PeakTrader.com

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PeakTrader said...

Some economic headwinds include a slowing Chinese economy and a E.U. recession:

Cutting 1 trillion yuan in China taxes
Jan. 5, 2012

"China’s economy is slowing down.

The export sector, about two-fifths of the economy in value added, may be shrinking.

The property sector, about one-tenth of the economy, may be shrinking too.

The auto and infrastructure sectors, about another two-fifths of the economy together, may have slowed to a single-digit growth rate from about 20%.

The retail sector may still maintain a growth rate in the mid-teens.

The economy as a whole could slow by half from the previous two years.

Electricity consumption, for example, may slow to a 7% growth rate, from 13%.

China can’t afford a lost decade. The country’s population will begin to decline in 2020. It would be extremely difficult to accumulate wealth with a declining, old and aging population.

The growth over the past three years has been funded by taxing efficient activities to fund inefficient ones.

Inflation is one manifestation of the rising inefficiency. It may make the economy bigger in the short term but would lead to crisis in the future.

China’s economy has probably gone backward in the past three years despite the growth.

The government sector has gotten very easy money from collecting taxes and fees and borrowing cheap money from banks. The easy money has caused the massive expansion of the government sector.

China needs to immediately cut taxes by one trillion yuan ($158.5 billion) to support economic growth and boost efficiency."

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PeakTrader said...

Morganovich, says: "alan greenspan" a fed chair who will go down in history as the idiot who undid volcker's good work."

Greenspan, who had a great feel for the economy, was the best Fed Chairman this country had.

Under Greenspan, the country had strong disinflationary growth and a massive increase in real wealth.

Greenspan anticipated and managed a most complex and dynamic economy very well by the "seat-of-his-pants," which boosted the U.S. standard of living to higher levels.

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PeakTrader said...

Morganovich also says: "he (Greenspan) turned the bubble of 2000 which was an easy one to recover from (equity funded, productive resources) into this one, a debt bubble in non productive resources, which will take a decade."

After the quick and massive creative-destruction process mostly from 2000-02, in a mild recession engineered by the Greenspan Fed after the longest expansion in U.S. history, the U.S. economy became much more efficient.

So, U.S. living standards continued to rise at a steep rate even in the structural bear market that began in 2000.

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PeakTrader said...

Buddy says: "What if the U.S. money supply had been at a consistent 3-5% growth, for the last twenty years..."

There are too many shocks to the system (both major and minor and positive and negative) to maintain consistent money growth, e.g. Y2K, 9/11, an oil shock, technology shocks, poor fiscal policy, etc.

Also, targeting anything except price stability, e.g. the money supply or output, will lead to instability.

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PeakTrader said...

Morganovich, it seems you completely ignored the real economy and focused on a paper economy when Greenspan was Chairman from 1987-06.

From 1982-07 was one of the greatest eras of U.S. prosperity.

And we could've avoided a severe recession in 2008 or could've achieved a V-shaped recovery beginning in 2009.

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PeakTrader said...

Geoih, perhaps I should've said directed rather than manage, because the Fed doesn't micromanage the economy.

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PeakTrader said...

Morganovich says: "he (Greenspan) blathered about "irrational exuberance" in 1996, then presided over a massive bubble."

"Jawboning" is one of the Fed's "tools."

Greenspan was trying to talk down the economy to achieve sustainable growth, which is optimal growth (because boom/bust cycles are inefficient, both in the boom and bust phases).

And you're confusing economic growth (of goods & services) with asset booms and busts.

The Fed is concerned with sustainable economic growth, not how many booms or busts take place in asset markets.

I've shown you lots of data that prove you wrong.

Yet, you continue to make the same statements.

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PeakTrader said...

Morganovich, here's part of the data I've shown you before:

US household net wealth rises
But remains below the record level set in Q3 2007.
15 June 2010

At the end of Q1 2010, the value of US household assets amounted to $68.53 trillion.

At the end of Q1 2010, the level of US total household debt was $13.97 trillion.

US net wealth now represents a very respectable 491% of household disposable income. The current ratio is actually exactly in-line with the long-term ratio, which dates back to 1952, although there have been times when the ratio has risen over 600%.

Overall the US consumer remains extremely wealthy by historical and international standards; despite the high level of debt.

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U.S. Real Per Capita GDP in Business Cycles 1973-82 (long-wave bust period), 1982-90 (expansion), 1991-00 (expansion), 2001-2007 (expansion, and 2001 recession so mild it wasn't a recession based on annual real per capita GDP).

1973 $23,200
1982 $25,280

1982 $25,280
1990 $32,112

1991 $31,614
2000 $39,750

2001 $39,773
2007 $43,482

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The U.S. created 17.6 million jobs between 1993-98, and created only 3.7 million jobs between 2001-06. However, U.S. real GDP growth was only slightly higher from 1993-98 than from 2001-06. So, the U.S. became much more productive in the 2000s, i.e. using fewer inputs to produce more output.

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Over a five-year period in the 2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3% annually, in spite of 6% annual current account deficits (which subtract from GDP).

The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, and in a structural bear market that began in 2000.

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I've also explained how the U.S. had increasingly larger gains-in-trade, while its trading partners had increasingly smaller gains-in-trade.

So, the U.S. was able to consume up to $800 billion a year more than produce, through the foreign exchange market, inflation, and interest rates, which raised U.S. living standards.

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PeakTrader said...

Morganovich, I stated:

The U.S. created 17.6 million jobs between 1993-98, and created only 3.7 million jobs between 2001-06. However, U.S. real GDP growth was only slightly higher from 1993-98 than from 2001-06.

U.S. real GDP growth

1993-98 3.83%
2001-06 2.69%

http://www.measuringworth.com/growth/

However, U.S. living standards rose at a steeper rate from 2001-06, because the U.S. consumed even more than produced.

China, for example, wasn't too happy about that:

U.S. has plundered world wealth with dollar: China paper
Oct 24, 2008

Plunder: to rob of goods or valuables by open force, as in war; despoil, or fleece; to take wrongfully, as by pillage, robbery, or fraud; loot.

BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said.

"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington's sole concern had been protecting its own interests.

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PeakTrader said...

Morganovich, and you continue to compare apples to oranges, because you don't make the appropriate adjustments to compare apples to apples, i.e. the pre-Information Age economy (before 1982) is not the same as the Information Age economy (in 1982-07).

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PeakTrader said...

Morganovich says: "...the new method reads higher real growth..."

You're supporting the fact inflation was increasingly overstated, at the height of the Information Revolution from 1982-07, using the old method.

It makes no sense U.S. real GDP growth would be zero or negative in periods of full employment.

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