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Are Aliens Buying Louis Vuitton Handbags? - World Exports $338Bn More Than It Imports

Tyler Durden's picture




 

The export miracle, that we have been cantankerously remonstrating against the possibility of for much of the last year, appears to be running into a wall of reality. The Economist puts its usual number-centric and acerbic spin on the nonsense that economists spew with regard to everyone exporting their way out of the debt-laden deleveraging quagmire we are in.

 

From The Economist: Exports From Mars

 

Economists are constantly urging governments to adopt policies that would reduce global imbalances—which, in crude terms, means that China should slash its current-account surplus and America its deficit. Yet they ignore the biggest imbalance of all: the current-account surplus that planet Earth appears to run with extraterrestrials. In theory, countries’ current-account balances should all sum to zero because one country’s export is another’s import. However, if you add up all countries’ reported current-account transactions (exports minus imports of goods and services, net investment income, workers’ remittances and other transfers), the world exported $331 billion more than it imported in 2010, according to the IMF’s World Economic Outlook. The fund forecasts that the global current-account surplus will rise to almost $700 billion by 2014.

 

 

 

 

Are aliens buying Louis Vuitton handbags? Are little green men bagging the best sunbeds by the hotel pool? The more down-to-earth explanation is that the global surplus reflects statistical errors. Either the current-account deficits of countries such as America are being understated or the surpluses of countries like China are being overstated, and by a rising amount.

 

The puzzle is compounded by the fact that the world ran a persistent current-account deficit for at least three decades until 2005. In 2001 the deficit was equivalent to 0.5% of global GDP, but by next year the IMF’s forecasts imply that the surplus could hit a record 0.8% of GDP (see left-hand chart). That turnaround exceeds the increase in China’s current-account surplus over the same period. Indeed, the global “surplus” now exceeds China’s.

 

A statistical black hole of this scale raises questions about the IMF’s forecast that global external imbalances will rise over the coming years. It expects China’s current-account surplus to double in dollar terms between 2010 and 2014. A forecast increase in China’s surplus ought to mean a bigger deficit elsewhere. Yet the fund also expects the rest of the world combined to run a rising surplus (this includes a big drop in America’s deficit).

 

What is going on? Past studies by the IMF concluded that the global deficit in the 1980s and 1990s was largely due to the underreporting of foreign-investment income by rich countries and the under-recording of freight receipts. But over the past decade, the “deficit” on investment income has diminished, partly because governments have cracked down on tax evasion and partly because interest rates have fallen. An IMF study in 2009, by Marco Terrones and Thomas Helbling, concluded that the biggest cause of the switch from a global current-account deficit to a surplus was mismeasurement of services. International trade in financial and legal services, insurance and consultancy is tricky to measure, and exporters are easier to identify than importers. For instance, law firms involved in cross-border deals are usually quite large, whereas most clients’ spending on their services is relatively small (though it may not seem that way to the clients). Exporters are thus more likely than importers to exceed the threshold for inclusion in the surveys used to track trade in services.

 

Since that report, however, measurement errors in merchandise trade have jumped and now match those in services (see right-hand chart). Transport lags can cause annual global exports to exceed imports when trade is growing rapidly because goods in transit in December are counted as exports by China, say, but are not counted as imports by America until January. But this cannot account for the scale of the recent rise in the statistical discrepancy because growth in trade has slowed since 2007.

 

Another possible explanation posits that the surge in the global discrepancy broadly coincides with both the explosion in vertically integrated businesses, where firms locate different stages of production in different countries, and the increase in China’s trade. A rising share of trade consists of parts, semi-finished goods and final products moving across borders between parent companies and their foreign subsidiaries. In 2009 intra-firm trade accounted for half of America’s imports. Transfer pricing used by multinationals to shift profits around the globe may distort trade figures. Much of this mispricing of exports and imports should cancel out, but probably not all.

 

More science, less fiction

 

Overinvoicing of imports and underinvoicing of exports by American multinationals trying to reduce their tax bills would mean that America’s true current-account deficit is smaller than officially reported. That would increase, not reduce, the global discrepancy. But under- or overinvoicing of trade within international firms is also used to dodge capital controls. A decade ago firms in emerging economies often reported exports at less than their value or imports at more, to shift money out of a country like China. In recent years, however, China’s booming economy and the expected appreciation of the yuan mean that exporters now have more incentive to overinvoice exports in order to bring money into the country. If so, official figures may overstate the surplus of China and other emerging economies.

