Economic Indicators

Economic Indicators – June 2014

I realize that I’m not preaching to the crowd but singing to the disaffected.  In the morning paper, the Associated Press reaffirmed news heard on the financial news that the job growth grew to 234k, well beyond expectations.  That signifies that all the jobs lost during the “Great Recession” have been regained.  Unemployment remains at 6%, down from almost 10% in 2009.  Of course, demographics tell us that that’s not enough.  This economy needs 7 million jobs to keep up with population growth which is growing at almost 7%.  Yes, we need to do more yet the U.S. Economic Indicators that economist measure growth tells us that the economy is growing, albeit slower than desired.  The chief economist at Wells Fargo says that they expect growth to be at 3%, not far off the desired growth rate to contain inflation.  The most recent data shows:

• Trade Balance is down .6%
• Manufacturing goods is up .7%
• Construction spending is up .2
• Retail Quarterly Profits is up 8.9 Billion
• Manufacturing Profits is up 8.7 Billion
• Producer Price Index (PPI) is up .6%
• Consumer Price Index (CPI) is up .3%

All told, this data avows that this current administration, given the state of economy he walked into and the obstructionism of the minority party, that we have been guided back into a relative state of economic prosperity.

I fully expect a spate on naysayers to attack this article as fabricated and continue to berate our President.  I myself have a few problems with him but, like everyone else, he’s not there to please just me.  Overall, I think he has done a much better job than the opposition (particularly the Tea Party) has given him credit for.

TYPICAL JINDAL

This was reported on MSNBC and CNN

Following a Governors’ Conference yesterday at the White House, Gov (?) Bobby Jindal couldn’t wait to get in front of the press and make his “campaign” statement, if one could call it that.  After what was called a good, bi-partisan meeting by both parties with constructive results, while in front of the press he accused the President of "raising the white flag" on job growth and turning America into "a minimum wage economy."  Gov. Dan Malloy, D Conn, had enough and pushed in front of him at the podium and tore into him.  Hooray for Gov. Malloy.  Even the Republican Governors behind him at the mike seemed to applaud him with smiles on their faces.  If you thought Jindals’  Opposition speech after the election of our President was bad, this was even worse and it was obvious he had no clue and had done no discovery with respect to what he was talking about.

Yes, I know the Welfare system is in desperate need of reform (some are making more than those on min wage) but that has been a collective result of several administrations and bears a separate discussion.

This President has had five (5) years of steady job growth and could be more if the Republicans would spring for the money to address the decaying infrastructure and power grids in our country.  The additional jobs would increase ordinary income and Social Security revenues and provide a reasonable “Rate of Return” (ROI), not to mention bringing us back up to the powerful country that we were.  I have to admit partisanship in this instance.  Jindal is one of the biggest jokes this country (world??) has ever seen.

ARE WE LOSING CONTROL??

The article below appears to be one of those political “I told you so” scare tactics when, if fact, it contains true statements (in general) and was sent to me by an ol' workplace Bud,  Altho we differ on some political issues, this one is pretty much dead on.  My thoughts on this information follows the article.

This article, though aimed at a US audience (thank-you Republicans), gives a scary insight into China's growing economic power.
A Little Known Reality.
June 8, 2013. Source: Michael Snyder, Guest Post
In future China will employ millions of American workers and dominate thousands of small communities all
Over the United States. Chinese acquisition of U.S. Businesses set a new all-time record last year, and it is
On pace to shatter that record this year.
The Smithfield Foods acquisition is an example. Smithfield Foods is the largest pork producer and processor
In the world. It has facilities in 26 U.S. States and it employs tens of thousands of Americans. It directly owns
460 farms and has contracts with approximately 2,100 others. But now a Chinese company has bought it for
$4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural
Communities all over America.

Thanks in part to our massively bloated trade deficit with China, the Chinese have trillions of dollars to spend.
They are only just starting to exercise their economic muscle.
It is important to keep in mind that there is often not much of a difference between “the Chinese government”
And “Chinese corporations”. In 2011, 43 percent of all profits in China were produced by companies where the
Chinese government had a controlling interest in.

