ALSO: Roubini in the Financial Times: The world must prepare for America's recession.
CR - you think the world is ready for a US recession?
I don't. Not if the number of foreign companies soliciting me to sell for them is any measure. I must get 2-3 new inquiries a week and I live in the boonies, not a hot market... I can only imagine what reps in places like Detroit experience.
dryfly, I don't think anyone is ready for a recession, especially a severe recession like Roubini is predicting.
Most forecasters are sticking with slower growth, not an outright recession. As an example, from the added NY Times article in the previous post: " ... many economists, Mr. Hatzius included, do not think a housing downturn is likely to push the overall economy into recession." Just a slowdown will probably cause significant problems for the U.S. and the world.
So a recession would be serious.
I'm still on the fence, but leaning towards recession. I think it's hard to call because each person will try hard to keep a job and maintain their lifestyle. One of my econ profs used to refer to the "Pig Postulates": 1) people want more, and 2) people want it now. It takes a lot to change that psychology and have a recession.
Is the World ready? Not at all. I suspect China will have some serious problems exposed when the next recession arrives (whether it's soon or in several years).
Dear All - recently had occaision to review the GDP accounts from 1929 to now and found them quite revealing (would you believe it just jumps out at you how WW2 saved the economy ?) but regarding trade it was relatively balanced at zero and was about 4% of the economy from 29-65 or so, give-or-take various cycles and surges. Over the period 65-73 it gradually grew to about 6% of the economy but was still balanced. In 73 growth accelerated until it reached 10% around '81. Now exports somewhat cycled around that number but imports have grown to 16% of the economy. Over most of the period trade was in balance but beginning in '93 showed a deterioration that looks mostly cyclical but from '98 forward there's been a kinked up growth in imports with the result that net exports (=exports-imports) has grown from a not-to-bad (& typical) 1% in '98 to nearly 6% today. And the rate appears to be acclerating.
Of course a recession would cure some of this but....
FWIW I talked with one of my peers in Florida about the prospects of a recession just this week. He says its starting to 'smells & feels' like a recession coming almost like you can smell & feel a big storm.
That is new - just a month ago or so he didn't have that take at all. He was VERY optimistic.
I'm not sure what the above comment actually means. Could you explain further?
I sell mechanical components for suppliers to large manufacturers - as an agent or rep. I mostly rep domestic firms but have on occasion sold for off-shore companies.
In the last few years more and more foreign firms have been contacting me & my peers to represent them to US OEMs. These solicitations have really picked up over the last few months. And not just for me - everyone I know in the biz.
My guess from talking to a few of them is... they desperately need the US market more now than ever... else they wouldn't contact middle men like myself looking for help. We don't work cheap.
But they need the orders and don't know where to get them. There must be an awful lot of unused capacity out there, globally. Not a good sign considering we aren't even in a recession yet.
CR -- interesting point about the slowdown in the pace of increase in US imports from China.
i am not sure a US slowdown puts pressure on China to revalue. it likely implies slower growth in Chinese exports to the US at any given exchange rate, which may make China more reluctant to move. on the other hand, it likely increases US political pressure (from the the threat of protectionism) for China to move.
What seems to me to matter more is that China's overall surplus is growing -- it must be selling a lot to a lot of other folks. Or, alternatively, more of the components of Chinese exports to the US and Europe are produced domestically, so Chinese value added is rising even if the headline growth in Chinese exports is slowing. Every $ of Chinese exports has fewer imported components.
Another thing that matters -- China's domestic growth is strong and accelerating, while US domestic growth looks to be decelerating ... which clearly argues for a revaluation.
Botton line -- I agree with your conclusion, but not necessarily because US growth is slowing so much as because chinese growth isn't slowing. At least not yet.
Or, alternatively, more of the components of Chinese exports to the US and Europe are produced domestically, so Chinese value added is rising even if the headline growth in Chinese exports is slowing. Every $ of Chinese exports has fewer imported components.
I know for a fact that has been happening and far more than media reports - the notion that China is only an assembler is dated - true a few years ago but rapidly flying backward in the rear view mirror.
I can't give you actual numbers from 'gov't statisitics' - only that I have been involved in a number of such projects - trying to source whole assemblies in China made from China components... things like washing machine transmissions where every part is made in China, assembled there then shipped to final assembly points around the world (primarily in NAFTA Zone & EU).
This trend is clearly picking up.
It is logistically CRAZY to import expensive loose parts into China, assemble, then ship back out. Companies did that initially to get a foothold but the plan had always been to relocate the supply chain there too. That's where the real money is.
Raw materials
-> components
-> sub-assemblies
-> final products
Its happening in full force now - I run into it everyday.
I think that the psychological impact on the general public of the Fed pause is very great. After 2 years of raising rates, the Fed essentially announced with a loudspeaker that the economy is slowing down. The fact that the Fed paused may in of itself cause more harm psychologically to the market than anything else they could do. IMHO this is an indictment of Greenspan's methodology of many small hikes. The problem was that there was no way to stop raising rates without sending a bad signal to the public.
ALSO: Roubini in the Financial Times: The world must prepare for America's recession.
CR - you think the world is ready for a US recession?