 

To understand whether global imbalances really are widening or not, you need to know where the errors lie. Rich countries’ trade statistics tend to be more reliable than those of emerging economies, where data collection is less developed. If more of the mismeasurement is in the emerging world, the total current-account surplus of emerging markets is probably much smaller than that officially recorded. Zhiwei Zhang, an economist at Nomura, estimates that measurement errors caused by underrecorded profits of foreign firms and capital flows disguised as trade flows may have inflated China’s current-account surplus by 3-4 percentage points (last year’s surplus was 5% of GDP).

 

The good news is that international concerns about global imbalances may be much less pressing than many think. The bad news is that conventional balance-of-payments measures are clearly less reliable in a world of rising intra-firm trade and complex supply chains. That matters because dodgy statistics lead to policy mistakes. Governments should clean the figures up.

 

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Thu, 11/17/2011 - 01:23 | 1885826 SilverIsKing
SilverIsKing's picture

It's that new math they're teaching the kids these days.

Thu, 11/17/2011 - 01:28 | 1885834 Careless Whisper
Careless Whisper's picture

The Careless Whisper Midnight Threadjacking News Update

 

 

Nevada Enforces The Rule Of Law; 606 Count Criminal Indictment For Fraud & Perjury; Arrest Warrants Issued For Robo-Signers

http://www.scribd.com/doc/72962934/Nevada-Robosigning-Indicment-11-16-11

Newt On FreddieMac Payroll 1999-2008; $300,000 Per Year

http://www.nydailynews.com/news/politics/newt-gingrich-defends-million-d...

Latinos Smarter Than You Think; Reject CDC Bullshit On HPV Vaccine; 95% Say "No Me Gusta!"

http://latino.foxnews.com/latino/health/2011/11/16/cdc-recommends-hpv-sh...

FloriDUH Says, Sharks Can Kill You, But You Can't Kill Them; Approves Sharks As Protected Species; Kill One Gets You 60 days In Jail

http://www.palmbeachpost.com/news/state/shark-species-win-florida-protec...

Mike "The Situation" Sorrentino Thinks He Owns "The Fitchuation"; Sues Abercrombie Fitch

http://www.nypost.com/p/news/local/the_situation_sues_abercrombie_for_Lf...

VIDEO; Celente Tells Bloomberg To Clean Up NYC

http://www.youtube.com/watch?v=b1S7jADdjU0#t=3m57s

4chan/b/ Down From DDoS Attack; Flooded With Pics Of Cute Kittens; Tumblr Flexes Muscle

http://news.cnet.com/8301-27080_3-57326177-245/4chan-outage-could-be-dig...

Thu, 11/17/2011 - 03:21 | 1885971 fnord88
fnord88's picture

Not sure this makes sense unless they add all blackmarket transactions. Columbians sell coke to the US off the books, then import stuff on the books? Global drug trade would have to be about that much?

Thu, 11/17/2011 - 09:03 | 1885998 i-dog
i-dog's picture

The global drug trade is at least 3 times that amount (the opium/heroin out of Afghanistan alone is worth over $400bn/year to TPTB).

[edit] Upon reflection ... That's street value, not export value, of course. The Afghan farmers would be lucky to get $6.66 in total for all that. :)

Thu, 11/17/2011 - 08:02 | 1886182 redcorona
redcorona's picture

ferengi

Thu, 11/17/2011 - 03:44 | 1885985 r00t61
r00t61's picture

Clearly, the damn hook-nosed green-skinned aliens from Alpha Centauri are screwing with our economies.  We need to enact some fair trade barriers to level out the playing field. 

Thu, 11/17/2011 - 05:21 | 1886072 James T. Kirk
James T. Kirk's picture

Just target practice for Sulu. I'll let him know.