Last year a Chinese company spent $2.6 billion to purchase AMC entertainment – one of the largest movie theatre
Chains in the United States. Now that Chinese company controls more movie ticket sales than anyone else in the world.

But China is not just relying on acquisitions to expand its economic power. “Economic beachheads” are being
Established all over America. For example, Golden Dragon Precise Copper Tube Group, Inc. Recently broke ground
On a $100 million plant in Thomasville, Alabama. Many of the residents of Thomasville, Alabama will be glad to have
Jobs, but it will also become yet another community that will now be heavily dependent on communist China.
And guess where else Chinese companies are putting down roots? Detroit. Chinese-owned companies are investing in
American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores,
And hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers
And their suppliers. If you recently purchased an “American-made” vehicle, there is a really good chance that it has a
Number of Chinese parts in it. Industry analysts are hard-pressed to put a number on the Chinese suppliers operating in
The United States.
China seems particularly interested in acquiring energy resources in the United States. For example, China is actually
Mining for coal in the mountains of Tennessee. Guizhou Gouchuang Energy Holdings Group spent 616 million dollars
To acquire Triple H. Coal Co.... In Jacksboro, Tennessee. At the time, that acquisition really didn't make much news, but now
A group of conservatives in Tennessee is trying to stop the Chinese from blowing up their mountains and taking their coal.

And pretty soon China may want to build entire cities in the United States just like they have been doing in other countries.
Right now China is actually building a city larger than Manhattan just outside Minsk , the capital of Belarus .
Are you starting to get the picture? China is on the rise. If you doubt this, just read the following:
# When you total up all imports and exports, China is now the number one trading nation on the entire planet.
# Overall, the U.S. has run a trade deficit with China over the past decade that comes to more than 2.3 trillion dollars.
# China has more foreign currency reserves than anyone else on the planet.
# China now has the largest new car market in the entire world.
# China now produces more than twice as many automobiles as the United States does. After being bailed out by
U.S. taxpayers, GM is involved in 11 joint ventures with Chinese companies.
# China is the number one gold producer in the world.
# The uniforms for the U.S. Olympic team were made in China.
# 85% of all artificial Christmas trees the world over are made in China.
# The new World Trade Center tower in New York is going to include glass imported from China.
# China now consumes more energy than the United States does.
# China is now in aggregate the leading manufacturer of goods in the entire world.
# China uses more cement than the rest of the world combined.
# China is now the number one producer of wind and solar power on the entire globe.
# China produces 3 times as much coal and 11 times as much steel as the United States does.
# China produces more than 90 percent of the global supply of rare earth elements.
# China is now the number one supplier of components that are critical to the operation of any national defense system.
# In published scientific research articles China is expected to become number one in the world very shortly.

MY THOUGHTS:

China is, indeed buying U.S.  real estate, both commercial and residential holdings, at a record clip.  Their target is not just the U.S. market however.  They are scarfing up distressed properties world wide.  Their initiative was spurred by the burst of the housing bubble brought on by deregulation (and lack of oversight on what little reg was left) and the great Recession of 2008/2009.  They also own 1.3 trillion (with a T) of U.S. debt, much of which can be attributed to tax cuts and continued Pork Barrel spending as well as defense spending on systems no longer applicable to what the experts say is today’s modern warfare methodology/tactics. 

The China problem actually began simplistically when President Clinton signed the free trade agreement with them which allowed them entry into the WTO.  The problem was exacerbated by President G.W. Bush when he said “My experiences in business school, China, and the oil business were converging into a set of convictions: The free market provided the fairest way to allocate resources. Lower taxes rewarded hard work and encouraged risk taking. Eliminating barriers to trade created new export markets for American producers & more choice for our consumers. Government should respect its constitutional limits.”  Little did he know the consequences?  On the surface, it appeared to be a brilliant move by both Clinton and Bush in that it allowed U.S. corporations to export autos, durable goods, etc to them until Corporate greed took advantage of Third World wages and began moving operations there.  That led to improving conditions and an increase in wealth for the state which, in turn, seems to have led to present day conditions.

