• Tag Archives GDP
  • Secular Stagnation?

    In today’s Outside the Box my good friend Charles Gave shares an instructive ‘Tale of Two Countries.’ Since 1981 in the UK and France, structural growth rates have diverged: The rate has fallen by two-thirds in France, while in the UK it has risen. Why? Well, to begin with, in the UK Margaret Thatcher was elected prime minister in 1979 and almost at once reduced the role of the bureaucracy in managing economic activity and dialed back government spending as a percentage of GDP. Meanwhile, in France, Franois Mitterrand was elected president in 1981 on a platform that expressly aimed to expand the scope of government.
    The effects on growth were predictable, says Charles, having been explained by Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy.
    More recently, in the US, when government spending as a percentage of GDP shot up from 33% to 39% during the Great Recession, our growth rate fell from 2.5% to less than one percent. And that, says Charles, is the story on US stagnation – not the more fashionable narrative of ‘secular stagnation.’

    This post was published at Mauldin Economics on JUNE 21, 2017.


  • Report: Measured for Social Progress, U.S. Is a Second-Tier Nation

    You can tell a lot about a nation by the kind of research reports it spews out monthly or quarterly. In the United States, we are bombarded with Federal government reports on Gross Domestic Product (GDP), Durable Goods Orders, Retail Sales, Housing Starts and the like. If you want to know the price of gold or oil or thousands of corporate stock prices, you can get those numbers on a second by second basis on your laptop or mobile app.
    Research releases in the United States that measure how the nation is doing in the area of social progress are far fewer and less timely. You’re not going to find such data released monthly or even quarterly. Take for example, Federal studies that measure homelessness among students in public schools. The most recent research we could find from the U. S. Department of Education measured the data for the 2014-2015 school year. Clearly, it’s not something a rich nation wants to brag about. The report found that pre-K through 12th grade students in the U. S. who had experienced homelessness in the 2014-2015 school year totaled 1,263,323 – double the amount from a decade ago and a stunning 34 percent increase since the economic recovery began in the summer of 2009.

    This post was published at Wall Street On Parade on June 21, 2017.


  • Argentina 100 Year Bond Sale 3.5x Oversubscribed

    When we previewed yesterday unexpected announcement that Argentina would join Mexico, Ireland and the U. K. in issuing a 100 year bond, just one year after emerging from its latest default, we said “we expected the potential yield of 8.25% to come down as the offering will likely be many times oversubscribed.” It was.
    According to Reuters, late on Monday Argentina sold $2.75 billion of a “hotly demanded” 100-year bond in U. S. dollars, and as expected the surge for yield resulted in 3.5x oversubscription: the South American country received $9.75 billion in orders for the bond, which in turn lowered the final yield to 7.9% with a 7.125% cash coupon, from the initial price talk of 8.25% in what Reuters dubbed an “otherwise low yielding fixed income market where pension funds need to lock in long-term returns.” Luckily for those same pension funds, they never have to worry about returns on capital as there is zero chance Argentina will not default again in the next 100 years.
    Meanwhile, courtesy of yield-starved investors around the globe, the Argentina government increased its overall 2017 foreign currency bond issuance target even more, to $12.75 billion from its previous plan of issuing $10 billion in international bonds, Finance Minister Luis Caputo told reporters in Buenos Aires, in large part to fund its soaring budget deficit. As Reuters notes, Argentina will tap international capital markets to finance a fiscal deficit of 4.2% of GDP. Caputo said Argentina has $2.6 billion in bonds left to be issued this year. The new paper could be denominated in euros, yen or Swiss francs. It is not clear if the remaining issues will be in 100 year or longer maturities.

    This post was published at Zero Hedge on Jun 20, 2017.


