Is there a way to tell what proportion of the rise in savings is do to people actually putting money aside versus having their credit restricted?
What I mean is, say someone with $12,000 on their credit card is told they will no longer be able to borrow, but must continue to pay done debt each month. Or say someone abandons their home to foreclosure. Both would contribute to aggregate savings, but it isn't really savings in the sense of putting money aside.
I guess that would show up in the Flow of Funds data later?
It will be interesting to see how PCE breaks down within that BEA report.
Yes, fed data provides its own unique definition of 'savings'; it remains up to us to provide the fine print on what that means.
It’s OK that informed regular readers of finance & economic blogs know that bureaucratic definition and its fine print.
However, a layperson senses, rightly so, that savings are not increasing as in "my saving account balances is increasing". At least not when a household budget goes from X% deficit last month to a smaller y% deficit this month.
Private wage and salary disbursements decreased $1.3 billion in April, compared with a decrease of $39.1 billion
in March. Private wages and salaries had been reduced by an adjustment of $20.0 billion at an annual rate in
January, in February, and in March to reflect smaller-than-usual bonus payments. This type of irregular payment
is not accounted for in the primary monthly source data for wages and salaries. This adjustment to the months
of the first quarter was not carried forward in the estimates of wage and salary disbursements for April and
subsequent months. Goods-producing industries' payrolls decreased $11.4 billion, compared with a decrease of
$15.6 billion; manufacturing payrolls decreased $3.7 billion, compared with a decrease of $8.1 billion.
Services-producing industries' payrolls increased $10.1 billion, in contrast to a decrease of $23.5 billion. Government wage and salary disbursements increased $4.4 billion compared with an increase of $3.3 billion.<b/>
However, this also means other countries, esp China, Japan, Oil exporters, Asian exporters cannot depend on USA for recovery. They'll have to look elsewhere.
This is very healthy IMHO. USA's consumption/PCE should continue to shrink. Savings account size and thrift behavior should become the next "Keeping up with the Joneses" competition.
If we're lucky, this will plant the seed for eventual recovery to a great economy, in say, a generation or two.
The quality and quantity of good paying jobs in this country continues to deteriorate. The increased positve savings rate in the private sector is more than matched by the increase in negative savings of the government, net, net, an increase in negative savings for the nation. What's different about this downturn is that corporations are laying their workers off as fast as consumption by the privated sector decreases. The government's cut in taxes and payouts to the workers is an artificial and non-sustainable vehicle to offset the most meaningful downturn in 80 years.
And that little pile of savings in USD is being systematically vaporized by Zimbabwe QE Ben. DXY declining quite sharply and well, bonds aren't faring much better.
How do they calculate income and how can it be growing? This report flys in the face of reality. Hundreds of thousands of people are under reduced hours/wages. I don't get it.
Looking at the chart, it seems that in all the recent recessions (since 1980) the savings rate has started to come back down as the recession was ending. Does the data support that interpretation?
If so, the fact that it's still climbing is definitely not a green shoot.
On the flipside, we better be damn sure that the reason we're facing a crisis is because of US overconsumption and not because of global overproduction. PCE decrease & USA Savings will save us from the fomer, but damn us with the latter. By "us" I mean globally, not just us as in "Americans".
Because if the reason is the latter, this thrift behavior by the USA will accelerate the unwinding of that crisis; which would be domino collapse in factories worldwide, no matter what USA and other Govt's do. (unless they give away stuff for free, but that still causes destruction through deflation)
not sure how this helps things in the long run- transfer the debt of private individuals to the government. That is essentially what his report is .
Used to be that we reserved the surge capacity of the government to borrow for important things like war. Now we use it to support purchases from China!
@housingdepression:
Has Anyone here seen their income increase because of the Stimulus?
I've seen my company layoff slow down and demands for wage cut disappear. From that perspective, it looks like my income did go up, although it didn't actually increase numerically.
Another finance blog, maybe John Mauldin and/or Barry's The Big Picture, looked at the recent historical pattern in post-publication revisions of economic data by federal sources. The trend seemed troubling. There seem not to be a random pattern of upward and downward revisions as of late. Instead, there was a visible trend for federal sources to release data that more frequently required downward revisions later. One argued that this was to be blamed on the innocuous effect of inflection points on federal algorithms.