This presents a conundrum of what to do about it.  First, the reality of it is that there seems to be very little we CAN do about it short of an enormous tax increase (a no-no in a fragile economy) and cutting spending of EVERYTHING, including defense and entitlements (yes entitlements, I PAID into SS and Medicare and am therefore entitled to the benefits of such).  So, what to do?

I guess accept it as "it is what it is", today’s reality.  A required reading in Macroeconomics was called “The Global Economy” written, I believe in the late 70's, by a Japanese author (can’t remember  the name) that actually foretold and explained the coming of the global economy in which we now live.  A simplistic, short term approach is to invest in the Chinese real estate conglomerate E-house, China holdings LTM.  Last price this date was $13.72.  Has a 52 week high of 15.14 and low of 3.58.  Pays a dividend of 0.15 per share.  Now, how’s that for crass??

INCOME INEQUALITY

Warning:  Soapbox time.  I seriously doubt these meandering, ill informed thoughts of mine will be read by very many.  To those who do, I thank you and ask you to vote, not by party affiliation but for the person and his/her vision for a stronger and a more economically diverse America.

          The information below was compiled with information from The Congressional Research report at http://digital.library.unt.edu/explore/collections/CRSR/browse/?q=income+inequality&t=fulltext and Oracle ThinkQuest at http://library.thinkquest.org/10949/fief/hifeudal.html  Please note also that population growth (less for the fifth quintile, or top 20% and more for the bottom 20%). 

While our economy is growing, albeit at a much slower rate than historic rates, much of it can be attributed to industrial and technological advances, i.e., software, robotics and worker efficiency through improved manufacturing methodology and materials.  These factors also contribute, but are not wholly, responsible for the jobless rate.  There are simply not many jobs for what was previously defined as a “skilled worker”.  These factors DO NOT, however, justify the historic, ever increasing disparity between the top 20% of income earners vs the bottom 80% (20% of which are historically below the poverty line and has not changed scientifically). The economic theories addressing this conundrum are relatively simple; the more money spread among the masses, the more spending and increased demand for goods, resulting in greater factory output, demanding more space and more workers and the cycle begins anew.  Spending among the top 20% is within a niche of expensive goods in which quality not quantity is in demand and therefore not produced in quantity.  Am I campaigning for a Socialist distribution of wealth? Absolutely not!! 

 

The Congressional Research Service defines the middle class as the middle 60% of households, which received a disproportionately smaller share of the total economic pie in 2011 (45.7%) than in 1968 (53.2%). Over the same period, the disproportionately large income shares of the top 20% and the top 5% of households have trended upward. The top fifth’s share of total household income rose from 42.6% in 1968 to 51.1% in 2011; the top 5%’s share rose from 16.3% to 22.3%.  The CRS states that these estimates are derived from federal income tax data.

Economic philosophy suggests that continuation of this income inequality could lead to a modern day Feudal System.  Oracle ThinkQuest defined the feudal society as being constructed for one reason: security. The nobles wanted the security of maintaining control over their far-reaching kingdoms, so they were forced to delegate power to local control. The peasants wanted security from marauders and barbarians from neighboring lands. They also wanted security from invading armies. And thus the development of the feudal system and the fief structure was almost inevitable. However, all this came at the great expense of the common man. He gave up many freedoms for his security. The question they ask you is: Was it worth it?

Now the question becomes; am I a Socialist Left Winger espousing distribution of wealth?  The answer is no, far from it.  I believe in a capitalistic society but not one in which corporate power and greed can override the rights and privileges of the common man to achieve the American Dream.

