Gross Domestic Product
The US and the rest of the developed world have a schedule of occupied venues for the next several days, false European headlines, and the occasional economic event.... Greece has a schedule of strikes. For those wondering what the oppotunity cost of Greek GDP and surplus is, here you go.
A new study concludes that so far, oil exporters were winners and oil importers losers of Arab Spring. In aggregate, the Arab Spring has actually provided a positive economic boost across the region worth almost $39 billion.
The last time (May 2010) when the head of the worst performing division at Goldman, GSAM's Jim O'Neill openly taunted the market skeptics ("Anyhow, dear grizzlies....bet your [sic] worried about today’s rally? See u later.") the market proceeded to implode with such ferocity (not to mention see the first and biggest SEC fine charged against his firm for CDO rigging) that it took QE2 to prevent a depressionary relapse. Now, following the latest two week surge in risk assets, driven as we currently speculate primarily due to a FX repatriation out of French banks on asset liquidation and USD to EUR conversion, Jim O'Neill has once again crawled out of his shell and has gone "bear hunting." However, so as not to jinx the ongoing melt up on proceeding liquidations, he is far more subdued and rhetorically answer himself: "So are the bears beaten? As tempting as it is, alas I think not - at least yet." He continues, putting the onus of the growth thesis once again squarely on China: "While the Euro challenges are immense, I don’t see them as being necessarily of the power to drag down either China or the US, or both. While it is perfectly possible, the US and China have coped perfectly well with Japan’s weakness for a long period, so I don’t see why they can’t cope with a struggling Europe. A collapsing Europe would be a different story, but a struggling Europe, that shouldn’t be too demanding. As for Europe, the bar has been raised these past few weeks, as markets have recovered and expectations of a Big Bang increased. There are all sorts of dilemmas remaining, ranging from Berlusconi’s tentative hold of power in Italy to the divergence of stances on the right broad European solution. What we really need from Europe is to just not implode, that would be a problem for the rest of us and the markets." Unfortunately for Jim, he appears to have missed the "paradigm shift" when few if any buy the China as world savior phenotype any more, and instead most finally see what Jim Chanos and other fringe bloggers have been claiming for year. As for the bears, Jim, just like last time, fear not - the bears will once again have the last laugh.
We all know that China has the biggest skyscrapers, the fastest growing economy, and the emptiest cities in the world. We also know that there is no such thing as a free lunch. And with every economic success story, no matter how engineered, manipulated, or contrived, comes a human cost. The 2009 documentary by Lixin Fan, "The Last Train Home", is just one such attempt to capture the "human element" behind the glitzy headlines and the 9% GDP growth. The quite synopsis: "Every spring, China's cities are plunged into chaos as 130 million migrant workers travel back to their home villages for the New Year's holiday. This mass exodus is the world's largest human migration, an epic spectacle that exposes a nation tragically caught between its rural past and industrial future. Working over several years in classic cinéma vérité style, director Lixin Fan traveled with one couple who have embarked on this annual trek for almost two decades. Like many of China's rural poor, the Zhangs have left their native village of Huilong in Sichuan province and their newborn daughter to find work in Guangzhou in a garment factory for 16 years and see her only once a year during the Spring Festival. Their daughter Qin, now a restless and rebellious teenager- bitterly resents her parents' absence and longs for her own freedom away from school and her rural hometown, much to the dismay of her parents. She eventually leaves school, against the wishes of her parents, to work in the city. Emotionally charged and starkly beautiful, Last Train Home examines one fractured family to shed light on the human cost of China's ascendance as an economic superpower." We bring the documentary in 6 parts to our readers in hopes of a greater understanding of the dynamics behind the world's biggest economic dynamo.
Sunday sarcasm. Or not?
The most concise summary of bullish and bearish events in the past week and commentary
A few weeks ago we discussed the growth of the "virtual" economy. The argument was that metal consumption (in particular copper and zinc) grew in accordance with global GDP until the mid '70's, after which metal consumption grew markedly more slowly than did global GDP. Our thesis was that global GDP (the "official" economy) has at least partially increased by management of perceptions and addition of a lot of economic "activity" which does not increase wealth. It has troubled me in the past that I could file lawsuits against present and past associates, who in turn might file suits against me. In the very best scenario all that would happen is a redistribution of existing wealth, yet all the legal fees would be additive to GDP. Yet no wealth would be created (except from the lawyers' perspective) and a great deal would be lost. It has always seemed to me that economic activity of this type forms a component of GDP the magnitude of which is unknown. A reader questioned whether the reduction in growth of consumption of these metals could be due to their replacement by less expensive alternatives. Although I believe that there may be a slight effect, as seen in relative increases in aluminum and stainless steel--I discount most of this because copper, for many of its applications, is very difficult to replace. It is why the price of Dr. Copper is thought to be such a good leading indicator for the economy.
"Tax fraud is a national plague," said Greece's finance minister after he found that Greeks owed $50 billion in back taxes. But it's complicated....