Below is what the BEA said in today's report about their recent many revisions. Seems we wait for the revisions to the April data:
Revisions
Estimates of personal income and DPI have been revised for October through March; estimates of PCE have
been revised for January through March. Changes in personal income, current-dollar and chained (2000)
dollar DPI, and current-dollar and chained (2000) dollar PCE for February and March -- revised and
as published in last month's release -- are shown below.
For October through December, the revisions to wages and salaries reflected the incorporation of
newly available BLS tabulations for fourth-quarter private wages and salaries from the quarterly census
of employment and wages. Wages and salaries were revised down for all three months. Revisions to
personal current taxes and to contributions for government social insurance reflected the revisions to
wages and salaries and the incorporation of revised federal budget projections.
BTW, increasing savings rate is ultimately good news. Though it seems to me that it might have to "overcorrect" to the upside for sometime to compensate for being too low for years. Might mean a lot more pain to come...
It just keeps getting better. Here's more on from the BEA on their revisions:
Comprehensive Revision of the National Income and Product Accounts
As part of the comprehensive (or benchmark) revision of the national income and product accounts (NIPAs), revised
estimates of personal income and outlays will be released along with preliminary estimates for June 2009 on
August 4, 2009. More information on the comprehensive revision is available on BEA’s Web site at National Economic Accounts: Articles including a link to the article in the March 2009 issue of the Survey of Current Business
that discussed the changes in definitions and presentations that will be implemented in the revision and to an article
in the May Survey that described changes in statistical methods. The September Survey will contain an article that
describes the results of the revision in detail. The Web site also contains links to redesigned PCE table
stubs; other revised NIPA table stubs and press release stubs will be available in June.
Dunno if this is news, but Travellers and Cisco replace GM and C.
Still think they should have used DIA as one of the replacements for GM in the DJIA - unless that would cause a circular error reference in the calculation....which may be a good thing.
The Rat Catcher:
The increased positve savings rate in the private sector is more than matched by the increase in negative savings of the government, net, net, an increase in negative savings for the nation.
There's some good articles and videos on the net about dollar and debt being synonymous. Go look them up.
If savings rate go up, and no other entity (in the world) is willing to absorb that extra savings rate; then the US govt has to absorb it through extra spending, issuing of bonds.
This is a closed system. Your savings is someone's debt.
The alternative of net savings WITHOUT an entity willing to absorb it (i.e. the govt doesn't become the entity of last resort), is a collapse in trade/commerce volumes, debt service and ultimately the savings themselves.
(i.e. if you try to pump more savings into the system, where nobody wants to absorb it, then the NET savings in the system doesn't increase, however, everything else decreases relatively. It is a form of beggar thy neighbor.)
Of course a bankruptcy for GM is good news......no one seems to address or understand the knockoffs to the 100's of biz's that will also file because of this.
We are so *ucked that we have these people controlling what we call a market nowadays.
This is so transparent. All that's left is manipulation. Been nice knowing you guys. It's not even worth talking about economics or fundamentals anymore. Only politics. And I HATE politics.
from CNBS: Stocks Rise After Economic Reports; GM Gains? - CNBC
Stocks opened higher Monday as investors were encouraged by economic reports out of China and the U.S. and shrugged off the General Motors bankruptcy filing.
China's manufacturing sector continued to expand, albeit moderately, in May. That gave investors encouragement that China's economy is stabilizing and the worst may be over for the global economy.
Right.... if I don't trust our government's numbers, I'm really gonna fall for numbers ginned up by some commie bastards.
"However, this also means other countries, esp China, Japan, Oil exporters, Asian exporters cannot depend on USA for recovery. They'll have to look elsewhere."
They are not looking anymore. Exports to USA are at best 10 percent of their GDP and GDP of China especially has been growing yearly more than their all yearly exports to USA, 250 billion dollars. Most of the growth is already internal, contrary to the 1997 situation during the Asian crisis.
It is just western economists, especially west of Normandy and east of Midway, repeating the mantra or meme of poor Asians totally dependent on the West. Another meme is that continental Europeans being so slow and bureaucratic that they cannot possible compete in this global world. (Except Fiat buying Chrysler, hoocodanode?!) PIGS-countries are also crap, according to these economists (when poor Spain has better high-speed train network than both US and UK..). Russians are also just dumb oil exporting yahoos. And yet another one is USA will recover more quickly than anybody else.
