PeakTrader.com

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PeakTrader said...

Obamanomics (the antithesis of Reaganomics) has destroyed (e.g. through private unemployment) and displaced (e.g. through government employment) U.S. capacity.

Yet, there's still too much capacity, or slack, in the U.S. economy.

The cheapest way to facilitate U.S. growth is through deregulation, including rolling-back the 130,000 pages of health care regulations.

Maybe we should start drilling for oil too:

Obama's drilling moratorium causes major company to go bankrupt
February 14, 2011

"On top of tens of thousands of workers losing their jobs when Obama imposed a drilling moratorium by executive order (and fudging what scientists and experts believed in order to justify his moratorium) now comes news that Seahawk Drilling, a major publicly-held drilling services company, has declared bankruptcy due to the sharp decline in Gulf drilling work."

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http://2.bp.blogspot.com/-JQ1Rv4bOchU/TVn9c7vCI4I/AAAAAAAAO9k/n5uayq1UFvk/s1600/gdp.jpg

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jeremy h. said...

I agree with the sentiment of this post, but you are slightly overstating the case. Making some sort of purchasing-power adjustment is necessary. Using the same IMF data, Japan is $33,828 and China is $7,518, a 4.5x difference, not 10x.

Note that this also makes the US look a lot better compared to Japan, since the US figure is the base for comparison.

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PeakTrader said...

Japan's per capita real GDP is over 10 times greater than China when quality differences are taken into account, e.g. comparing houses, autos, goods at Wu-Mart to Japanese stores, etc.

Also, of course, China's high social costs, which have a negative impact on living standards, are completely ignored.

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http://www.blogger.com/comment.g?blogID=28997633&postID=5942729658042479600

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http://www.blogger.com/comment.g?blogID=28997633&postID=8021272944843747336

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PeakTrader said...

Even if food prices double this year, it won't add much to U.S. inflation.

For example, the food component of a box of cereal in the U.S. is a small proportion of its price.

Also, Americans spend less than 10% of their income on food.

If developing countries pay more for wheat, rice, corn, etc., then they'll have less to spend on beef, poultry, fish, etc., which may result in lower U.S. prices for those items.

Then there are fixed costs, e.g. mortgage and auto payments, which become relatively cheaper when nominal income rises.

After severe recessions, high real growth rates add little to inflation, and we haven't had high real growth.

It's likely in 2011, U.S. real growth will pick-up to 4%, while inflation remains around 2%, or 6% nominal growth.

Even Dr Doom is expecting low U.S. inflation-Nouriel Roubini's 2011 prediction:

•GDP growth in 2011 will most likely support a pace of job creation that will be barely capable of absorbing increases in the labor force and will fail to bring down the unemployment rate significantly.

•Inflation will remain well below the implicit 2% Fed target for core PCE for quite some time. This implies no change in Fed policy.

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jeremy h. said...

PeakTrader,
What is your alternative data source, which takes the quality differences into account?

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PeakTrader said...

Jeremy, Japan has and meets higher standards.

Quality differences between Japanese and Chinese housing, autos, and other goods are understated, in part, because China cuts corners often and fails to meet its own low standards.

Here's one example:

The Problems and Potential of China's Pharmaceutical Industry
(April 2009)
AEI

"China is dogged by a history of poor-quality pharmaceuticals that have killed hundreds and sickened thousands of its own citizens and people across the globe. The government has begun to tighten its laws, but enforcement remains weak, and official obfuscation is rampant."

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jeremy h. said...

Peaktrader,
I acknowledge that there are quality differences, but conventional PPP measures are supposed to adjust for both price and quality.

Perhaps the IMF measure of 4.5x Japan/China difference is slightly off. But my question was, What data sources claims the difference is "over ten times greater"? This would be a huge error on the part of IMF and other similar sources.

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PeakTrader said...

Jeremy, PPP doesn't come close to adjusting for "price and quality."

Also, if you're looking for accurate economic data on China, good luck.

However, I suspect, China's living standards are much lower than reflected in GDP.

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jeremy h. said...

PeakTrader,
PPP adjustments are certainly imperfect. But they are attempting to make the adjustments for price and quality based on the best available estimates, using best current practices. No offense, but, I suspect these adjustments are more accurate than any one person's intuitions.

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PeakTrader said...

Jeremy, no offense, but economics is a lot more than a simple standard model.