Thu, 11/17/2011 - 03:20 | 1885828 TruthInSunshine
TruthInSunshine's picture

Krugman is from Mars

Steve LIESman is from Venus

Mark Zandi is from Neptune

The Bernank is of Uranus

 

*Barton Biggs just put the East India Trading Company on his 'conviction buy' list

**Abby Joseph Cohen came out of her troglodyte cave, saw a 'V' shaped recovery in the making (according to her proprietary model -  one that she heavily modified based off of a circa-1637 Dutch econometric model), and predicted spooz @ 1984  by year's end - She's calling it the pending "May Santa Clause Stuffeth Your Stockings With Tulip Bulbs for Christmas Rally."

***Steve LIESman got really hungry for some ice cream when he saw the "I drank your milkshake" scene in 'There Will Be Blood.'

Thu, 11/17/2011 - 01:26 | 1885832 caerus
caerus's picture

"are aliens buying louis vuitton handbags?"

very clever

edit: i also enjoyed "cantankerously remonstrating" 

you guys are smart

Thu, 11/17/2011 - 02:20 | 1885913 DeadFred
DeadFred's picture

Smart? Bah! They don't even know that ETs don't exist. This is due to time travel not space travel. JP Morgan in 2033 finally had to cover their short positions and had to find gold and silver in the only place it was still available, the past. How else did you think the techies were coming up with such cool new widgets?

Thu, 11/17/2011 - 02:39 | 1885926 caerus
caerus's picture

fair enough...i still like "cantakerously remonstrating" nice turn of phrase

edit: i just appreciated your sarcasm...

Thu, 11/17/2011 - 01:25 | 1885835 lizzy36
lizzy36's picture

I have a theory that all this crap ends up on the island for misfit toys.

Or in this case island of misfit LV bags.

Thu, 11/17/2011 - 03:03 | 1885952 TruthInSunshine
TruthInSunshine's picture

+1 because I love the Abominable Snowman from Rudolph the Red-Nosed Reindeer.

He's just misunderstood, and meant no harm, like The Bernank.

Thu, 11/17/2011 - 06:33 | 1886122 nmewn
nmewn's picture

"I have a theory that all this crap ends up on the island for misfit toys."

LOL!!!...the toy in abundance there is the Three Monkey Economist Toy...see no evil, hear no evil, speak no evil.

Thu, 11/17/2011 - 13:32 | 1887489 TruthInSunshine
TruthInSunshine's picture

There was an island of misfit toys and then also an island of mutated, freakish, uber-Keynesian economists ("let's print even more fiatski to pay off the existing massive base of fiatski toilet paper in debt that we've accumulated") who were too close for comfort to Fukushima-Daiichi and its radiant afterglow.

These freakonomists came up with a full-retard idea to save the EU (and ostensibly the U.S. & even China) by establishing in one form or another leveraged sovereign stability funds (secured by nothing of value, ultimately, that did/didn't exist before), and they made the baby Jesus cry, so Santa Clause (underneath the beard and red suit was Ludwig von Mises) decided to drop a can of I Am Finally Pissed Off Now & Am Going To Drop Kick Your Asses Into Ashes, Bitchez! under their Christmas Trees & Hanukkah Dreidles.

Thu, 11/17/2011 - 01:25 | 1885838 kito
kito's picture

some great deals on canal street in chinatown..............

Thu, 11/17/2011 - 01:28 | 1885841 Rincewind
Rincewind's picture

What is there to say to that other than all these figures are fiction, with a large margin of error.

Thu, 11/17/2011 - 01:29 | 1885843 Stack Trace
Stack Trace's picture

I think that extra $338bn should bail-out Greece!

/Sarc off

Thu, 11/17/2011 - 01:30 | 1885846 Seasmoke
Seasmoke's picture

its all just the difference in the net and gross due to groupon

Thu, 11/17/2011 - 01:31 | 1885847 onarga74
onarga74's picture

10k patriots expected at Broad/Wall in the morning. 

Thu, 11/17/2011 - 01:31 | 1885849 PAPA ROACH
PAPA ROACH's picture

Wow! So the question would be is that on Corzine math or Reaganomics math?

Thu, 11/17/2011 - 01:32 | 1885850 GMadScientist
GMadScientist's picture

Are we strictly talking legal exports?