The Bilderberg Plan for 2009: Remaking the Global Political Economy The Bilderberg Plan for 2009: Remaking the Global Political Economy
After the meetings finished, Daniel Estulin reported that, “One of Bilderberg’s primary concerns according to Estulin is the danger that their zeal to reshape the world by engineering chaos in order to implement their long term agenda could cause the situation to spiral out of control and eventually lead to a scenario where Bilderberg and the global elite in general are overwhelmed by events and end up losing their control over the planet.
The concept that your savings is someone's debt is true EVEN IF WE'RE TALKING ABOUT GOLD-BACKED CURRENCY.
It's amazing to me that why very few people understands what true savings are.
Unless you're a miser, who saves just for the sake of saving and will never spend anything. (maybe a twisted pleasure from watching savings account numbers increase in digits) Most people will save for a future withdrawal.
Savings is a claim on future production.
Thus it's TWO transactions when you save, not one: The savings, and the future withdraw (of that savings).
Both actions act on a dynamic system.
Should the world's production go up, it will be able to produce the extra to service your withdrawal when you do it.
Should the world's production go down, your withdrawal may end up producing less.
It's not hard to envision:
1. When I save enough money for 10 tons of rice, in a world that produces 100 tons of rice; my expectation is to be able to access 10 tons of rice (plus some interest, possibly) in some future time. My savings claim is also 10% of the world's production is another way to look at it.
2. However, lets say disaster strikes:
2A. Some massive crop failure occurred, we only have 10 tons of rice in world production worldwide. Question to ask now is: is my savings still 10% of world's production; meaning 1 ton of rice; or still 10 tons of rice? The answer you give here is telling of your philosophy here. Typically, someone with ABSOLUTE world view will demand 10 tons of rice, since he saves 10 tons; world disaster be damned.
2B. Lets say the world no longer produces rice (maybe rice as a species went extinct), and produces wheat instead. Lets say that wheat is easier to grow but is less satisfying, the world produces 150 tons of wheat, but one have to consume double the amount of sustain oneself. (Bear with me here, I'm just using analogies, not really rice vs wheat) Again, the same relevant question applies: when you withdraw, is it 10 tons of wheat? or 10% of world's production (15tons of wheat) or absolutist's answer: 20 tons of wheat (since it's functionally equal to 10 tons of rice).
You'll notice I don't describe what currency is in the scenarios, because currencies are transient. Value is the ultimate thing being traded.
I also submit that most goldbugs are also absolutists... Thinking they can preserve absolute value in the face of disaster.
I will submit this: When the world's production capacity collapses, even gold's value collapses, simply because there's not enough production to buy anymore, no matter how much gold you have.
If you disagree, imaging how useful gold is, in a desert, or on the moon. Then compare to how valuable it is to know how to access water or make oxygen on the moon. In each scenario, knowledge/inventiveness/production outweight absolute weight of gold.
Essentially, the gov't bypassed the board on choice of the CEO. I would be outraged, except that the board system is so damn broken that it made sense.
They also point out that a sizeable fraction of the board were ex-CEOs fired/left under pressure. We need to see more of that in board-composition reporting.
@timmyone:
They are not looking anymore. Exports to USA are at best 10 percent of their GDP and GDP of China especially has been growing yearly more than their all yearly exports to USA, 250 billion dollars. Most of the growth is already internal, contrary to the 1997 situation during the Asian crisis.
There are signs that China is trying to grow on it's own; but I call its more experimental than anything serious unless it's willing to depeg.
Without depegging, it's still trying to maintain an export advantage to the USA, and with the recent drop in USD, the peg translates to begger thy asian neighbour policy for China, as now they can compete with Vietnam, Malaysia, etc.
As the soup (of pegging) gets sweeter (USD drops), it becomes harder and harder to wean China from it. If we don't get out of this trap, this will brew the next global disaster (see how it created the RE crisis).
A savings rate over 5% is the best news I have heard in a long time. The long term average seems to be around 8% so I think once we hit that level consumer spending can actually recover. As it is right now, I'm not sure what is going on with all of these "economic indicators" but I remain unconvinced.
Most people don't understand "savings" because they think of them in the sense of a squirrel putting away nuts for the winter. But in modern times hardly any our savings are of that nature; they are nearly all loans to someone else, and their true value depends on what the borrower spends the money on.
