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globaleconomicollaps
09-01-12, 09:50 AM
A couple of articles showcasing the recovering economy. Just to point out the epic failure of Zerohedge et. al. Click on the links to see the pretty pictures. I'm not going to copy/paste them today.


http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100019701/fresh-glimmers-of-hope-for-the-eurozone-technical/
Fresh glimmers of hope for the eurozone (technical)

By Ambrose Evans-Pritchard Economics Last updated: August 30th, 2012

Comment on this Comment on this article

Very quickly, for the handful of readers who share my quirky interest in monetary data.

By the way, any commentator on this thread who wilfully conflates Monetarism and Keynesian demand theory one more time is disqualified and sentenced to Dante’s 8th Circle of Hell (Bolgia IX) for sowers of discord and schism.

Seminator di scisma, fuor vivi.

The most useful M1 monetary gauge for the eurozone – real six-month M1 growth – has continued to churn higher.

The July data suggest that EMU money contraction bottomed out in April and May. The core is now rising fast, and Ireland is moving into their camp.

Typically, this is a leading indicator of industrial output by around six months. It is a pattern, not a prediction.

Here are the charts from Simon Ward at Henderson Global Investors:

Click to enlarge

Click to enlarge

Just so there is no misunderstanding, this does not mean the eurozone is "recovering". Far from it.

It would suggest – ceteris paribus, and depending on events in the US, China, and the global oil markets, etc – that eurozone output will trough in the Autumn.

Recession may well get worse for a while before the money effects feed through, but the potential outlook for early 2013 is better.

Mr Ward says surging money growth in Germany is the real political risk. This may test the patience of Bundesbank and the German professoriate to breaking point.

At the end of the day, there is no plausible way to set policy for the North and South of the eurozone. The structure is unworkable.

They can hold it together but only by creating endless distortions for one area or the other, with an endless lurch from one crisis to another, until the maniacs who created monetary union are finally hanged from lampposts by a justly enraged mob. One notes dispassionately, however, that mobs aren’t what they used to be.

Be that as it may, money cycles within EMU’s Bataan Death March can be powerful. They can lift equities a long way. Conversely, they can clip the wings of AAA safe-haven bonds enough to hurt.

You can be absolutely certain that hedge funds – usually operating on a three-month time-frame – are paying very close attention to the money data and whatever they think about the viability of EMU or the Second Coming of the D-Mark.

Personally, I think there are still risks that the global mini-slump of the last few months could tip into a "bad equilibrium" or a "negative feedback loop" to borrow the vogue terms of the IMF, if we are not very careful.

The Draghi Plan may be derailed. The six dissenting Fed hawks at the regional banks may block QE3. Capital flight from China may turn the current hard-landing into the kind of crisis that almost nobody (except Prof Victor Shih, Caixin’s Andy Xie, Also Sprach Zarathustra, and a few others) have even begun to think about.

But here at least is something for the bulls, for a bit.


http://www.financialsense.com/contributors/doug-short/are-the-big-four-indicators-rolling-over


Are the Big Four Indicators Rolling Over?
By Doug Short08/30/2012

Print

Note from dshort: This commentary has been revised to include today's release of the July Real Income Less Transfer Payments data. This is the last of the Big Four to be updated through July.

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

There is, however, a general understanding that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:

Industrial Production
Real Income (excluding transfer payments)
Employment
Real Retail Sales

us monthly

The weight of these four in the decision process is sufficient rationale for the St. Louis FRED repository to feature a chart four-pack of these indicators along with the statement that "the charts plot four main economic indicators tracked by the NBER dating committee." In his July 10th Bloomberg TV interview, ECRI's Lakshman Achuthan cites these four at about the 2:05 minute point in his remarks. He says, and I quote "When you look at those four measures, they are rolling over."

Are they really rolling over? First, here are the four as identified in the Federal Reserve Economic Data repository. See the data specifics in the linked PDF file with details on the calculation of two of the indicators.

The FRED charts are excellent. They show us the behavior of the big four indicators currently (the green line) as compared to their best, worst and average behavior across all the recessions in history for the four indicators (which have start dates). Their snapshots extend from 12 months before the June 2009 recession trough to the present.

The latest update to the Big Four was today's release of the July Real Income Less Transfer Payments data (the red line in the chart below), which rose 0.3 percent over last month, which matched the consensus expectations.

trough
Background Analysis: The Big Four Indicators and Recessions

The charts above don't show us the individual behavior of the Big Four leading up to the 2007 recession. To achieve that goal, I've plotted the same data using a "percent off high" technique. In other words, I show successive new highs as zero and the cumulative percent declines of months that aren't new highs. The advantage of this approach is that it helps us visualize declines more clearly and to compare the depth of declines for each indicator and across time (e.g., the short 2001 recession versus the Great Recession). Here is my own four-pack showing the indicators with this technique.

four indicators 30 aug 2012

Now let's examine the behavior of these indicators across time. The first chart below graphs the period from 2000 to the present, thereby showing us the behavior of the four indicators before and after the two most recent recessions. Rather than having four separate charts, I've created an overlay to help us evaluate the relative behavior of the indicators at the cycle peaks and troughs. (See my note below on recession boundaries).