Thu, 11/17/2011 - 01:35 | 1885854 NotApplicable
NotApplicable's picture

Question is, what's the value of alien anal probes?

Thu, 11/17/2011 - 06:35 | 1886123 fajensen
fajensen's picture

Don't know what the value is, but in Amsterdam the price would probably be around EUR 100 and up - depending on how alien the probe. Gratis if you go to a place where they spike your drink.

Thu, 11/17/2011 - 01:36 | 1885855 CapitalistRock
CapitalistRock's picture

Government economic data has always been a lie. The degree of the lie is different in different countries and at different times. This is just more evidence that you must take all that data with a suspicious eye.

Hold physical.

Thu, 11/17/2011 - 01:36 | 1885856 Schmuck Raker
Schmuck Raker's picture

Cue the Uranus jokes in 3....2....

Thu, 11/17/2011 - 01:41 | 1885857 prains
prains's picture

1.......I'm sure Penn State could get to the bottom of this mystery in the time it takes to shower after practice

Thu, 11/17/2011 - 01:37 | 1885859 barliman
barliman's picture

 

Given how much "cooking of the books" has become THE global corporate sport, one would have to presume that the Goodfellas at the IMF have filed off the rough edges ( ~ 80%?) from the original crude numbers to arrive finally at this delicate flower of $ 338 Bn.

barliman

Thu, 11/17/2011 - 01:39 | 1885863 ACP
ACP's picture

I think Will Smith and Tommy Lee Jones can probably fill in the gap.

Thu, 11/17/2011 - 01:40 | 1885865 DormRoom
DormRoom's picture

Perhaps the market for drugs, guns, and human trafficking is about 388B..  That's a lot of misery.

Thu, 11/17/2011 - 01:47 | 1885869 slewie the pi-rat
slewie the pi-rat's picture

alien importers relieve overstuffed channels

Thu, 11/17/2011 - 01:46 | 1885872 Bansters-in-my-...
Bansters-in-my- feces's picture

can't resist...."remonstrating"....???

I know,easy to say if you are chinese.

Thu, 11/17/2011 - 01:56 | 1885881 zebra
zebra's picture

So what's alien's currency? moon rock?

Thu, 11/17/2011 - 01:57 | 1885883 YesWeKahn
YesWeKahn's picture

In fact, there are about 1000 vessels carrying 300 billions of goods on the open oceans. Those are exported, but not actually sold to anyone yet.

Thu, 11/17/2011 - 01:59 | 1885886 Yancey Ward
Yancey Ward's picture

Clearly Fifth Columnists are selling arms to the Krugaliens who are preparing their attack.

Thu, 11/17/2011 - 01:59 | 1885887 adr
adr's picture

Producing billions of dollars worth of goods tht never ends up going anywhere, why tha sounds like perfectly fine business practice to me. Kind of like global channell stuffing. All that matters is the production of goods and the transfer of inventory that can be booked as a sale. No actual consumption by consumers is neccesary to satisfy the need of the global stock ponzi. The economy has been stupified to a level where the electronic transfer of stock certificates is the only path left to generate wealth. Only 4% of available inventory is sold on a weekly basis and that 4% is constantly replenished so stores look full. That tells you how much the world has overproduced in order to satisfy Wall Street. END THE FED AND END THE PUBLICLY TRADED STOCK MARKET. It is the only answer.

Thu, 11/17/2011 - 02:03 | 1885892 pcrotty41@hotma...
pcrotty41@hotmail.com's picture

I work in the backpack/sport bag industry and have been to Asia three different times this year with a three month span between trips.  Everytime I am in a factory whether it be in China or Vietnam the production lines are full.  When I asked the factory owners who is buying all these bags, they know who the brands are but they also scratch their heads as to who the end consumer is that is buying all the bags...the bags are being shipped all over the world.

I thought it was funny that we were both scratching our heads trying to figure out who is buying all this stuff...especially backpacks and bags which are used to stuff more shit into...I mean if the backpack business is good that means that everything else is good, because people are buying so much shit that they need to buy another bag to stuff all their crap into and haul it around....go figure.

