CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Monday, March 26, 2012
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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12 Comments:
The E.U. is in recession and there'll likely be a hard landing in China.
The Fed has done its part to maximize economic growth and maintain price stability.
Now, it's up to the government to deregulate, cut spending, and cut taxes:
Bernanke says U.S. needs faster growth
Mar 26, 2012
"U.S. gross domestic product grew 3 percent in the fourth quarter, but is expected to have slowed to just below 2 percent in the first three months of this year. For all of last year, it grew only 1.7 percent.
The U.S. central bank lowered overnight interest rates to near zero in December 2008 and has bought $2.3 trillion in debt securities to drive other borrowing costs lower to spur faster growth and cut unemployment.
The Fed said it would likely keep rates near zero at least through late 2014."
Factory activity in China contracted for a fifth straight month in March, hit by declining order books, disappointing exports and new hiring hitting a two-year low ...
China's slowdown partly reflects the weakness of economies in Europe, its single biggest export partner.
Memphis, Tennessee-based FedEx Corp, whose delivery service spans the globe, included a warning with its earnings report issued on Thursday that tepid economic growth was causing it to scale back its outlook for the rest of this year. -- Reuters
“If you look at the Chinese data, you should stop debating about a hard landing,” Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll ...
“One should be concerned about what’s happening in the China property market,” Mowat said at yesterday’s conference.“People are too complacent that the government can turn what’s going on in this market.” -- Bloomberg
China needs to slowly shift from being less of an export-led economy to more of a consumer-driven economy.
However, in the short-run, that'll cause inflation and unemployment.
China hasn't had the massive "creative-destruction" process, in over 20 years, that's needed to fundamentally improve the economy, most likely, because the communist elites don't want massive political upheavel.
There are many problems in China's economy. I stated before:
China's GDP is an illusion. The private sector is small (consumption fell from 45% to 36% of GDP in the past decade). Basically, China is a giant assembly plant.
What the Chinese do best is corruption, crony capitalism, misallocate resources, cause negative externalities, prevent creativity, create inefficiency, and export much of its GDP.
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Y = C + I + G + NX
GDP = Consumption + Investment + Government + Net Exports.
If you take away China's investments and net exports, you have consumption and government, and we know consumption is low and malinvestment is high.
Forgive me, VangelV, but I do not see the conclusion to which you are alluding to. All I see in this post is the fact that the Conference Board Leading Indexes improve. It seems to me that it's up to the reader to infer the usefulness of these statistics.
One other thing: the Conference Board in February revised their leading indicators, so they no longer incorporate money supply. The injections of liquidity are not reflected in the LI's.
Most of China's Leading Indexes statistics come from The National Bureau of Statistics.
From ShanghaiDailey.com 3-17-2012:
"THE National Bureau of Statistics has pledged to prevent local governments from manipulating economic data after revealing for the first time that some local entities had falsified facts and figures."
further...
"Too many layers in China's former data collecting system added inaccuracies and discrepancies. However, China established a unified system on February 18, through which enterprises can upload data directly on to the national statistics database. This is expected to contain the source of data distortion by eliminating redundant submissions and limiting the opportunities for local officials to interfere with data, the bureau said."
So, economic data enhancement may be taking a hit and in turn lessening comparative growth figures in China.
The following doesn't bode well for European economies to recover and is it also another indicator of the weakening purchasing power of the dollar?
EU Gas Now Over $10: Charting The Global Gas Pump Price Shock
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Juandos, yes, the Europeans had a rude awakening recently.
The E.U. has much worse debt problems than the U.S., while gasoline prices are 2 1/2 times higher and natural gas prices are six times higher.
I wonder how much further European living standards will fall?
We could've produced an additional 1 million barrels a day of crude oil in 2011, instead of 120,000 a day, to lower prices and create jobs:
EIA Expects Higher U.S. Crude Production
Mar 7, 2012
"U.S. crude oil production increased by an estimated 120 thousand bbl/d to 5.60 million bbl/d in 2011.
A 390-thousand bbl/d increase in lower-48 onshore production in 2011 was partly offset by a 40-thousand bbl/d decline in Alaska and a 230-thousand bbl/d decline in output in the Federal Gulf of Mexico/GOM.
The rise in production is driven by increased oil-directed drilling activity, particularly in onshore shale formations."
"I wonder how much further European living standards will fall?"...
I'm wondering how our own living standard will be affected...
As you know what happens in Europe has some effects in this country too but there are other and more immediate factors to consider...
Also note the comments Bernanke made in his Recent Developments in the Labor Market today at the National Association for Business Economics Annual Conference...
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