  • The Fed’s Policy and Its Balance Sheet

    At its June meeting, the FOMC again raised the target range for the federal funds rate by 25 basis points, to 1 – 1 percent. They did so despite evidence that inflation had moderated and that the second estimate of first quarter GDP growth was clearly subpar at 1.2%. Furthermore, despite the fact that 7 of the 12 Federal Reserve district banks had characterized growth in the 2nd quarter as ‘modest,’ as compared with only 4 banks that described it at ‘moderate’ (the NY bank simply said that growth had flattened), the FOMC in its statement described growth as ‘moderate’ (here one needs to know that in Fed-speak ‘modest’ is less than ‘moderate’). The overall discussion evidenced in the statement and subsequent explanations by Chair Yellen in her post-meeting press conference, together with the fact that the only significant change in June’s Summary of Economic Projections was a slight downward revision in the unemployment rate for 2017, failed to make a convincing argument to this writer that there was a compelling case for a rate move at this time. The principal conclusion we can draw is that the FOMC had already conditioned markets to expect an increase in June and that the FOMC’s main rationale was its desire to create more room for policy stimulus should the economy take a sudden turn to the downside.
    More significant than the rate move, however, was the detail the FOMC provided on its plan to normalize its balance sheet, which elaborated on the preliminary plan it put forward in March. Once the Committee decides to begin that process, it will employ a set of sequentially declining caps, or upper limits, on the amount of maturing assets that will be permitted to run off each month. The cap for Treasury securities will initially be $6 billion per month, and it would be raised in increments of $6 billion every three months until $30 billion is reached. Similarly, the cap for MBS will be $4 billion per month, which would also be raised by that amount every three months until $20 billion is reached. These terminal values would be maintained until the balance sheet size is normalized. Left unsaid was what the size of the normalized balance sheet would be.

    This post was published at FinancialSense on 06/19/2017.


  • NY Fed Nowcast Downgrades Q2 GDP Growth To 1.86%, Bad Housing Start Data Latest Culprit (Slip Slidin’ Away)

    The New York Federal Reserve’s NOWCAST model for GDP growth just downgraded Q2 GDP growth to 1.86%.
    The latest culprit? The rotten housing starts data from this morning.
    And we were so hopeful about 3%+ GDP growth in February. Alas, Congress is not going along with Trump’s economic agenda.

    This post was published at Wall Street Examiner on June 16, 2017.


  • Here Comes Quantitative Tightening

    All of a sudden the Fed got a little tougher. Perhaps the success of the hit movie Wonder Woman has inspired Fed Chairwoman Janet Yellen to discard her prior timidity to show us how much monetary muscle she can flex when the time comes for action. Although the Fed’s decision this week to raise interest rates by 25 basis points was widely expected, the surprise came in how the medicine was administered. Most observers had expected a ‘dovish’ hike in which a slight tightening would be accompanied by an abundance of caution, exhaustive analysis of downside risks, and assurances that the Fed would think twice before proceeding any farther. But that’s not what happened. Instead Yellen adopted what should be viewed as the most hawkish policy stance of her chairmanship. The dovish expectations resulted from increasing acknowledgement that the economy remains stubbornly weak. Just like most of the years in this decade, 2017 kicked off with giddy hopes of three percent growth. But as has been the case consistently, those hopes were quickly dashed. First quarter GDP came in at just 1.2%. What’s worse, second quarter estimates have been continuously reduced, offering no indication that a snap back is imminent. The very day of the Fed meeting, fresh retail sales and business inventory data surprised on the weak side, becoming just the latest in a series of bad data points (including figures on auto sales and manufacturing). By definition these reports should further depress GDP growth (much as widening trade deficits already have).

    This post was published at Euro Pac on Friday, June 16, 2017.


  • JUNE 16/DEPT OF JUSTICE SHENANIGANS/NY FED LOWERS ESTIMATE OF 2ND QUARTER GDP TO 1.8%/GOLD RISES $1.80 BUT SILVER LOSES 5 CENTS/ FOR THE 12TH CONSECUTIVE DAY, THE AMOUNT OF SILVER STANDING AT THE…

    GOLD: $1254.00 UP $1.80
    Silver: $16.64 DOWN 5 cent(s)
    Closing access prices:
    Gold $1253.40
    silver: $16.67
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME) SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $1260.95 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: $1252.61
    PREMIUM FIRST FIX: $8.34

    This post was published at Harvey Organ Blog on June 16, 2017.


  • NY Fed Crashes Trump’s Party, Slashes Q2 GDP Forecast

    A day after President Trump proclaimed Q2 GDP “numbers are going to be shockingly good,” The New York Fed has slashed its forecast for America’s growth to just 1.86%.
    Wednesday…
    I think this quarter’s GDP numbers are going to be shockingly good given all the facts we’re seeing” Thursday…
    ‘I think some very good numbers are going to be announced, by the way, in the very near future, as to GDP,’ Friday…
    Thanks to the collapse in housing data this morning, The New York Fed has slashed its growth expectations for Q2 GDP to just 1.86% (from 3% in March)…

    This post was published at Zero Hedge on Jun 16, 2017.


