Gross domestic product :slashingtongue

Debt watch : Study United Kingdom

Tuesday, December 1st, 2009 at 6:02 pm  
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If America wants to know what is the best method to deal with our debts tomorrow, we should watch with eagerness what is happening in Britain today. Many experts have come out saying that the British has accumulated too much debt in the past 24 months, and there may be consequences.

Experts like Morgan Stanley have suggested that the UK has spent too much in the past couple of years in trying to prop up the economy. It has a tremendous amount of debt; its debt vs GDP ratio is much higher than ours here in the US.

Most experts still agree that the UK would not crash as yet; but an outcome would be that her currency , the Pound Sterling, would have to be weakened . While there would be many businesses that rejoice at that news, it is not all that rosy.

For one, a weakening of the pound would mean a rise in inflation for the local Brits. Imported goods would cost more. Most of the products made in the United Kingdom are, like most countries, made in China. So there would be a rise in prices in Chinese products.

We here, across the Atlantic should take note. While our debt vs GDP is not as bad as it is for Japan, India, Italy or the United Kingdom, we still have more debt than all of them put together. We still have got issues to sort out, like our lack of tax income and our terrible health care problem. We are still borrowing more and more money from the Chinese. A few bad moves in the next few years might make us experience the bad outcome before the United Kingdom.

Of course there are advantages with our system. For one, if we want to, we can virtually produce everything in America. That is something that the United Kingdom can only dream of. Technically speaking, if we lower the value of our dollar, companies would be more interested in opening factories and production centers in America. We have the resources as our country is huge, the United Kingdom does not. Also with full employment as the result of the factories, there would come the demand which would strengthen the dollar back to what it is supposed to be in the long run. We do have a juggernaut of an economy that is much larger than the Brits’.

That being said,football games are not won on paper. We need to play the game well to win. In this case, anything could go wrong; from bad leadership to counter measures by the Chinese. There are lots of things that could happen.

So it is very essential that we sit back and watch how the British handle their debt problem. If they do it well, we should model ours based on their techniques. If they screw up, we should learn from their mistakes and avoid making them. It is something that is very important for the future of our nation.

We should do our part as a people and read up on the situation. We should be keen about what is going on over there. In that manner, we can vote the person with the right solution into power.

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Dow hits high, where are the jobs

Tuesday, November 10th, 2009 at 6:44 am  
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First it was the GDP results which showed that the economy is roaring back to strength. Now it is the Dow Jones that is roaring back to strength. So the money is coming back. The investors are coming back. So where are the jobs?

The Dow Jones hit a 13-month high. It went up more than 2% and closed above 10 000 again. Reuters reported that this is due to the G20 statement where they state that they would still back the economies. It is a “pure risk rally” quoting the site.

Another reason is that the Dollar hit 15 month lows. This makes American goods cheaper for the outside world. Hence exporters rejoice at this fact. However, this means that oil and gold’s prices would increase and the cost of goods is all bound to go up.

So, now that the Dow is up, where are the jobs? Why is it that all the other numbers are roaring back but the jobs is not? Why is this happening in the US as compared to other countries.

For example, the French economy grew a mere 0.2% with the CAC (Paris Stock Exchange) not nearing 13 month highs, unemployment goes down. The German economy grew by 0.3% with the DAX (Frankfurt Stock Exchange) 200 points short of 12 months highs, but unemployment in Germany is going down. It is the same with Canada and other countries.

So what is it that our country that is growing more robustly that the rest is doing wrong that we have such high unemployment number? What is the cause? Is it due to the lack of a manufacturing sector that went AWOL after the tech crash? Also, how long can we grow when unemployment numbers keep on increasing? We need people to buy goods, so how long can we carry on if so many people have no income to buy anything?

In my humble opinion, I think that we are in this rut because we do not make things enough in America. When one sixth of the economy is health care, we know that something must be going wrong. That figure should be three to five times less than that. We need to build a better rail network. Why is it that Asia and Europe are having bullet trains while we do not? I think we need to be building new cars and planes, etc.