21st century recessions

The chart above is an excellent starting point for evaluating the relevance of the four indicators in the context of two very different recessions. In both cases, the bounce in Industrial Production matches the NBER trough while Employment and Personal Incomes lagged in their respective reversals.

As for the start of these two 21st century recessions, the indicator declines are less uniform in their behavior. We can see, however, that Employment and Personal Income were laggards in the declines.

Now let's look at the 1972-1985 period, which included three recessions -- the savage 16-month Oil Embargo recession of 1973-1975 and the double dip of 1980 and 1981-1982 (6-months and 16-months, respectively).

recessions 1972 to 1985

And finally, for sharp-eyed readers who can don't mind squinting at a lot of data, here's a cluttered chart from 1959 to the present. That is the earliest date for which all four indicators are available. The main lesson of this chart is the diverse patterns and volatility across time for these indicators. For example, retail sales and industrial production are far more volatile than employment and income.

recessions since 1959
Are the Big Four Rolling Over?

As of the latest data, no, they are not collectively rolling over. Here is the big picture since 1959, the same chart as the one above, but showing the average of the four rather than the individual indicators. This chart clearly illustrates the savagery of the last recession. It was much deeper than the closest contender in this timeframe, the 1973-1975 Oil Embargo recession. While we've yet to set new highs, the trend has collectively been ever upward.

metalman
09-01-12, 11:42 PM
you missed zerocred's latest 'i told you so'.... (http://www.zerohedge.com/news/september-arrives-does-french-dexia-moment-france-nationalizes-its-second-largest-mortgage-lend) re the euro...

the euro's still standing 38% over the place where it started...

http://research.stlouisfed.org/fredgraph.png?g=a3U

zerocred re euro... http://i.imgur.com/XsLUv.gif

globaleconomicollaps
09-02-12, 05:36 AM
you missed zerocred's latest 'i told you so'.... (http://www.zerohedge.com/news/september-arrives-does-french-dexia-moment-france-nationalizes-its-second-largest-mortgage-lend) re the euro...

the euro's still standing 38% over the place where it started...



Maybe you need to look at your graph one more time. That looks to me like a big fat goose egg.


Refresh my memory Mr. Metalman. What has our fearless leader said about the path of the Euro? Other than "gone in six months" or something like that?

Not to get into a big battle with you or anything, but the article you linked ( outside of being a tour-de-force of analysis of a very complex and important event ) does seem to perfectly prevision what happened yesterday ( nationalization of a major bank in France ) , three months in advance. The linked article doesn't seem to contain the word Euro. Is ZH making any specific predictions ( other than "gone in six months" )?

metalman
09-02-12, 11:45 AM
Maybe you need to look at your graph one more time. That looks to me like a big fat goose egg.

what? look at the chart... euro starts off a tad stronger than the usd @ 1.1 to the $$$... putts down to .75... climbs to 1.6... bounces between 1.2 & 1.5 for yrs while zerocred publishes 9000 articles re the death of the euro next week. fact... euro remains stronger than the usd.


Refresh my memory Mr. Metalman. What has our fearless leader said about the path of the Euro? Other than "gone in six months" or something like that?

Not to get into a big battle with you or anything, but the article you linked ( outside of being a tour-de-force of analysis of a very complex and important event ) does seem to perfectly prevision what happened yesterday ( nationalization of a major bank in France ) , three months in advance. The linked article doesn't seem to contain the word Euro. Is ZH making any specific predictions ( other than "gone in six months" )?

ever head of goole? you must have your reasons for not locating the facts.

for example, from the most recent article...

CI: Europe?
EJ: There are many more chapters to go for Europe and the euro, including assistance from the US, before that idealist experiment ends. Europeís eventual final existential crisis after several more near death experiences in a few years will also be the end of Japanís 20-year experiment in using Keynesian theory to grow government debt from 63% of GDP to 245%, to move credit bubble era debts from private to public account. Flight out of Japanese bonds and yen will get the Japanese government default ball rolling there finally.

globaleconomicollaps
09-02-12, 01:47 PM
what? look at the chart... euro starts off a tad stronger than the usd @ 1.1 to the $$$... putts down to .75... climbs to 1.6... bounces between 1.2 & 1.5 for yrs while zerocred publishes 9000 articles re the death of the euro next week. fact... euro remains stronger than the usd.
I thought I would publish the actual numbers from the graph you posted:
start 1.1812
end ( as of Friday) 1.2580
(1.2580-1.1812)/1.1812 = 0.065
or a 6.5% rise
that is stronger than the dollar, but I've got to say, you are not making your case. I'm not going to defend ZH. In fact I posted this article in the first place to poke fun at them, but this is not a plug for Itulip either.




ever head of Google? you must have your reasons for not locating the facts.

for example, from the most recent article...