I don't. Not if the number of foreign companies soliciting me to sell for them is any measure. I must get 2-3 new inquiries a week and I live in the boonies, not a hot market... I can only imagine what reps in places like Detroit experience.
I'm not sure what the above comment actually means. Could you explain further?
dryfly, I don't think anyone is ready for a recession, especially a severe recession like Roubini is predicting.
Most forecasters are sticking with slower growth, not an outright recession. As an example, from the added NY Times article in the previous post: " ... many economists, Mr. Hatzius included, do not think a housing downturn is likely to push the overall economy into recession." Just a slowdown will probably cause significant problems for the U.S. and the world.
So a recession would be serious.
I'm still on the fence, but leaning towards recession. I think it's hard to call because each person will try hard to keep a job and maintain their lifestyle. One of my econ profs used to refer to the "Pig Postulates": 1) people want more, and 2) people want it now. It takes a lot to change that psychology and have a recession.
Is the World ready? Not at all. I suspect China will have some serious problems exposed when the next recession arrives (whether it's soon or in several years).
Best Wishes.
Dear All - recently had occaision to review the GDP accounts from 1929 to now and found them quite revealing (would you believe it just jumps out at you how WW2 saved the economy ?) but regarding trade it was relatively balanced at zero and was about 4% of the economy from 29-65 or so, give-or-take various cycles and surges. Over the period 65-73 it gradually grew to about 6% of the economy but was still balanced. In 73 growth accelerated until it reached 10% around '81. Now exports somewhat cycled around that number but imports have grown to 16% of the economy. Over most of the period trade was in balance but beginning in '93 showed a deterioration that looks mostly cyclical but from '98 forward there's been a kinked up growth in imports with the result that net exports (=exports-imports) has grown from a not-to-bad (& typical) 1% in '98 to nearly 6% today. And the rate appears to be acclerating.
Of course a recession would cure some of this but....
A small edit - net exports are negative. That is have gone from -1% to -6%. Sorry for the typing.
CR - Interesting reply. Thanks.
FWIW I talked with one of my peers in Florida about the prospects of a recession just this week. He says its starting to 'smells & feels' like a recession coming almost like you can smell & feel a big storm.
That is new - just a month ago or so he didn't have that take at all. He was VERY optimistic.
Sentiment is shifting...
I'm not sure what the above comment actually means. Could you explain further?
I sell mechanical components for suppliers to large manufacturers - as an agent or rep. I mostly rep domestic firms but have on occasion sold for off-shore companies.
In the last few years more and more foreign firms have been contacting me & my peers to represent them to US OEMs. These solicitations have really picked up over the last few months. And not just for me - everyone I know in the biz.
My guess from talking to a few of them is... they desperately need the US market more now than ever... else they wouldn't contact middle men like myself looking for help. We don't work cheap.
But they need the orders and don't know where to get them. There must be an awful lot of unused capacity out there, globally. Not a good sign considering we aren't even in a recession yet.
CR -- interesting point about the slowdown in the pace of increase in US imports from China.
i am not sure a US slowdown puts pressure on China to revalue. it likely implies slower growth in Chinese exports to the US at any given exchange rate, which may make China more reluctant to move. on the other hand, it likely increases US political pressure (from the the threat of protectionism) for China to move.
What seems to me to matter more is that China's overall surplus is growing -- it must be selling a lot to a lot of other folks. Or, alternatively, more of the components of Chinese exports to the US and Europe are produced domestically, so Chinese value added is rising even if the headline growth in Chinese exports is slowing. Every $ of Chinese exports has fewer imported components.
Another thing that matters -- China's domestic growth is strong and accelerating, while US domestic growth looks to be decelerating ... which clearly argues for a revaluation.
Botton line -- I agree with your conclusion, but not necessarily because US growth is slowing so much as because chinese growth isn't slowing. At least not yet.
Or, alternatively, more of the components of Chinese exports to the US and Europe are produced domestically, so Chinese value added is rising even if the headline growth in Chinese exports is slowing. Every $ of Chinese exports has fewer imported components.
I know for a fact that has been happening and far more than media reports - the notion that China is only an assembler is dated - true a few years ago but rapidly flying backward in the rear view mirror.
I can't give you actual numbers from 'gov't statisitics' - only that I have been involved in a number of such projects - trying to source whole assemblies in China made from China components... things like washing machine transmissions where every part is made in China, assembled there then shipped to final assembly points around the world (primarily in NAFTA Zone & EU).
This trend is clearly picking up.
It is logistically CRAZY to import expensive loose parts into China, assemble, then ship back out. Companies did that initially to get a foothold but the plan had always been to relocate the supply chain there too. That's where the real money is.
Raw materials
-> components
-> sub-assemblies
-> final products
Its happening in full force now - I run into it everyday.
I think that the psychological impact on the general public of the Fed pause is very great. After 2 years of raising rates, the Fed essentially announced with a loudspeaker that the economy is slowing down. The fact that the Fed paused may in of itself cause more harm psychologically to the market than anything else they could do. IMHO this is an indictment of Greenspan's methodology of many small hikes. The problem was that there was no way to stop raising rates without sending a bad signal to the public.