However, that is just an opinion and not a fact. I would like to hear from our readers what they think. What is costing us all the jobs when our economy on paper is doing better than most of the world? Is it the tax cuts, or lack of it? Is it the banks? Is it just that Americans are not ready yet to fit into the economy of today as they have yesterday’s mentality?

Whatever it is, I hope that we would be led out well of this near depression. There is nothing we want more than to see the jobs coming back to America.

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Unemployment above 10%

Sunday, November 8th, 2009 at 6:30 am  
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Unemployment has soared to 10.2%. That is the highest in nearly 2 decades. What is so disappointing is that we are experiencing the steepest rates of job losses in the past few months in the midst of the GDP and the economy roaring back to health.

There are some good news. There are less unemployed college degree holders. That rate has dropped 0.2% to 4.7%. Management and professionals too experienced the largest job growth, from 5.2% – 4.7%.

However, the fact that these numbers are so small means that it does not impact the economy that much. It was ages ago when the unemployment rate was 4.7%, the rate of unemployed college degree holders. That is unnerving.

Now back to the bad news. Blue collared workers, those that work in production jobs and factories, rose to 14.5 %. That is a 0.4% jump and it is very high. Worst of the lot is the jobless rate for workers in construction, maintenance or natural resources industries. It shot up 1.2%, which is huge! It now stands at a whopping 15.5%.

To sum it all up : The sectors that are least affected are becoming better, while the sectors that are most affected are becoming worse. And the worse is getting worse faster than the better is getting better (a weird expression, I know).

Why? Is it because the college degree holders and people in management make up the GDP while the rest of the economy does not? I am not being populist here, I myself am a college degree holder. But if there are 10% of the population that does not have a job, how can it be good for the economy? That is 10% of the population contributing next to nothing on the demand, how can there be jobs which would be needed in supply? Can people out there please explain this to me?

This also goes back to the topic of the stimulus. Stimulus was meant to create or save jobs. Around $800 billion was set aside to create jobs in 2009 and 2010. But with 1/3 of it being tax cuts, it is ridiculous, that is only going to kick in next year. Less than half of the “non tax cut” cost has been spent. That would be up to around $300 billion. And so far that has saved 1 million jobs.

I think that a stimulus was necessary to save jobs, but the manner done was wrong. For one, I think that the tax cuts are a joke. Cutting taxes in the time of recession is okay, but it should not be costing us more than $200 billion. Cutting taxes when income is next to zero is like selling a catamaran at a discount in the ghetto. It really does not work.

Things should be concentrated on jobs. For one, rather than giving money to the states like what was done, they should have taken over the budget of policeman and / or firemen in the states. This would force state to cut non essential jobs like roadwork ones rather than the firemen and policemen that are essential. I think that we should have reworked the roads, rail networks and electrical grids, reeducate our teachers and get better support for our students.

I think that if the next quarter, the economy grows again but jobs are still being lost, I think that a study has to be demanded. We cannot go down that road at all.

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We are out of recession, but

Thursday, October 29th, 2009 at 6:09 pm  
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It was slightly higher than expected, and it is the first growth the GDP has seen since the third quarter 2008 which would make some term this news as an end of the recession. Others, who believe that the recession started in 4th quarter2007; would say that we need another quarter of growth to say that we would be out of recession. But the one question on our lips is : When is the jobs coming back?

This should be the best news for us to hear but for a long time, but please forgive us for not being so optimistic. President Obama should be hailed as a savior of the economy, but please for give us, President Obama, for we do not give a crap for “technical mumbo-jumbo”, till we see the jobs coming back! I think that people genuinely feel that this increase in GDP is just because of the “fat-cats making money” while we are still suffering.

That is not true. The main reason that we are having a good GDP result is because the personal consumption expenditures has increased by about the same amount GDP has. In other words, people are more confident in the economy now than they were three months ago. That was the biggest reason that the GDP grew.

There were still losses in Private domestic investment in non-residential structures, government investment and spending in local government and most importantly, personal disposable income. This GDP figure does show the fact that we hold about 3.5% less money now than we had it a few months ago.