 

Thu, 11/17/2011 - 09:12 | 1886301 msamour
msamour's picture

It's a stretch, but maybe, just maybe, there are underground cities, and the people living there are buying all this stuff. Maybe could account for "missing stuff". It's a long stretch I know...

Thu, 11/17/2011 - 10:41 | 1886699 pcrotty41@hotma...
pcrotty41@hotmail.com's picture

That could be it..the funny thing is we like most brands place our production orders according to demand and don't just order stuff be made unless we have firm orders for at least 75% of what we are making.

Fri, 11/18/2011 - 06:30 | 1890656 fajensen
fajensen's picture

Mexican drug dealers buying bags to carry their money to Wachovia in?

The 0.001%'ers buying bags to carry on the helicopter during their Saigon Embassy-style evacuation to more accomodating places?

Thu, 11/17/2011 - 02:21 | 1885916 Milton Waddams
Milton Waddams's picture

The fact that people make serious financial decisions on releases such as GDP data and what not would be hilarious if it were not so pathetic.  The first thing my mentor said to me - after asking my opinion on the most recent GDP data, to which I profferred an answer - was, 'you do know that they pencil in most of the inputs and overwrite the estimates, sometimes years later, with ink'.  So yeah, most of the real time macro data is complete pablum.

Thu, 11/17/2011 - 02:24 | 1885922 Dingleberry
Dingleberry's picture

The way my wife spends money....I think I found the missing import $$$$.

Thu, 11/17/2011 - 02:31 | 1885930 Bolweevil
Bolweevil's picture

(Cue Looney Tunes intro.)

Thu, 11/17/2011 - 03:01 | 1885950 Arthur
Arthur's picture

Rounding error.

Thu, 11/17/2011 - 03:13 | 1885958 catch edge ghost
catch edge ghost's picture

It could prove the moon is made of cheese. If it's Swiss cheese it would explain a lot.

Thu, 11/17/2011 - 03:18 | 1885964 TruthInSunshine
TruthInSunshine's picture

Krugman was right after all.

Prepare for a massive alien invasion and they will come.

The only detail he got wrong is that instead of spending BernankBucks building bunkers and fortified positions and munitions, we should roll out the Prada.

Thu, 11/17/2011 - 03:38 | 1885979 HD
HD's picture

ATTENTION ZERO HEDGE

Your site is in violation of the Stop Online Piracy Act (SOPA), also known as H.R.3261  http://en.wikipedia.org/wiki/Stop_Online_Piracy_Act

The facts you are reporting are the sole intellectual property of The Powers That Be - and you are not authorized to reproduce or distribute the facts in whole or in part at any time, or for any reason.

Henceforth, any content you publish must be pre-approved by the Federal Reserve Bank of the United States or Jim Cramer of CNBC

Failure to comply will be cause to remove your site from the Internet without further notice.

 

Thu, 11/17/2011 - 03:39 | 1885981 i-dog
i-dog's picture

The Bermuda Triangle is filling up with excess exports!? Time to go fishing for iPads....

Thu, 11/17/2011 - 06:21 | 1886106 GoldbugVariation
GoldbugVariation's picture

Economist journos are neo-colonialist morons.  It's like reading a paper written by a very keen, but misguided, undergraduate student in economics.  On a more sensible analysis it seems unlikely the developing countries are the main cause of the statistical error here.

(1)  Developing countries' reporting standards are unlikely to be especially different in 2011 from what they were in 1971, or if anything will be better now.  A basic and generalised truth is that in these countries they like to do things properly to show they are serious contenders, and government employees are a lot smarter than in developed countries because in a developing country, working in government is a prestigious job for the intellectual elite.  Also export, and international trade, is extremely important to developing countries, and they tend to have methods to cross-check trade statistics due to exchange control or at least FX monitoring.  All these factors will tend to result in high standards in trade statistics.

(2)   It's obvious from what we know elsewhere that accounting tricks and tax avoidance scams are rife in the US and other developed countries, causing reported figures of most major enterprises to be wildly different from the underlying reality.  The erroneous world trade statistics are highly likely to be a consequence of that.  To give one example, Google Ad Services global (non-US) income is paid to local Google businesses, and the local Google businesses pay huge IP fees to Bermuda which tends to keep their own taxable profits low.  The Google associate company in tax haven Bermuda receives the IP fees and itself in turn bills lower fees for the same IP to Google US, so it makes a huge tax-free profit in Bermuda.  This makes it look like Bermuda is "exporting" a lot more services than it is importing.

