http://www.nytimes.com/2013/01/19/business/economy/car-sales-continue-to-fall-in-many-developed-countries.html?ref=business&_r=0
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"Everyone takes the limits of his own vision for the limits of the world." (Arthur Schopenhauer)
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The NYTimes.com reported today that U.S. industrial production for 2012 was up 2.2%, pushing it past the 2006 average for the first time since the recession started in 2007. Car sales have come back up but not to pre-recession levels.
Looking at the trend lines for car sales and industrial production across countries and especially at the U.S. versus the Eurozone gives the feeling that worldwide markets aren't back yet.
Local BMW dealers here in Dallas were quoted this week as being excited to get added inventory to sell from Europe where BMW just wasn't moving units.
Local housing in Dallas is looking up according to the Dallas Morning News survey of price changes in pre-owned single-family homes for 2012. Percentage changes were up in all but three of the 45 Dallas-area residential districts tracked. Prices increased at an average of 6% and are expected to increase in 2013. Good news.
Mauro Guillen, a professor at the Wharton School, referred this week to the Eurozone as having fallen into a "double-dip recession." Certainly, the trend lines I referred to above reinforce that perspective.
If we think of the world as three major economic zones, plus emerging markets, then we have China "growing" at a GDP growth rate that's less than it was (7% to 8% maybe), the Eurozone in a double-dip recession, and the U.S. looking at better numbers in key economic sectors but not all the way back yet. I think those three major world economic powers need to be "all" coming back at the same time because there are enough interconnections that, if one of the three has slipped, it makes it harder for the other two - so BMW is sending cars to the U.S. But what is the U.S. sending to the Eurozone, and in what volume?
These are just some "thoughts."
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The IMF increased their expectations of 2013 growth too. Industrial production is a tricky thing. People have more money to spend, but for how long. We could view this as stimulus money converting into consumer demand. Even if this is legit. Interest on loans must still be paid. It only puts off an inevitable correction. But lets leave that to later generations. Maybe some scientists will discover some new things to do and create a whole new industry that destroys significantly less GDP than it creates. Hopefully, this new industry will start in the U.S. too.
ReplyDeleteAlso, car sales may increase, but where does the revenue go? Buying Ford gives USA more money than buying Toyota, right? However, manufacturing of some vehicles remains over in America for Toyota. Distribution of revenue by country for the entire supply chain could complicate your line of thinking too.
I happened to watch some economists talking about a variety economic topics, including your ole buddy Krugman. They went on about how now is the best time for U.S. to borrow, interest rates are negative after all. What??!! I thought they were full of it, but look at TIPS.
http://research.stlouisfed.org/fred2/series/DFII10?cid=82
An explanation for TIPS is provided here:
http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips.htm
So.... yeah.... kind of weird.
Europe and China are disappointing. I doubt everyone is going to try to make this as smooth as possible. Everybody wants some kind of justice as things come tumbling, which will decrease the efficiency and speed of recovery. William Ackman and Joseph Stiglitz went on Charlie Rose and briefly spoke about a simple methodology for resolving liquidity issues with banks.
ReplyDelete[there are 3 parts]
http://www.youtube.com/watch?v=AWs4W9J_JDQ
However, political realities always intervene (bare with me). The Chinese apparently financed a huge amount of debt that ended up financing Fannie Mae and Freddy Mac mortgages. The two government machines really have been used since the 1970's if not earlier to stimulate the economy. This book would explains it better than I can:
http://www.amazon.com/dp/1609497694#_
Then, you have the homebuyers themselves struggling keep up with their mortgage due to market corrections that sufficient public opinion believes should receive financial assistance.
What can we expect from other financial tragedies? Europe and Chinese investors facing huge losses will drag their feet as much as possible. Just a thought. China has a more unified leadership but more corruption and less integrity that ultimately translates into bad data, information asymmetry causes misdistribution of resources. Europe has more data with much better accuracy yet fragmented leadership. I am willing to bet laws vary widely throughout European countries as well as political realities.
Positive. Positive. Positive. The Federal Reserve can keep pumping money into the economy. That will eventually cause inflation, but jobs seem to be a higher priority short term despite academic literature that proves inflation yields long term growth disadvantages greater than increasing employment. Some NYTimes ran a story a month or so ago about this... bah you find it. Should we take their word? Who knows... almost all economists missed the crisis. Wages increasing and housing market activity rising could result from all this. Will the Federal Reserve raise rates upon sensing inflation? Will politics realistically allow the effective federal fund rates to rise?
ReplyDeleteRegardless of inflation, Obama publicly acknowledged plans exist to bring back manufacturing to U.S. However, his statements seem to focus on bringing manufacturing processes and products that require relatively much more research to develop. That's cool more jobs but perhaps more expensive or less profitable products. I suppose government big wigs are not that interested in bringing back manufacturing of commoditized products. However, how long before the Chinese duplicate these products and begin selling them across the world at a cheaper price? Maybe some more jobs return net return on the products might decrease but employment will increase. Again: inflation verses employment. Some articles threw in lines like this decision disagrees with mainstream economics. But then industry professionals say there are ways to manufacturer some things cheaper in the U.S. that currently reside in China. Comparative advantages... There is always the dynamic the Chinese do not offer programs like Medicare and Social Security. What about all the other departments and agencies that provide regulation, social safety nets, justice for all, etc..?? I am pretty sure China has less. Government costs less in China. China does not have to tax as much. China has a surplus of highly educated people and hundreds of millions of poor people. In other words, China has cheap labor. Unfortunately, this all means significantly lower living standards for Chinese citizens compare to citizens of America. Lets also remember China owns enormous amounts of international debt. If other countries want to move manufacturing out of China, will not China respond in kind? Not sure how that will work out. On top of all that, outsourcing manufacturing to cheaper countries like China raises an important question. Should living standards decrease in developed countries in the long term to equalize, more so as compared today, living standards on a global scale? We could compete with Chinese manufacturing by eliminating Social Security, Medicare, and other programs to lower taxes, decrease prices, and therefore increase living standards for some amount of time. We would gain jobs at the same time too. Maybe this is at its core a measure of what American wants to do with their lives and what amount of a role governments should play. I doubt anyone will really figure this out. It will probably be an unending struggle for people to try to be happy but at the same time not like what it takes to be happy. People hate Congress... No, they just do not want to accept their desires are unrealistic. Congress just can't tell people that without enraging them. Anything is possible. Personally, I want stability. So, all this back and forth between opposite ends of policy over decades shows things just go in whatever direction public opinion ultimately prefers. However, some aspects of China make me wonder. Do they value and goals similar to ours? The more money they earn, the more ability they gain influence the world, to decide what is normal. What are the ultimately the best values and goals for the world? I don't know. Everybody ultimately votes with what they buy... After pondering all this, countries vote too by what they sell. Then, the net flow must demonstrate the shift of ability to affect values and goals of the world. Who has what level of living standards...
Anyways
ReplyDeleteHere is Krugman on Europe:
http://www.youtube.com/watch?v=Z8u8x5SWJ88
Thought you might find that interesting
http://www.cnbc.com/id/100408608
This is interesting too. Ackman vs. Icahn
yeah. I see all those grammar/composition issues, but the ideas are there. It's 3:18 AM. I have been working all day and reading Warriner's earlier today. How ironic.
ReplyDelete