So where is the positive news coming from? The following show a double digit quarter to quarter growth. Personal Domestic consumption of durable goods, residential, exports and imports. The double digit in growth shows that trade is back, but the sad thing is that our imports (16.4%) are increasing faster than our exports(14.7%).

I think that you may understand what I feel about the GDP by the second paragraph in this article. I see no point in the economy growing when the job indicators show no good results. I also think that it would be the reversal of the job loss rate that would be the correct indicator of growth. Let me put it in numbers. We have lost at least 8.5million jobs since the recession began. Until and when we put at least half of those lost jobs back, then and only then, we talk of recovery.

I feel rather angry about this. For example, when we exit a recession our number roared back to recovery with unemployment numbers increasing. Germany exited the recession with a growth rate of 0.3% but unemployment was down. France exited with a mere 0.2% growth but unemployment was down. Why are we bucking the trend?Why is the economy improving but the jobs are not coming back? Are we doing something very wrong or very right?

That being said, if President Obama really needs to have a pat on the back for the figures. He has lead the economy out in some manner. So I give credit where credit is due. I think that if this were the previous administration, they would be gloating about this and the President is not.

But the President is still under my sights for criticism. I do not care if the GDP shows a 20% growth in the fourth quarter; as long as the jobless numbers increases, you are failing! I would still give him time though.

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3% R&D : Enough or too much?

Friday, May 8th, 2009 at 3:40 pm  
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While there are many news that has been coming out of th news lately, there is one that is relatively ignored by all media. On print you can only find it on Reuters prior to this and the source of this article, CSPAN.

What President Obama basically said is that the US would spend 3% of her GDP on Research and Development. This is the kid of news that an American should look out for as it is this kind of move that has far reaching effects into their future.

The reason that President Obama want to do this is rather obvious. Any economist, right-wing Austrian School of Economists or left wing Keynesians would tell you that the most important thing for America to get back us is to restart manufacturing in the United States.

President Obama can do some manufacturing in the short term by investing heavily in green technology today. But that is just for the short term measure. Once the wind farms are up and the geothermal generators are up, there is only so much jobs that they can accommodate and the chances of growth in the future for that industry would not be great in the long term.

So there needs to be a change once in a while that would create more and more jobs. That is where Research and Development comes in. It is something that would be giving investors new markets and ideas to exploit.

Nobody would go against R&D. Many countries take a huge chunk of their GDP out to spend on R&D. It was R&D that eventually allowed America to land the first man on the moon. It is because of R&D by the US Army that we have the Internet today.

But the question is who should spend for it? It is one thing for private companies to fund for it and is another for the government to fund for it. Why is it that the government spend money on something when they cannot make it directly back later?

This really goes back down to the Mathematics that has yet to be shown. Unlike the Keynesian or Austrian school of Economics discussion that I made in the first days of this site, I cannot make even the stand that this could work as there is no Mathematic equation that I can see at all. This was unlike the economic discussion where I said that it could work if the assumptions made by either were right. So the entire view of mine would be at a view-point of logic and I can understand if people disagree.

I feel that unless the US government sells these rights in the future, I really do not see any direct way of earning money after spending 3% of GDP on research. The US government cannot be the main manufacturer as that would put the entire US economy in jeopardy should anything go wrong.

Secondly, where is the private companies coming into this equation? In the end of the day, it would be them who would be making parts and employing people. Are they going to get things cheaply from the US government at the detriment of the US taxpayer? Even if they bought the right, would they then still produce them in overseas factories? That would be coming back to square one again and not solving the problem of lack of manufacturing in this country at all.

Another angle would be this : What kind of R&D would President Obama be doing? Would it be for green energy, something that I said was for the short term, military or a mission to Jupiter? That is something that I feel that the President should be more open about. After all he is not doing this cheaply.

I think the solution would be something that is similar to what some Asian governments do. Give companies a loans for R&D. This would decrease the chances of a loss that the US government would incur though it would still be high risk of loss.

While I disagree with the manner President Obama is trying to do this, I think that it is very positive that at least there is this realization and an attempt to restart manufacturing in USA. I think that this should open a box of ideas had the media concentrated on this.

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