  • Quiet Start To Quad Witching: Stocks Rebound Around The Globe, BOJ Hits Yen

    Today is quad-witching opex Friday, and according to JPM, some $1.3 trillion in S&P future will expire. Traditionally quad days are associated with a rise in volatility and a surge in volumes although in light of recent vol trends and overnight markets, today may be the most boring quad-witching in recent history: global stocks have again rebounded from yesterday’s tech-driven losses as European shares rose 0.6%, wiping out the week’s losses.
    USD/JPY climbed to two-week high, pushing the Nikkei higher as the BOJ maintained its stimulus and raised its assessment of private consumption without making a reference to tapering plans, all as expected. Asian stocks were mixed with the Shanghai Composite slightly softer despite the PBOC injecting a monster net 250 billion yuan with reverse repos to alleviate seasonal liquidity squeeze, and bringing the net weekly liquidity injection to CNY 410 billion, the highest in 5 months, while weakening the CNY fixing most since May. WTI crude is up fractionally near $44.66; Dalian iron ore rises one percent. Oil rose with metals. Treasuries held losses as traders focused on Yellen hawkish tone.
    The MSCI All Country World Index was up 0.2%, and after the latest global rebound, the value of global stocks is almost equal to that of the world’s GDP, the highest such ratio since th great financial crisis, BBG reported.

    This post was published at Zero Hedge on Jun 16, 2017.


  • Is the Fed Repeating ‘The Mistake of 1937’?

    The esteemed brothers and sisters of the Federal Reserve raised interest rates 0.25% yesterday.
    It was the fourth rate hike since December 2015… and the third in six months.
    Janet Yellen has officially taken to the warpath.
    Phoenix Capital:
    … the Fed is embarked on a serious tightening cycle. One rate hike can be a fluke. Two rate hikes could even be just policy error. But three rate hikes means the Fed is determined.
    But is the Fed repeating ‘the mistake of 1937’?
    Stricken by the Crash of ’29, the American economy was climbing out of its sickbed by 1936.
    Annual GDP growth – real GDP growth – was rising steadily.
    Unemployment was falling, from its 25% high to 14%.
    But by 1936 the Federal Reserve grew anxious, anxious that it was incubating inflation… that its previous loose monetary policy had healed enough.
    It feared any more could start a fever.

    This post was published at Wall Street Examiner on June 15, 2017.


  • U.S. Economy at Risk from Trump’s Poll Numbers

    A new poll is out from the Associated Press/NORC Center for Public Affairs Research at the University of Chicago. It doesn’t bode well for Donald Trump’s presidency nor for the U. S. economy. Despite Wall Street’s century-old propaganda campaign to convince Washington that it controls the levers to economic growth in the U. S., and thus must be placated on its every desire, informed citizens understand that economic power rests in the hands of the consumer in a nation where two-thirds of GDP is consumer spending.
    Likewise, consumer confidence in the President of the United States impacts one’s willingness to open the purse strings and buy. The thinking is: if the country is headed in the wrong direction, how safe is my job? Perhaps I should stop spending and put money away for a rainy day.
    The new poll shows that 64 percent of Americans disapprove of the job Trump is doing. Particularly troubling for a democracy, 65 percent say he doesn’t respect the country’s institutions and traditions. On specific issues, 66 percent disapprove of his handling of health care; 64 percent disapprove of his handling of climate change; 63 percent disapprove of his handling of foreign policy; 60 percent disapprove of his handling of immigration and 55 percent disapprove of how he’s handling the economy.

    This post was published at Wall Street On Parade on June 15, 2017.