If the money's spent in ways that help the the economy produce things of value in the future, or to create long-lasting things (e.g., houses) that can continue to be used long into the future (and which people will value in proportion to their cost), then in the long term we are ahead of the game. And the lender -- i.e., the saver -- will receive in interest and principal payments money that will buy as much or more than he or she could have bought with the money if he or she had spent it at once instead of saving -- i.e., lending -- it.
If the borrower doesn't spend the money in a way that creates useful future productive capacity or some long-lasting thing of value, then in the long term we're behind in the game. And the lender -- i.e., the saver -- will not get back money that will buy as much or more than he or she could have bought.
As hc noted, it doesn't matter how much gold you have, if the productive capacity or long-lasting things aren't there. If you "save" by buying gold rather than investing your money in a way that equates to a loan, all you have done is to transfer the lending power to whoever sold you the gold, and the future buying power of your gold is going to depend on what the borrower they lent it to did with it.
While I get really tired of the boomer-bashing that people indulge in from time to time on this site, looking at this graph with its dramatic change of trends (60s trending up, 80s and beyond trending continually down) I see an awfully damning picture for the majority of my generation.
hc, your idea about savings being a claim on future production is almost a tautology. But I see no particular reason to expect long term collapse of production capacity. If there is excess capacity now--and it is clear that there is excess capacity at least in certain sectors such as motor vehicles globally and housing in the US and some parts of Europe--a simple correction (yes, with the usual half-decade perhaps of overcorrection) is much more probable.
This morning, I read an inspiring story about GLL Centres, a London-based non-profit
operating gyms for the benefit of the community. (check their site at gll.org). This is
truly brilliant thinking, as it uses the current environment to subtly undermine the status quo. The non-profit model would be a brilliant
Total credit market debt as a percentage of GDP has risen from 130% of GDP in 1952 to 350%
of GDP today. The various bailout and stimulus schemes enacted in the last year will drive
this percentage above 400% in the near future. When a country allows this much debt to
accumulate versus its GDP, they have done something seriously wrong. The country’s
politicians, business leaders, and citizens have all contributed to this disaster.
TII, R?
Everyone up for volleyball!
That's inflationary, right?
"Incomes increased sharply boosted by the stimulus plan."
Really? That would be fast.
Green shoots! I assume the tax cuts are the part of the stimulus that is working?
Stock mkt?
OFF to Miami shortly.
So incomes are up sharply and savings are up.
Hmmmm, people==banks?
CR,
Is there a way to tell what proportion of the rise in savings is do to people actually putting money aside versus having their credit restricted?
What I mean is, say someone with $12,000 on their credit card is told they will no longer be able to borrow, but must continue to pay done debt each month. Or say someone abandons their home to foreclosure. Both would contribute to aggregate savings, but it isn't really savings in the sense of putting money aside.
I guess that would show up in the Flow of Funds data later?
Every social security recipient got a $250.00 check. Maybe that was the accelerant?
A nation of savers ?
Instead of Mrs Wantanabe we get MsSixPack ?
On second thought... LMAO!
It will be interesting to see how PCE breaks down within that BEA report.
Yes, fed data provides its own unique definition of 'savings'; it remains up to us to provide the fine print on what that means.
It’s OK that informed regular readers of finance & economic blogs know that bureaucratic definition and its fine print.
However, a layperson senses, rightly so, that savings are not increasing as in "my saving account balances is increasing". At least not when a household budget goes from X% deficit last month to a smaller y% deficit this month.
"Firing Wagoner Became Necessary for CEO in Denial of Bankruptcy"
- Bloomberg.com
Pretty good read. Surprising to see government forcing the hard choices. Wish they would do something similar about the TBTF banks.
CR, your May Economic Summary in Graphics was astounding. Thanks.
From the report:
Private wage and salary disbursements decreased $1.3 billion in April, compared with a decrease of $39.1 billion
in March. Private wages and salaries had been reduced by an adjustment of $20.0 billion at an annual rate in
January, in February, and in March to reflect smaller-than-usual bonus payments. This type of irregular payment
is not accounted for in the primary monthly source data for wages and salaries. This adjustment to the months
of the first quarter was not carried forward in the estimates of wage and salary disbursements for April and
subsequent months. Goods-producing industries' payrolls decreased $11.4 billion, compared with a decrease of
$15.6 billion; manufacturing payrolls decreased $3.7 billion, compared with a decrease of $8.1 billion.
