track record and "wonderful" informed opinions, we can safely ignore this noise?
Of course, these are the same folks who said there would not be a recession two years ago. Given their "excellent" track record and "wonderful" informed opinions, we can safely ignore this noise?
A Dynamic Commodity Long/Short Strategy
I have recently developed a dynamic commodity long/short strategy, which is built upon a number of factors related to fundamentals, technicals, and market sentiments. Historical back-testing is very promising. Given the current volatilie market condition, this should be appealing for investors who are seeking enhanced performance but with conservative risk appetite...
Debt Debt Debt!!!
I saw this article on FT this morning,
"The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years."
"The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?"
Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.
The fact that the Federal Reserve is now buying longer-term Treasuries in an effort to keep Treasury yields low adds credibility to this scary story, because it suggests that the debt will be monetised. That the Fed may have a difficult task reducing its own ballooning balance sheet to prevent inflation increases the risks considerably. And 100 per cent inflation would, of course, mean a 100 per cent depreciation of the dollar. Americans would have to pay $2.80 for a euro; the Japanese could buy a dollar for Y50; and gold would be $2,000 per ounce. This is not a forecast, because policy can change; rather it is an indication of how much systemic risk the government is now creating.
"The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years."
"The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?"
Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.
The fact that the Federal Reserve is now buying longer-term Treasuries in an effort to keep Treasury yields low adds credibility to this scary story, because it suggests that the debt will be monetised. That the Fed may have a difficult task reducing its own ballooning balance sheet to prevent inflation increases the risks considerably. And 100 per cent inflation would, of course, mean a 100 per cent depreciation of the dollar. Americans would have to pay $2.80 for a euro; the Japanese could buy a dollar for Y50; and gold would be $2,000 per ounce. This is not a forecast, because policy can change; rather it is an indication of how much systemic risk the government is now creating.
Monday 18 May 2009
Beer Beats Wine in Recession
A Chart compares beer and domestic wine prices from January 2008 to March 2009.
"While alcohol beverages are sometimes thought to be recession-proof, we're seeing significant evidence of changes in consumers' dinning and buying habits. People are buying larger package sizes, more domestic beverages and taking less of an experimental approach..."
"While alcohol beverages are sometimes thought to be recession-proof, we're seeing significant evidence of changes in consumers' dinning and buying habits. People are buying larger package sizes, more domestic beverages and taking less of an experimental approach..."
Friday 15 May 2009
Thursday 14 May 2009
Monday 11 May 2009
China Consumer Spending vs. Savings
If you want to know whether the China story is sustainable, consider this chart — then imagine what the US version of this looks like:
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Chart Source: Merrill Lynch, “U.S. Economics, January 2009”
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