  • Around the world, beer consumption is falling

    THE world appears to have passed peak booze. The volume of alcoholic drinks consumed globally fell by 1.4% in 2016, to 250bn litres, according to IWSR, a research firm. It is the second consecutive year of decline, and only the third since data started to be collected in 1994. The drop-off is caused by people drinking less beer, which accounts for three-quarters of all alcohol drunk by volume. Worldwide beer consumption shrank by 1.8% to 185bn litres last year. Yet because the drinking-age population of the world grew by 1% in that time, beer consumption per drinking-age adult declined even more, by 3.2%. The overall decline is almost entirely because of downturns in three of the five biggest markets. China, Brazil and Russia accounted for 99.6% of the global decrease in the volume of beer drunk in 2016.
    Both economics and changing tastes play a part. China overtook America to become the world’s biggest market for beer by volume in 2001. It now quaffs a quarter of all beer. But consumption per person peaked in 2013 and dropped further last year. One reason is that Chinese drinkers are turning away from cheap local brews towards premium products and imported beers. Beer’s appeal is also waning among older drinkers. Over-30s are moving to wine and over-40s favour baiju, the national spirit. Elsewhere, recessions have hit beer-drinkers’ pockets. In both Brazil and Russia, consumption by the average adult fell by 7%.
    Beer-drinking patterns also change as countries grow richer. In a study in 2016, Liesbeth Colen and Johan Swinnen of the University of Leuven examined the effects of income growth and globalisation on beer consumption in 80 countries between 1961 and 2009. They found that as GDP per person increased in poorer countries, beer became more popular. But when it reached around $27,000 per person, consumption began to fall again.
    For decades, consumers in emerging markets have driven beer sales ever upwards. The latest figures suggest that the froth is coming off.

    This post was published at The Economist


  • The Fed Accelerates The Collapse Of The Economy, The Clock Is Ticking Down – Episode 1306a

    The following video was published by X22Report on Jun 14, 2017
    Time Inc is cutting 300 jobs, Toy R Us is in trouble as sales continue to decline. Retail sales numbers are out and sales in each sector has declined. The retail industry is imploding. GM extends shutdown of more plants as inventories build up. 2nd Quarter GDP has taken another hit as the economy rips itself apart. Bundesbank’s warns that they are now looking at the biggest asset bubble they have ever seen and cryptos might cause everything to crash. The US Gov/Central Banks are going after cryptos now. The Fed makes their move and they raise interest rates. They have now just accelerated the collapse of the economy. As BoA reports when the Fed tightens we end up with an event.


  • The Timetable for an Exploding US Debt Bomb

    US national debt currently stands at $19.9 trillion and, at the rate it’s going, is set to surpass $20 trillion in 2017. Gary Shilling, publisher of the must-read Insight newsletter, said this is not a problem until we either see “a tremendous amount of inflation or a complete breakdown in confidence in US Treasury obligations.” Once that happens, the world’s largest economy is at risk of an exploding ‘debt bomb,’ as he puts it:
    “Government debt in this country is about 80% of GDP – federal government debt – and that’s the net debt in the hands of the public. We throw out the debt where one government agency is lending to another…(because) when government collects Social Security payments from everyone, the Social Security Administration sends that to the Treasury and then the Treasury issues them an actual government bond, but that’s an intergovernment transfter and doesn’t really have anything to do with markets and so on, so we exclude that…
    We look back at the point in which the interest on the government debt was the highest it ever was and that was back in the 70s and that did not upset the apple cart and we say, ‘What will it take to get there?’ Because, you see, the whole argument here is this ‘debt bomb,’ it’s the idea that government debt gets to the point that the interest on that debt becomes a huge chunk of the deficit and that adds to the debt and then the whole thing then grows asymptotically.

    This post was published at FinancialSense on 06/13/2017.


  • To Bypass Food Embargo, Qatar Will Pay $8 Million To Airlift 4,000 Cows

    Yesterday we reported that as the Qatar crisis continues with no resolution in sight, in an act of generosity toward its distressed Gulf neighbor, Iran dispatched four cargo planes of food to Qatar and plans to provide 100 tonnes of fruit and vegetable every day. Qatar has also been holding talks with Iran and Turkey to secure food and water supplies after Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut links, accusing Doha of supporting terrorism.
    However, any stopgap measures implemented so far are not nearly enough to compensate for all the food imports lost as a result of the gulf blockade. So, for the nation with the highest GDP/capita in the world, where money is largely not an object, an ingenious solution has emerged.
    Call it the biggest bovine airlift in history, as Bloomberg puts it. Because while the “showdown between Qatar and its neighbors has disrupted trade, split families and threatened to alter long-standing geopolitical alliances”, it has prompted one enterprising Qatari businessman to fly 4,000 cows to the Gulf desert in an act of resistance and opportunity to fill the void left by a collapse in the supply of fresh milk.