Services-producing industries' payrolls increased $10.1 billion, in contrast to a decrease of $23.5 billion.
Government wage and salary disbursements increased $4.4 billion compared with an increase of $3.3 billion.<b/>
Has Anyone here seen their income increase because of the Stimulus?
This is much needed to balance USA long term.
However, this also means other countries, esp China, Japan, Oil exporters, Asian exporters cannot depend on USA for recovery. They'll have to look elsewhere.
This is very healthy IMHO. USA's consumption/PCE should continue to shrink. Savings account size and thrift behavior should become the next "Keeping up with the Joneses" competition.
If we're lucky, this will plant the seed for eventual recovery to a great economy, in say, a generation or two.
The quality and quantity of good paying jobs in this country continues to deteriorate. The increased positve savings rate in the private sector is more than matched by the increase in negative savings of the government, net, net, an increase in negative savings for the nation. What's different about this downturn is that corporations are laying their workers off as fast as consumption by the privated sector decreases. The government's cut in taxes and payouts to the workers is an artificial and non-sustainable vehicle to offset the most meaningful downturn in 80 years.
And that little pile of savings in USD is being systematically vaporized by Zimbabwe QE Ben. DXY declining quite sharply and well, bonds aren't faring much better.
Atta boy, Benny!
How do they calculate income and how can it be growing? This report flys in the face of reality. Hundreds of thousands of people are under reduced hours/wages. I don't get it.
CR,
Looking at the chart, it seems that in all the recent recessions (since 1980) the savings rate has started to come back down as the recession was ending. Does the data support that interpretation?
If so, the fact that it's still climbing is definitely not a green shoot.
On the flipside, we better be damn sure that the reason we're facing a crisis is because of US overconsumption and not because of global overproduction. PCE decrease & USA Savings will save us from the fomer, but damn us with the latter. By "us" I mean globally, not just us as in "Americans".
Because if the reason is the latter, this thrift behavior by the USA will accelerate the unwinding of that crisis; which would be domino collapse in factories worldwide, no matter what USA and other Govt's do. (unless they give away stuff for free, but that still causes destruction through deflation)
not sure how this helps things in the long run- transfer the debt of private individuals to the government. That is essentially what his report is .
Used to be that we reserved the surge capacity of the government to borrow for important things like war. Now we use it to support purchases from China!
Just wait until sliced bread costs 200 000 dollars a piece. Statistics are going to show wonderful things.
@housingdepression:
Has Anyone here seen their income increase because of the Stimulus?
I've seen my company layoff slow down and demands for wage cut disappear. From that perspective, it looks like my income did go up, although it didn't actually increase numerically.
TNX at 3.618% and rocketing.
Oil at $67.50/bbl after quantitatively easing over $68/bbl earlier this morning.
Another finance blog, maybe John Mauldin and/or Barry's The Big Picture, looked at the recent historical pattern in post-publication revisions of economic data by federal sources. The trend seemed troubling. There seem not to be a random pattern of upward and downward revisions as of late. Instead, there was a visible trend for federal sources to release data that more frequently required downward revisions later. One argued that this was to be blamed on the innocuous effect of inflection points on federal algorithms.
Below is what the BEA said in today's report about their recent many revisions. Seems we wait for the revisions to the April data:
Revisions
Estimates of personal income and DPI have been revised for October through March; estimates of PCE have
been revised for January through March. Changes in personal income, current-dollar and chained (2000)
dollar DPI, and current-dollar and chained (2000) dollar PCE for February and March -- revised and
as published in last month's release -- are shown below.
For October through December, the revisions to wages and salaries reflected the incorporation of
newly available BLS tabulations for fourth-quarter private wages and salaries from the quarterly census
of employment and wages. Wages and salaries were revised down for all three months. Revisions to
personal current taxes and to contributions for government social insurance reflected the revisions to
wages and salaries and the incorporation of revised federal budget projections.
BTW, increasing savings rate is ultimately good news. Though it seems to me that it might have to "overcorrect" to the upside for sometime to compensate for being too low for years. Might mean a lot more pain to come...
But it's a good pain like pushing on your tooth.
Dunno if this is news, but Travellers and Cisco replace GM and C.
How did you come to the conclusion that personal income is up because of the stimulus?
Clearly, we need a tax on savings. Spend you morons! Spend! Don't listen to your common sense- listen to Krugman and DeLong.