If you have read this far, thank you for your patience and your tolerance for a stupid man that thought this white paper would, in any way, influence anyone’s thinking.  In any case, you might be interested in Robert Reich’s thoughts on the subject at http://www.denverpost.com/business/ci_24889586/robert-reich-income-inequality-defining-issue-u-s

A LAYMAN’S VIEW OF THE ECONOMY

A LAYMAN’S VIEW OF THE ECONOMY

Given that I have a limited knowledge of economic development I nevertheless, like most Americans, have thoughts on how we can improve the difficult situation we find ourselves in today. Although we are slowly climbing out of a major recession that bordered on a full blown DEPRESSION, we remain in a very tenuous position economically. The issues are spending versus budget cuts and tax reform.

Our spending and budget deficit has been, many times, compared to our own household and from a MICRO economic viewpoint, it is. That would be because our household economic health depends solely upon us; whether we can….or will….hold a job that meets our household expenditures. From a MACRO economic standpoint, the view from the middle and bottom is similar but different due to economy of scale. Rather than one household, it becomes an issue of a nation of households. A nation of different educational levels, skill sets, number in the family, social status, health requirements, et., al.

President Reagan, whom I admired very much and voted for, had a “trickle down” economic philosophy. It sounds good on the surface but the problem is/was that the money never “trickled down”. It stayed at the top. There’s ample evidence obtainable from credible sources with a simple Google search. Simplistically stated, our current problems comes down to the old Capitalistic credo of “SUPPLY AND DEMAND”. A simple analogy would be to return to the individual household.

In our household, we earn money and, if fortunate, earn enough to meet our financial obligation i.e., food, shelter, health care for our family, reliable transportation, etc. Unfortunately, as a nation, these requirements will vary due to the national population differences stated above. Nevertheless, we can, and most do, meet those obligations albeit on a sliding scale from top to bottom. BUT, and it all begins and ends with “but”. To accomplish even a simple modicum of life as we in this country have known, we must have a job or career, depending on our qualifications.

I have always been a budget hawk and despised deficit spending, although in my earlier years, I was a pretty good practitioner of it due to necessity. I believe this to be one of those times that deficit spending is in order. Opponents rave we will be leaving debt for our children to pay. No, not necessarily. Yes, the R.O.I. on the money we have to spend will take awhile to repay but it can be done with increased revenue. You say, “how can we increase revenue”? We, as a citizenry, did not get ourselves into this mess but, clearly, we are going to have to get out of it ourselves or our children’s future will be of no consequence.

The Keynesian theory of economics state that the government must input funding into the economy by creating a TRICKLE UP economy as opposed to Reagan’s trickle down philosophy. So, how do we create a “trickle up” economy? Again, it starts with jobs. Jobs thru infrastructure and, in todays world, alternative energy careers. These fields will create lower and middle and some upper level jobs and exponentially expand into other career fields.

These jobs will place disposable income into the hands of the worker who becomes a consumer who, in turn, spends and creates DEMAND. This demand requires new goods and services as inventories are lowered which, in turn, creates MORE jobs. Most importantly, it creates even more revenue thru payroll income taxes. The U.S. Bureau of Labor Statistics place the number of unemployed Americans at 13.9 million through Oct, 2011. If that infusion creates only 80% (11.1 million) in jobs at an average of only $12,000/yr in personal income taxes, it results in a revenue stream of 1.3 trillion per annum. Add the household income derived from the tax increase on the “wealthy”, which really only returns to the levels during the Clinton era and lower than the Reagan era, which will generate even more revenue and it’s pragmatically possible that we can work out of this jam in a relatively short period. Won’t happen overnight but as the work ramps up, the revenue stream will consistently increase.

There’s even more to say in this area about healthcare affordability, mental stability, etc. but time and space constraints beg restraint. One last point, Roosevelt accomplished recovery from the Great Depression(with a D) with the many civil programs, i.e. infrastructure, dams, TVA, etc put into place in early 30’s. His major problem was when he was cajoled by Republicans to CUT spending which led us back into the major recession (with an R) of 1937.