    This post was published at Zero Hedge on Jun 13, 2017.


  • Annual Growth Rates Have Dropped from 13% to 2% Since 1947 but Bill Gates Blames Robots?

    Then we have workers being replaced by robots along with driverless cars. Here too, thanks to the elitists like Bill Gates, who suddenly wants to be an economist, he comes up with the solution that the government should tax robots as if they are workers. This, he proposes, would prevent the depletion of the government of much-needed income tax revenue.
    First of all, robots are killing jobs because taxes and demand for benefits are going crazy. healthcare costs are consuming the net disposable income and government taxes, and the combination are conspiring to lower annual economic growth rates dramatically. Real GDP growth rates have been declining every since World War II and the dawn of big government. These people just do not get it. They are the problem. GDP annual growth has declined from 13% down to 2%. Just where has big government helped?

    This post was published at Armstrong Economics on Jun 13, 2017.


  • UBS Has Some Very Bad News For The Global Economy

    At the end of February we first highlighted something extremely troubling for the global “recovery” narrative: according to UBS the global credit impulse – the second derivative of credit growth and arguably the biggest driver behind economic growth and world GDP – had abruptly stalled, as a result of a sudden and unexpected collapse in said impulse.
    As UBS’ analyst Arend Kapteyn wrote then, the “global credit impulse (covering 77% of global GDP) has suddenly collapsed” and added that “as the chart below shows the ‘global’ credit impulse over the last 18 months is essentially mainly China (the green shaded bit), which even now is still creating new credit at an annualized rate of around 30pp of (Chinese) GDP. But the credit impulse is the ‘change in the change’ in credit and even the Chinese banks could not sustain the recent extraordinary pace of credit acceleration. As a result: whereas back in Jan ’16 the global credit impulse was positive to the tune of 3.8% of global GDP (of which China comprised 3.5% of global GDP) it has now fallen back to -0.1% of global GDP (China’s contribution is -0.3% of global GDP).”
    As we concluded then, “absent a new, and even more gargantuan credit expansion by Beijing – which is not likely to happen at a time when every single day China warns about cutting back on shadow banking and loan growth – the so-called recovery is now assured of fading. It is just a matter of time.”

    This post was published at Zero Hedge on Jun 12, 2017.


  • U.S. Weeks Away From A Recession According To Latest Loan Data

    While many “conventional” indicators of US economic vibrancy and strength have lost their informational and predictive value over the past decade (GDP fluctuates erratically especially in Q1, employment is the lowest this century yet real wage growth is non-existent, inflation remains under the Fed’s target despite its $4.5 trillion balance sheet and so on), one indicator has remained a stubbornly fail-safe marker of economic contraction: since the 1960, every time Commercial & Industrial loan balances have declined (or simply stopped growing), whether due to tighter loan supply or declining demand, a recession was already either in progress or would start soon.
    This can be seen on both the linked chart, and the one zoomed in below, which shows the uncanny correlation between loan growth and economic recession.

    And while we have repeatedly documented the sharp decline in US Commercial and Industrial loan growth over the past few months (most recently in “We Now Know “Who Hit The Brakes” As Loan Creation Crashes To Six Year Low“) as US loans have failed to post any material increase in over 30 consecutive weeks, suddenly the US finds itself on the verge of an ominous inflection point.

    This post was published at Zero Hedge on Jun 10, 2017.


  • PROFIT/PROTECT from Looming MEGA-RISKS

    Mega-Risks Loom in the Next very few months and most will be realized. But for Investors properly positioned, they Provide Very Substantial Profit and Wealth Protection Opportunities. First let’s examine the Risks, then the Profit Opportunities.
    MEGA-RISKS
    China
    Perhaps the Main One will be the slowdown in growth in China, the world’s second largest economy. This Slowdown will be Caused mainly by China’s serious drive to restrain unsustainable credit growth.
    Indeed, credit outstanding (including to ‘Wealth Management’ entities outside the formal banking system) is a Real Threat to China’s Economy and was recently estimated to be 260% of GDP. Indeed, China’s Credit has been rising twice as fast as China’s GDP. But China’s restraints on Credit Growth will lead to the slowing of China’s economy.
    Consequences of China’s Slowing:

    This post was published at GoldSeek on 9 June 2017.