Announcement

Collapse
No announcement yet.

the commodities squeeze, chinese exports and the cold war "solution"

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • #46
    Re: the commodities squeeze, chinese exports and the cold war "solution"

    For what it's worth, I haven't seen any indication of your scenario of consumers drawing down their credit card lines before defaulting, at least not yet.

    Overall credit card loan balances were basically flat in July after increasing slightly late this spring. Card spending has been growing at nearly a 10% annual rate, with American Express (targeting high-end customers) experiencing much faster spending growth than the bigger banks targeting mass-market customers.

    Credit losses and even early-stage delinquencies (indicative of future charge-offs) are near historical lows because, basically, higher-risk customers have been purged from the credit card system. The remaining card users are skewed toward higher-income consumers who spend more, haven't been affected by the recession, and pay down their balances every month.

    Also for what it's worth, the perspective of the index creators as of a month ago was as follows, although even they concede they don't know what's going on.

    August 15, 2011: Daily Growth Index Surge Continues; But Why?

    ...in any event, compared to our essentially "real-time" data, the government reports are ancient history. The rise in our Daily Growth Index from its lows at the end of May have been both spectacular and unprecedented....

    The mechanics of the rapid rise in our Daily Growth Index (and its precursor Weighted Composite Index) are at least partly related to the weightings of the housing sector components in the historical NIPA tables from the BEA, especially in years when housing was still an important part of the economy. Any year-over-year improvements in the housing arena will therefore produce significant gains in our weighted indexes. Furthermore, the housing sector was so moribund at this time last year that any signs of life will be a vast improvement....

    But why has there suddenly been an upswing in interest in housing? We can only speculate, but among the many plausible causes are:

    - The U.S. debt ceiling debate caused dire warnings in the media about near-term interest rate increases... [which] generally re-enforced the feeling that mortgage rates have only one direction to go: up. Whether that will prove true or not, the mass psyche assumes that now is the time to snatch up bargain priced residential real-estate.

    - The housing bubble actually burst a half decade ago. Since then a full quarter of a generation of young adults has progressed to the stage of household formation. That cohort was too young to get materially harmed by the housing debacle, and they are entering the housing market with pristine credit ratings (thanks to keeping their student loans current) and the desire to take advantage of historically low mortgage rates and housing prices.

    - For the non-housing sectors, we think it is critical to fully understand the impact that gasoline prices have had on discretionary expenditures. Gas prices are down, and most people are reminded of that fact at least once a week at the gas pump. The larger impact of that moderation is that popular fears of run-away inflation have subsided. By early July it became clear that the doomsday projections for summer-driving season gas prices were not going to materialize, and the needs for obsessive frugality subsided. This particular scenario best explains the extreme reversal seen in our demand data between spring and early July.

    - Some have suggested the flip side to the above argument: that increasing frugality among an increasingly distressed populace is driving them onto the web in search of the bargains needed to make ends meet. We freely admit that there are potential biases in our data caused by our use of on-line shopping data, and this could be yet another -- since our algorithms to remove the long term market share shift of commerce from brick-and-mortar to the web are not sensitive to short term spikes of that nature. If this scenario is true, then circumstances for "Main Street" Americans materially worsened in the second quarter.

    - And finally, the reluctance of the banking sector to aggressively pursue new foreclosures ("what will we do with even more empty houses?") has led to extended periods of "rent free living" for a growing portion of the cohort of consumers most harmed by the housing crisis. The numbers relating to strategic defaults are murky, but our own "back of the envelope" calculations indicate that as much as $100 billion per year in consumer cash is being freed up. The implications of this amount of free cash for both retail sales and the bottom lines of those same banks has probably been greatly under-appreciated.

    Our bottom line has always been that the U.S. economy is comprised of roughly 100 million household "loose cannons" that will do whatever they think is in their own best interests. Perhaps better them than the geniuses inside the beltway.

    Comment


    • #47
      Re: the commodities squeeze, chinese exports and the cold war "solution"

      Originally posted by Jay View Post
      It should be the bowling pin economy...




      Lots of red tape between the classes too!!
      You should trademark that......that's awesome.

      Comment


      • #48
        Re: the commodities squeeze, chinese exports and the cold war "solution"

        I have an anecdote that might be related, or might not.

