Gross Domestic Product

Report: China Surpassed U.S. in 2010

The Deepwater Horizon incident demonstrated that most of the oil left is deep offshore or in other locations difficult to reach. Moreover, to obtain the oil remaining in currently producing reservoirs requires additional equipment and technology that comes at a higher price in both capital and energy. In this regard, the physical limitations on producing ever-increasing quantities of oil are highlighted, as well as the possibility of the peak of production occurring this decade. The economics of oil supply and demand are also briefly discussed, showing why the available supply is basically fixed in the short to medium term. Also, an alarm bell for economic recessions is raised when energy takes a disproportionate amount of total consumer expenditures. In this context, risk mitigation practices in government and business are called for. As for the former, early education of the citizenry about the risk of economic contraction is a prudent policy to minimize potential future social discord. As for the latter, all business operations should be examined with the aim of building in resilience and preparing for a scenario in which capital and energy are much more expensive than in the business-as-usual one.

Seasonal adjustments are not forever. 

Wonder why the premise of a Gross Domestic Product is bunk? Wonder why politicians care first, foremost and only about bailing out banks, with little thought put to actually saving that core driver which according to economic canon is responsible for 70% of GDP? Wonder why the status quo is more threatened by a gold, or any kind of standard, that limits the potential of infinite dilution of nominal concepts? The Privateer's Bill Buckler expains, in three short paragraphs, the great lies that are Elastic Economics and Elastic Money, and why everything else is noise.

All you need to read and more.

All you need to read and more.

"The statistical component of the European Union, Eurostat, is quite clear; they do not count guarantees or contingent liabilities as part of any nation’s debt. We might all note that if Nestle or IBM or General Electric did this they would find their senior executives jailed for Fraud but never mind; this is the methodology of the EU which quite obviously masks the truth. The problem then is not the simple math used to obtain a more accurate debt to GDP ratio but in digging out the various guarantees, contingent liabilities and obligations of any member nation of the European Union. “Time consuming” would be the accurate words because you have to sleuth around like Sherlock Holmes to come up with the data. Yes, it is all there somewhere or another but it is nowhere all together and so must be found." And as Mark Grant points out what we noted last July, when one factors in all the various guarantees and contingent liabilites by Germany to date, something peculiar appears: instead of a 81.8% Debt/GDP, the country's actual Debt to GDP soars to a Italy-lie 139.8%.

All you need to read and some more.

All you need to read and some more.

All you need to read.

Gold may not be 'money' to the Chairman, but it sure is to Turkey. The WSJ reports that "The Turkish government, facing a bloated current-account deficit that threatens to derail the country's rapid expansion, is trying to persuade Turks to transfer their vast personal holdings of gold into the country's banking system." The reason: "The push to tap into the individual gold reserves—the traditional form of savings here—is part of Ankara's efforts to reduce a finance gap that is currently about 10% of gross domestic product." In other words, "sequester" the population's hard assets (politely of course), and convert these to paper to fund the country's creditors, both foreign and domestic. Mostly foreign. In other words, Southeast Europe is slowing becoming the staging ground for the 21st century equivalent of Executive Order 6102, where first Greek, and now Turkish gold, is about to be pulled from point A to point B, where point B is some top secret vault deep under London.

The global economy remains on shaky ground.  China’s manufacturing activity contracted for its 5th straight month, the US recovery is still very early to call, and the euro zone debt crisis may not be finished. Eurozone PMI data is due later today which will show how the economy is doing after Greece averted default earlier this month. Thomson Reuters GFMS have said that gold at $2,000/oz is possible - possibly in late 2012 or early 2013. Thomson Reuters GFMS Global Head of metals analytics, Philip Klapwijk, featured on Insider this morning and advised investors to "buy this gold dip”.  Gold should be bought on this correction especially if we go lower still as we may need a shake-out of "less-committed investors." Klapwijk suggested that a brief dip below $1,600 is on the cards but the global macro environment still favours investment, notably zero-to-negative real interest rates and he would not rule out further easing by either the ECB or the Fed before year end.

Remember Europe's so-called success story - Ireland? Time to scratch it off the list, as the "best performing" PIIG, and "peripheral reform" wunderkind, just reminded everyone that the only true success story in Europe is that other I country - Iceland, after its fourth quarter GDP unexpectedly dropped 0.2%, well below consensus estimates of a 1.0% GDP boost. Odd - recall that back in October, following the announcement that Greece would be allowed to extract a bondholder haircut, initially at 50% and ultimately at 78.5%, we said that "this means that Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." Looks like Ireland is well on its way to doing just that, and the GDP slide is actually not all that surprising. Next: prepare for more "surprising" GDP misses from Portugal, Spain and, of course, Italy.

All you need to read.

All you need to read.