CI: Europe?
EJ: There are many more chapters to go for Europe and the euro, including assistance from the US, before that idealist experiment ends. Europe’s eventual final existential crisis after several more near death experiences in a few years will also be the end of Japan’s 20-year experiment in using Keynesian theory to grow government debt from 63% of GDP to 245%, to move credit bubble era debts from private to public account. Flight out of Japanese bonds and yen will get the Japanese government default ball rolling there finally.

Why should I use Google when you are available and the wellspring of all knowledge?

EJ has studiously avoided making a Euro prediction, with good reason. Euro predictors have been losing their shirts for 10 years, over and over again. He has however been kind enough to make a dollar prediction, which has the odd property of being a oblique Euro prediction.

You see, EJ is fond of the Trade Weighted U.S. Dollar Index: Major Currencies (http://research.stlouisfed.org/fred2/series/DTWEXM) or just the "Dollar index".
This index has the interesting feature of tracking the Euro very well. This is because it is a "Trade Weighted" index that neglects the major trading partner of the US. For this reason I call it the "Idiot Meter", because anybody that uses it to foretell the future state of the US dollar is an idiot. I spell out some of the problems with it here:
http://www.itulip.com/forums/showthread.php/22712-Eric-Janszen-on-Hyperinflation-vs-High-Inflation?p=231287&highlight=usdx#post231287

these are the weights in the index:
It is a weighted geometric mean of the dollar's value compared only with

Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight

To the Euro area number you can add the Swiss Franc which is now explicitly pegged to the Euro. This brings the weight of the Euro in the Dollar Index to ~60%.
in effect more than half of the thing that EJ measures in the dollar index is the USD/EUR cross. EJ predicts an eventual goal of 60 for the dollar index. This represents a ~20% rise in the value of the currencies in the dollar index over a period of ( how long?) some years. He doesn't say exactly.

But to directly address your critique, ZH consists of at least a dozen writers with different points of view. I do indeed hear about The End Of The Euro about once a week. However there do seem to be more reasoned "personalities" playing Tyler Durden. In fairness, EJ is also bleak about the future of the Euro. EJ has the advantage being a single individual with a single (not so shrill) voice.

As an aside I want to point out that there is precisely zero cognizance of a currency crisis here in France.

Let's move this discussion forward. I have no reputation to protect. Nobody is going to bet their life savings on my predictions, so I can go out on a limb. This is what I think is going to happen:
http://buildengineer.com/itulip/USD-EUR-2012-8-10-projection.png

BadJuju
09-02-12, 02:14 PM
Let's move this discussion forward. I have no reputation to protect. Nobody is going to bet their life savings on my predictions, so I can go out on a limb. This is what I think is going to happen:
http://buildengineer.com/itulip/USD-EUR-2012-8-10-projection.png


Is this a chart of Euro vs the USD or a combination of the currencies?

globaleconomicollaps
09-02-12, 02:26 PM
Is this a chart of Euro vs the USD or a combination of the currencies?
I don't know what a "combination of the currencies" is, but this is the same thing you see here:
http://finance.yahoo.com/echarts?s=EURUSD%3DX+Interactive#symbol=;range=my; compare=;indicator=volume;charttype=area;crosshair =on;ohlcvalues=0;logscale=off;source=undefined;

BadJuju
09-02-12, 02:34 PM
Ah, I see, thank you. So you see the Euro being in a stronger position long-term then?

globaleconomicollaps
09-02-12, 02:46 PM
Ah, I see, thank you. So you see the Euro being in a stronger position long-term then?
weaker. It will eventually go to 4 to the dollar (mid 2015)
This is what I am saying dollar UP Euro DOWN. Not the other way around.

BadJuju
09-02-12, 02:58 PM
weaker. It will eventually go to 4 to the dollar (mid 2015)
This is what I am saying dollar UP Euro DOWN. Not the other way around.

Well, crap! It was the ordering of it that threw me off since the graphs I usually see go EUR/USD when measuring the EUR versus the USD. Thanks for the information, my fellow Inebriate!

Techdread
09-03-12, 05:56 AM
So you believe the Northern states will abandon the Euro?

globaleconomicollaps
09-03-12, 09:01 AM
So you believe the Northern states will abandon the Euro?

I think the Euro will stay together. Greece is willing to undergo a literal great depression to stay in. Merkel is willing to shoot her election chances in the head. Everybody is pulling together. Whether or not this is good is open to debate, but the anti-euro movement is non-existent. We have had several elections. The public has had a chance to vote on the Euro and the Euro has won.