Now you know why C is up today.
double post
It just keeps getting better. Here's more on from the BEA on their revisions:
Comprehensive Revision of the National Income and Product Accounts
As part of the comprehensive (or benchmark) revision of the national income and product accounts (NIPAs), revised
including a link to the article in the March 2009 issue of the Survey of Current Business
estimates of personal income and outlays will be released along with preliminary estimates for June 2009 on
August 4, 2009. More information on the comprehensive revision is available on BEA’s Web site at
National Economic Accounts: Articles
that discussed the changes in definitions and presentations that will be implemented in the revision and to an article
in the May Survey that described changes in statistical methods. The September Survey will contain an article that
describes the results of the revision in detail. The Web site also contains links to redesigned PCE table
stubs; other revised NIPA table stubs and press release stubs will be available in June.
Dunno if this is news, but Travellers and Cisco replace GM and C.
Still think they should have used DIA as one of the replacements for GM in the DJIA - unless that would cause a circular error reference in the calculation....which may be a good thing.
There is one already...Inflation!
The Rat Catcher:
The increased positve savings rate in the private sector is more than matched by the increase in negative savings of the government, net, net, an increase in negative savings for the nation.
There's some good articles and videos on the net about dollar and debt being synonymous. Go look them up.
If savings rate go up, and no other entity (in the world) is willing to absorb that extra savings rate; then the US govt has to absorb it through extra spending, issuing of bonds.
This is a closed system. Your savings is someone's debt.
The alternative of net savings WITHOUT an entity willing to absorb it (i.e. the govt doesn't become the entity of last resort), is a collapse in trade/commerce volumes, debt service and ultimately the savings themselves.
(i.e. if you try to pump more savings into the system, where nobody wants to absorb it, then the NET savings in the system doesn't increase, however, everything else decreases relatively. It is a form of beggar thy neighbor.)
Of course a bankruptcy for GM is good news......no one seems to address or understand the knockoffs to the 100's of biz's that will also file because of this.
We are so *ucked that we have these people controlling what we call a market nowadays.
Ciao
MS
TBT up $2.06 this morning.
Holy smoke, Obama's bubbles put George Bush's bubbles to shame.
Brazil (EWZ) is one of my favorite bubble indicators. It's already up another 4% today.
Good thing we voted for change!
ac-
shorting EWZ last year was a small (lot size) money-maker here. Wouldn't touch it short now.
Un-furkin-believable what we have today......
Ciao
MS
Shouldn't this a Circuit breaker type day? I mean really or it is reality or is it really?
I thought Chrysler and GM BKs were supposed to be financial armageddon.
Shows what I know.
I'm bewildered. I don't know whether to decide that the bears are just flat wrong, or that the rest of the world has gone completely nucking futz.
This is so transparent. All that's left is manipulation. Been nice knowing you guys. It's not even worth talking about economics or fundamentals anymore. Only politics. And I HATE politics.
How high will they goose the Dow in the last five minutes? With the GM bankrupcy, its good for another 100 points.
from CNBS: Stocks Rise After Economic Reports; GM Gains? - CNBC
Stocks opened higher Monday as investors were encouraged by economic reports out of China and the U.S. and shrugged off the General Motors bankruptcy filing.
China's manufacturing sector continued to expand, albeit moderately, in May. That gave investors encouragement that China's economy is stabilizing and the worst may be over for the global economy.
Right.... if I don't trust our government's numbers, I'm really gonna fall for numbers ginned up by some commie bastards.
"However, this also means other countries, esp China, Japan, Oil exporters, Asian exporters cannot depend on USA for recovery. They'll have to look elsewhere."
They are not looking anymore. Exports to USA are at best 10 percent of their GDP and GDP of China especially has been growing yearly more than their all yearly exports to USA, 250 billion dollars. Most of the growth is already internal, contrary to the 1997 situation during the Asian crisis.
It is just western economists, especially west of Normandy and east of Midway, repeating the mantra or meme of poor Asians totally dependent on the West. Another meme is that continental Europeans being so slow and bureaucratic that they cannot possible compete in this global world. (Except Fiat buying Chrysler, hoocodanode?!) PIGS-countries are also crap, according to these economists (when poor Spain has better high-speed train network than both US and UK..). Russians are also just dumb oil exporting yahoos. And yet another one is USA will recover more quickly than anybody else.