        A friend of mine - the one who bought out his house to cash out for his divorce thinking housing prices always go up - has since managed to short sale this dead albatross in return for $30K in interest free 10 year loan.

        A couple months after that, he was offered a similar deal for his burgeoning credit card debt: $40K or $50K to be converted into a 10 year interest free loan. He passed on that deal at that time.

        I didn't ask for the fine print, though I really wanted to.

        This past month, he tried to get into that deal offered. Sorry, Charlie.

        Maybe what was really happening was banks repackaging their losses into these interest free loans via some official or non-official government or Fed intervention.

        Thus we see a shift out from distressed housing loan or distressed credit card loan balances into 'good' balances which are neither.

        This program then ended.

        With the end of this program, or fashion, or whatever, the underlying behavior has returned.

        Comment


        • #49
          Re: the commodities squeeze, chinese exports and the cold war "solution"

          cold war as economic stimulus, anyone?
          see post #1 of this thread, just over 3 years old.



          China-Japan rearmament is Keynesian stimulus, if it doesn't go horribly wrong

          ambrose evans-pritchard

          Asia is on the cusp of a full-blown arms race. The escalating clash between China and almost all its neighbours in the Pacific has reached a threshold. All other economic issues at this point are becoming secondary.

          Beijing's implicit threat to shoot down any aircraft that fails to adhere to its new air control zone in the East China Sea is a watershed moment for the world. The issue cannot easily be finessed. Other countries either comply, or they don't comply. Somebody has to back down.

          The gravity of the latest dispute should by now be obvious even to those who don't pay attention the Pacific Rim, the most dangerous geostrategic fault line in the world.

          {snip}

          The Senkaku islands offer a perfect opportunity for Beijing to test the resolve of the Obama Administration since it is far from clear to the war-weary American people why they should risk conflict in Asia over these uninhabited rocks near Taiwan, and since it also far from clear whether President Obama's Asian Pivot is much more than a rhetorical flourish.

          Besides, Beijing has just watched the US throw its long-time ally Saudi Arabia under a bus over Iran. It has watched Moscow score an alleged victory over Washington in Syria. You and I may think it is an error to infer too much US weakness from these incidents, but that is irrelevant. Beijing seems to be drawing its own conclusions.

          Even if the immediate crisis can be defused, we are clearly sliding into a new Cold War. While it is dangerous, it could have paradoxical and powerful side effects. Rearmament lifted the world economy out of slump in the late 1930s, working as a form of concerted Keynesian fiscal stimulus. It could do so again.

          The parallels are not exact. They never are. But an Asian arms race would almost certainly tackle some of the underlying causes of the long malaise in the Western economies. It would soak up much of the Asian "savings glut" and the excess industrial capacity in China, and would help to narrow the perennial East-West trade gap.

          This would be an answer of sorts to the West's "secular stagnation" to use the term of former US treasury secretary Larry Summers or the liquidity trap as others call it. But be careful what you wish for.

          {snip}

          http://blogs.telegraph.co.uk/finance...orribly-wrong/
          Last edited by jk; 11-26-13, 07:55 PM.

          Comment


          • #50
            Re: the commodities squeeze, chinese exports and the cold war "solution"

            Originally posted by jk View Post
            cold war as economic stimulus, anyone?
            see post #1 of this thread, just over 3 years old.



            China-Japan rearmament is Keynesian stimulus, if it doesn't go horribly wrong

            ambrose evans-pritchard.....

            It would soak up much of the Asian "savings glut" and the excess industrial capacity in China, and would help to narrow the perennial East-West trade gap.

            This would be an answer of sorts to the West's "secular stagnation" to use the term of former US treasury secretary Larry Summers or the liquidity trap as others call it. But be careful what you wish for.

            {snip}

            http://blogs.telegraph.co.uk/finance...orribly-wrong/
            a better bet would be:

            a moonshot-mission-critical design contest for the worlds best ENGINEERING talent (vs the rest of the posers tilting at windmills ) design a ONE-DESIGN next-gen nuke power system/plant - AND KRANK EM OUT BY THE THOUSANDS....

            think about how many nagging 'inconvenient truths' this would address - IMHO, it could set off an EXPLOSION OF PROSPERITY the likes of which the free world has never known...

            personally, i'm in the game with bet on CCJ

            Comment

            Working...
            X