The route to saving the Euro is a general devaluation against the Dollar. This is what is happening now.

jk
09-03-12, 12:10 PM
gec, i think you are confusing the "dollar index," dxy, with the trade-weighted index. the trade-weighted index is so-called, because it is weighted by.. um... trade.

a google search on "trade weighted dollar index" will quickly reveal the truth. or you could just ask metalman.

jpatter666
09-03-12, 01:22 PM
Well, looks like many companies are preparing for the Grexit at a minimum.

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.
That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together. On Thursday, the European Central Bank will consider measures that would ease pressure on Europe’s cash-starved countries.
JPMorgan Chase, though, is taking no chances. It has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeedthe euro (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/euro/index.html?inline=nyt-classifier) in other countries

http://www.nytimes.com/2012/09/03/business/economy/us-companies-prepare-in-case-greece-exits-euro.html?pagewanted=1&_r=1

globaleconomicollaps
09-03-12, 02:10 PM
gec, i think you are confusing the "dollar index," dxy, with the trade-weighted index. the trade-weighted index is so-called, because it is weighted by.. um... trade.

a google search on "trade weighted dollar index" will quickly reveal the truth. or you could just ask metalman.

You know I frequently make mistakes. I would not be surprised to see that I had totally screwed this up, but I'm feeling pretty sure of myself right now. I went right to the source rather than consulting the inimitable Mr. Metal, I consulted The Federal Reserve:
http://research.stlouisfed.org/fred2/series/DTWEXM

who have been good enough to provide a detailed explanation of how they calculate the various "Dollar Indexes"
http://www.federalreserve.gov/pubs/bulletin/2005/winter05_index.pdf

The one that I am referring to is the same one the EJ likes and it has a name that you might recognize:
Trade Weighted U.S. Dollar Index: Major Currencies (http://research.stlouisfed.org/fred2/series/DTWEXM)


Notes:

A weighted average of the foreign exchange value of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue.
Major currencies index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. For more information about trade-weighted indexes see http://www.federalreserve.gov/pubs/bulletin/2005/winter05_index.pdf.



would you agree that that was a Trade Weighted index?

This not the first time that I have tried to educate you about the Dollar Index. See here:
http://www.itulip.com/forums/showthread.php/22712-Eric-Janszen-on-Hyperinflation-vs-High-Inflation?p=231287&highlight=usdx#post231287

jk
09-03-12, 03:04 PM
try "trade weighted BROAD" http://research.stlouisfed.org/fred2/series/TWEXB
THIS IS THE INDEX THAT EJ REFERS TO.

globaleconomicollaps
09-03-12, 03:36 PM
try "trade weighted BROAD" http://research.stlouisfed.org/fred2/series/TWEXB
THIS IS THE INDEX THAT EJ REFERS TO.

Humm... No.

This is a recent example:
http://www.itulip.com/forums/showthread.php/22926-Will-negative-nominal-interest-rates-cause-a-massive-bank-run?p=233272&highlight=Dollar#post233272

or this one:
http://www.itulip.com/forums/showthread.php/22839-How-serious-will-this-weekend-be-for-the-Euro?p=232339&highlight=Dollar#post232339

a quote:

The Fed will worry that the strengthening dollar may push the CPI below 1% as the dollar approaches 79. The Fed may blink before that and institute QE3 when the dollar reaches 75. In any case, I don't feel comfortable maintaining the Whites of his Eyes trade with the dollar at 75 or higher.


Please don't tell me you are turning into one of those biblical literalists that are an embarrassment even to the pope. You are too sharp a guy for that.

globaleconomicollaps
09-03-12, 04:02 PM
In the course of researching this, I decided to look up the weights for the various Dollar Indexes. I discovered something interesting. The Fed is no longer publishing the weights for the major currencies index. Instead, they refer you to the doc from 2005 and tell you to "make your own":


Weights for the major currencies index and for the OITP (other important trading partners) index can be derived from the weights, shown below, for the broad index of the foreign exchange value of the dollar. The method used to construct the weights is described in an article (73 KB PDF) in the Winter 2005 Federal Reserve Bulletin. The broad index and the other exchange rate indexes calculated by staff of the Federal Reserve Board are presented on the page of summary measures of the foreign exchange value of the dollar.

Why would they leave out such an important fact? The Fed has literally thousands of charts on every aspect of economics. Why leave this one out? I think it is an embarrassment to them. The major currencies now represent about 40% of all trade and are no longer "Major". I will put together some charts showing the weights in time series.

jk
09-03-12, 08:23 PM
gec, you're right. ej refers to dtwexm, not the broad index. i guess in my mind i always translated this as the broad index, since the so-called "major" index makes so little sense.