The Bilderberg Plan for 2009: Remaking the Global Political Economy
The Bilderberg Plan for 2009: Remaking the Global Political Economy
After the meetings finished, Daniel Estulin reported that, “One of Bilderberg’s primary concerns according to Estulin is the danger that their zeal to reshape the world by engineering chaos in order to implement their long term agenda could cause the situation to spiral out of control and eventually lead to a scenario where Bilderberg and the global elite in general are overwhelmed by events and end up losing their control over the planet.
I love the smell of desperation from the elite
The concept that your savings is someone's debt is true EVEN IF WE'RE TALKING ABOUT GOLD-BACKED CURRENCY.
It's amazing to me that why very few people understands what true savings are.
Unless you're a miser, who saves just for the sake of saving and will never spend anything. (maybe a twisted pleasure from watching savings account numbers increase in digits) Most people will save for a future withdrawal.
Savings is a claim on future production.
Thus it's TWO transactions when you save, not one: The savings, and the future withdraw (of that savings).
Both actions act on a dynamic system.
Should the world's production go up, it will be able to produce the extra to service your withdrawal when you do it.
Should the world's production go down, your withdrawal may end up producing less.
It's not hard to envision:
1. When I save enough money for 10 tons of rice, in a world that produces 100 tons of rice; my expectation is to be able to access 10 tons of rice (plus some interest, possibly) in some future time. My savings claim is also 10% of the world's production is another way to look at it.
2. However, lets say disaster strikes:
2A. Some massive crop failure occurred, we only have 10 tons of rice in world production worldwide. Question to ask now is: is my savings still 10% of world's production; meaning 1 ton of rice; or still 10 tons of rice? The answer you give here is telling of your philosophy here. Typically, someone with ABSOLUTE world view will demand 10 tons of rice, since he saves 10 tons; world disaster be damned.
2B. Lets say the world no longer produces rice (maybe rice as a species went extinct), and produces wheat instead. Lets say that wheat is easier to grow but is less satisfying, the world produces 150 tons of wheat, but one have to consume double the amount of sustain oneself. (Bear with me here, I'm just using analogies, not really rice vs wheat) Again, the same relevant question applies: when you withdraw, is it 10 tons of wheat? or 10% of world's production (15tons of wheat) or absolutist's answer: 20 tons of wheat (since it's functionally equal to 10 tons of rice).
You'll notice I don't describe what currency is in the scenarios, because currencies are transient. Value is the ultimate thing being traded.
I also submit that most goldbugs are also absolutists... Thinking they can preserve absolute value in the face of disaster.
I will submit this: When the world's production capacity collapses, even gold's value collapses, simply because there's not enough production to buy anymore, no matter how much gold you have.
If you disagree, imaging how useful gold is, in a desert, or on the moon. Then compare to how valuable it is to know how to access water or make oxygen on the moon. In each scenario, knowledge/inventiveness/production outweight absolute weight of gold.
Look at it this way GH, One positive thing does come out of this IMHO those Econ class 101 text books no longer apply, free fire wood.
"I'm bewildered. I don't know whether to decide that the bears are just flat wrong, or that the rest of the world has gone completely nucking futz."
Hey, why not go with both.
ac-
shorting EWZ last year was a small (lot size) money-maker here. Wouldn't touch it short now.
Un-furkin-believable what we have today......
Ciao
MS
Yep, I tried to short that a couple of years back too soon. Eventually I made some money but it was a tough place to be for a while.
Right now I'm not gonna pet that dog.
That Wagoner-firing article is amazing.
Essentially, the gov't bypassed the board on choice of the CEO. I would be outraged, except that the board system is so damn broken that it made sense.
They also point out that a sizeable fraction of the board were ex-CEOs fired/left under pressure. We need to see more of that in board-composition reporting.
hc, just look at the bond market and you can see that the terms of trade for being a parasite (not by choice for most people here) are changing.
Financial armageddon -> massive infusion of liquidity -> higher equities and commodities
We've played the tune so many times the market doesn't even wait for the liquidity any more.
Well, here is something that makes sense at a time when nothing else does: the dollar is tanking.
Jeebus, they're just putting it right up the shorts' green chute.
I'd call that a buying panic.