We recently received a note from a German journalist writing for a national paper there. He asked, “Simon, German politicians swear to support the well-being of the German people. Given this, what would you advise the German government about the euro– keep saving it? Or let everything fail regardless of the consequences?” Europe and the United States have much in common in that their sovereign debt problems are really quite simple to understand. You don’t need a PhD in economics– you just need to understand basic arithmetic.
Retails Sales Beat Expectations On Levered Car And Gas Sales, As Inflation Picks Up Again In Import PricesSubmitted by Tyler Durden on 10/14/2011 07:49 -0500
There is good and bad news in today's economic data release: on one hand retail sales in September beat expectations at 1.1%, on expectations of 0.7%, and up from an upward revised 0.3% in August. Retail sales less autos was a modest beat at 0.6% on expectations of 0.3%, although the previous number was revised substantially higher from 0.1% to 0.5%. Yet confirming that the bulk of the "beat" was in auto and associated gas sales, was that Retail Sales ex Autos and Gas (duh) came at 0.5% on expectations of 0.4%. Basically, surging subprime loans to autopurchasers and the resulting increase in gasoline sales was the reason for this "surprise" beat. And as for the bad news, import prices jumped to 0.3% in September, on expectations of -0.4%, a surge from August's revised -0.2%. And while fuel imports had dropped in August -1.4%, in September these jumped to a positive 0.1%, showing just how big the monthly sensitivity to any moves in the energy complex are. In other words, should inflation persist, don't expect for retail sales, which we expect to decline to recent deleveraging at the consumer level, to persist.
UPDATE: EURUSD loses 1.3750
On Oct. 13, 2011, Standard & Poor's Ratings Services lowered the long-term rating on the Kingdom of Spain from 'AA' to 'AA-', while affirming the short-term ratings at 'A-1+'. The outlook is negative. The transfer and convertibility assessment remains 'AAA', as it does for all members of the eurozone. The negative outlook reflects our view of the risks to Spain's economic growth linked to private sector deleveraging, external financing pressures, and their impact on budgetary consolidation. We could lower the ratings again if, consistent with our downside scenario, the economy contracts in 2012, Spain's fiscal position significantly deviates from the government's budgetary targets, or additional labor market and other growth-enhancing reforms are delayed. Conversely, we could revise the outlook to stable if, consistent with our upside scenario, the government meets its budgetary targets in 2011 and 2012, risks to external financing conditions subside, and Spain's economic growth prospects prove to be more buoyant than we currently assume.
Parts of Thailand have experienced terrible flooding lately, and much of the country’s production shut down as a result. Thailand makes everything from tire factories to hard disk drive manufacturers to rice… and given the slowdown in the economy, it couldn’t have come at a worse time. Not to worry, though, the government has a plan to fix it. Let me explain: Thailand’s central bank is sitting on roughly $212 billion in net foreign reserves right now. That’s up 37% from last year and nearly 80% from 2009. Curiously, it all starts with Ben Bernanke.
Jobless Claims 1K "Better" Than Expected 405K, To Be Revised To "Miss" Next Week; Record Trade Deficit With ChinaSubmitted by Tyler Durden on 10/13/2011 07:45 -0500
In today's weekly dose of BS from the BLS, we get the previous week's massive beat of 401K revised to 405K, cutting the 410K estimate beat in half. But what is important is that the expectation for this week of 405K was once again "massively beaten" by a whopping 1K at 404K. Of course, next week this number will be revised to 408K meaning the consensus was missed but no robots will care. As for the non-noise, non seasonally adjusted claims soared by 66,442 in the week from 332,394 to 398,836. Spin cycle to commence imminently. In some modestly good news, the "cliffers", those on EUCs and Extended benefits, which have declined by 1.3 million in the prior year, increased modestly by 2K, meaning those playing Xbox and collecting benefits actually rose for the week. In other news, the Trade Balance came in line with expectations, at a deficit of 45.6 billion. However, last month's number which gave all the banks hope that Q3 GDP was going to be a whopping beat and got so many Lemmings to re-revise their GDP forecast higher, was reduced from -44.8 billion to -45.6 billion, meaning Q3 GDP is right back down where it belongs. Most notably, the Chinese trade deficit hit a politically convenient record, increasing from $27.0 billion in July to $29.0 billion in August. Exports increased $0.2 billion (primarily soybeans, fish and shellfish, and nonferrous metals) to $8.4 billion, while imports increased $2.2 billion (primarily other household goods and toys, games, and sporting goods) to $37.4 billion. Expect Chuck Schumer's head to explode in 5...4...3...
Today's Economic Data Docket - And The Depression Rolls On With Yet Another 400K+ Jobless Claims NumberSubmitted by Tyler Durden on 10/13/2011 06:51 -0500
Today we get jobless claims and the trade balance, both largely irrelevant as they will merely confirm the downward trajectory of the economy. What matters are flashing headlines, HFT kneejerk responses, lies, rumors, innuendo, and endless bullshit.