It's also well known that in the UK, balance of trade figures are annually adjusted by a few billion $ as an "estimate" of the amount of carousel trade fraud which is occurring.  Carousel trade fraud is where goods (for example mobile phones in bulk) are openly exported to other countries and VAT refunds claimed, and then the goods are silently re-imported by small/unregistered/false-name businesses who disappear without paying VAT - each time the goods go around this carousel, it looks like an additional export transaction without a balancing import.

The UK adjusts its figures for this, typically more than $15 billion of annual adjustment, but probably under-estimates it, because it's such a political issue (the failure to tackle it properly costs the UK Treasury several billion $ in lost VAT per year).  The UK also fails to take account that the same type of fraud occurs in services.

More importantly for global statistics, exactly the same problem exists in other EU countries, it's a type of VAT fraud which takes place in all EU countries and it's not UK-specific.  Unfortunately, the other EU countries generally do not adjust their export figures for this fraud like the UK does.

Maybe these Economist journos should read their own "newspaper" (it's actually a magazine dummies): http://www.economist.com/node/7008797

Thu, 11/17/2011 - 07:19 | 1886152 s2man
s2man's picture

Just an accounting "glitch"

Thu, 11/17/2011 - 07:47 | 1886170 Ol Man
Ol Man's picture

Not a "glitch",  its a "feature"...

 

;)

Thu, 11/17/2011 - 08:05 | 1886185 ziggy59
ziggy59's picture

Perpetual Selling Machines

Thu, 11/17/2011 - 08:08 | 1886187 I Am The Unknow...
I Am The Unknown Comic's picture

The answer to this math problem is simple......the BP oil spill was counted as "exports" and since the Ocean doesn't give us it's GDP number, there lies the discrepancy. 

It's those damned anti-free market anti-capitalists in Atlantis not reporting their import numbers again. 

Thu, 11/17/2011 - 08:29 | 1886200 earnulf
earnulf's picture

If anything (or any figure) could be believed, it might be cause for concern.   Then again, it could just be those pesky PM people buying the physical and socking it away for a rainy day and not telling anyone.

Naw, who'd seriously take a barbaric relic like PM's and think they would be worth something someday in the near future.    We have plastic, digichips, and best of all, fiat!

330 billion a year is a good start for physical.

Thu, 11/17/2011 - 08:58 | 1886264 firstdivision
firstdivision's picture

First rule of fudging number, make sure the accounting balances.

Thu, 11/17/2011 - 10:06 | 1886524 Stuck on Zero
Stuck on Zero's picture

It makes a lot of accounting sense.  The exports are "booked" values and the imports are already paid.  This can continue indefinitely.  If we look at total trade and figure the average account receivable period is then it all falls into place.  Every CPA knows that.  Ask Andrew Fastow.

Thu, 11/17/2011 - 11:39 | 1886947 Hephasteus
Hephasteus's picture

I heard intel does 8 billion a quarter with pan pacific fucking ancestor ghosts buying that shit like candy.

hahaha fuck you intel and fuck your butt buddy apple too.

Thu, 11/17/2011 - 12:48 | 1887271 asteroids
asteroids's picture

"Everyone Lies".... House M.D.

Thu, 11/17/2011 - 21:50 | 1889942 fnordfnordfnord
fnordfnordfnord's picture

Must be Somali pirates. Those guys are hard workers ain't they?

Fri, 11/18/2011 - 16:10 | 1892229 downtownshuter
downtownshuter's picture

We are saved! SETI finally pays off

Fri, 01/06/2012 - 13:27 | 2039746 maddogs
maddogs's picture

I wonder if it's over reporting on the under reported, or to say, the admitted hiding of income(You Swiss trcksters!) now to Centrals tax collectors.

Mon, 02/06/2012 - 17:18 | 2131882 Hondo
Hondo's picture

In other words as expected and has been historically....the government numbers are nothing but some ether pulled out of the Orian nebula.....

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