@timmyone:
They are not looking anymore. Exports to USA are at best 10 percent of their GDP and GDP of China especially has been growing yearly more than their all yearly exports to USA, 250 billion dollars. Most of the growth is already internal, contrary to the 1997 situation during the Asian crisis.
There are signs that China is trying to grow on it's own; but I call its more experimental than anything serious unless it's willing to depeg.
Without depegging, it's still trying to maintain an export advantage to the USA, and with the recent drop in USD, the peg translates to begger thy asian neighbour policy for China, as now they can compete with Vietnam, Malaysia, etc.
As the soup (of pegging) gets sweeter (USD drops), it becomes harder and harder to wean China from it. If we don't get out of this trap, this will brew the next global disaster (see how it created the RE crisis).
A savings rate over 5% is the best news I have heard in a long time. The long term average seems to be around 8% so I think once we hit that level consumer spending can actually recover. As it is right now, I'm not sure what is going on with all of these "economic indicators" but I remain unconvinced.
"I'd call that a buying panic."
As retarded as it sounds, I think you're right. Perhaps this is the devaluation trade happening right before our eyes.
GH-
I came to that conclusion months ago. When the Fed/GS eliminates almost all competition on the sell side this is what happens.
The best headline of the day is just after GM was opened....it reads:
NYSE to suspend trading in GM stock..
Priceless
Ciao
MS
see the movie
buy the doll
see the movie
buy the doll
CLAP HANDS
CLAP HANDS
When you see the green "applause" sign begin clapping and continue until you see the light go out.
PE is now 130!
GM is now BK!
Hoooray!
Welcome to the Command Economy where all prices are fixed in all markets!
Yes. We. Can.
The devil says
Square Dance With Me!
YouTube - Eminem - Square Dance [Music Video]
The best headline of the day is just after GM was opened....it reads:
My favorite is over at the top page of Yahoo finance where GM is one of the three stocks "generating the most bullish buzz".
....thnx, hc........
Good posts, hc.
Most people don't understand "savings" because they think of them in the sense of a squirrel putting away nuts for the winter. But in modern times hardly any our savings are of that nature; they are nearly all loans to someone else, and their true value depends on what the borrower spends the money on.
If the money's spent in ways that help the the economy produce things of value in the future, or to create long-lasting things (e.g., houses) that can continue to be used long into the future (and which people will value in proportion to their cost), then in the long term we are ahead of the game. And the lender -- i.e., the saver -- will receive in interest and principal payments money that will buy as much or more than he or she could have bought with the money if he or she had spent it at once instead of saving -- i.e., lending -- it.
If the borrower doesn't spend the money in a way that creates useful future productive capacity or some long-lasting thing of value, then in the long term we're behind in the game. And the lender -- i.e., the saver -- will not get back money that will buy as much or more than he or she could have bought.
As hc noted, it doesn't matter how much gold you have, if the productive capacity or long-lasting things aren't there. If you "save" by buying gold rather than investing your money in a way that equates to a loan, all you have done is to transfer the lending power to whoever sold you the gold, and the future buying power of your gold is going to depend on what the borrower they lent it to did with it.
market manipulation destroyed cr community.
what good is prognosticating about fundamental economics in a Command Economy?
While I get really tired of the boomer-bashing that people indulge in from time to time on this site, looking at this graph with its dramatic change of trends (60s trending up, 80s and beyond trending continually down) I see an awfully damning picture for the majority of my generation.
hc, your idea about savings being a claim on future production is almost a tautology. But I see no particular reason to expect long term collapse of production capacity. If there is excess capacity now--and it is clear that there is excess capacity at least in certain sectors such as motor vehicles globally and housing in the US and some parts of Europe--a simple correction (yes, with the usual half-decade perhaps of overcorrection) is much more probable.
This morning, I read an inspiring story about GLL Centres, a London-based non-profit
operating gyms for the benefit of the community. (check their site at gll.org). This is
truly brilliant thinking, as it uses the current environment to subtly undermine the status quo. The non-profit model would be a brilliant
Total credit market debt as a percentage of GDP has risen from 130% of GDP in 1952 to 350%
of GDP today. The various bailout and stimulus schemes enacted in the last year will drive
this percentage above 400% in the near future. When a country allows this much debt to
accumulate versus its GDP, they have done something seriously wrong. The country’s
politicians, business leaders, and citizens have all contributed to this disaster.
I came across this interesting site.. Econ & Finance Articles Updated Daily