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  • Global decoupling? Then answer this conundrum

    http://www.nytimes.com/2007/12/16/opinion/16roach.html

    American consumers spent close to $9.5 trillion over the last year. Chinese consumers spent around $1 trillion and Indians spent $650 billion. It is almost mathematically impossible for China and India to offset a pullback in American consumption.
    From Stephen S. Roach

  • #2
    Re: Global decoupling? Then answer this conundrum

    The sharp housing slowdown throughout the world the recent 2 months - with the exception of Canada :p - has proven that decoupling is a myth.

    Comment


    • #3
      Re: Global decoupling? Then answer this conundrum

      American consumers spent close to $9.5 trillion over the last year. Chinese consumers spent around $1 trillion and Indians spent $650 billion. It is almost mathematically impossible for China and India to offset a pullback in American consumption.
      A significant devaluation of the dollar and appreciation of the yuan could make some difference; it would also be interesting to know how much of this $9.5 trillion is taken by the FIRE US economy, the importers, shippers in the chain, etc. - I would imagine that only a minority of the $9.5T ends up in India and China.

      Not saying that a recession in the US will not hurt the developing countries, but perhaps the amount Chindian consumers need to step up their consumption isn't quite as large as the figures in the article suggest.

      Comment


      • #4
        Re: Global decoupling? Then answer this conundrum

        Originally posted by renewable View Post
        A significant devaluation of the dollar and appreciation of the yuan could make some difference; it would also be interesting to know how much of this $9.5 trillion is taken by the FIRE US economy, the importers, shippers in the chain, etc. - I would imagine that only a minority of the $9.5T ends up in India and China.

        Not saying that a recession in the US will not hurt the developing countries, but perhaps the amount Chindian consumers need to step up their consumption isn't quite as large as the figures in the article suggest.

        $9.5 tr works out to $31,666 per american. That $31,666 can't possibly be totally made up of $2 stuff toys, $50 electronic gadgets. Most of the money would have gone to education, transport, and healthcare.
        Last edited by touchring; December 16, 2007, 10:39 PM.

        Comment


        • #5
          Re: Global decoupling? Then answer this conundrum

          Roach's numbers are based on the percentage of the US economy which depends on consumer spending.

          GDP is around $13.3T - hence the $9.5T number.

          As for FIRE percentage, what is the FIRE economy as a percentage of GDP?

          Of course this number doesn't mean that $9.5T per year is departing the US, but it does mean that if spending drops 10%, that this amount of consumption is difficult to replace.

          As when I talk about the real economic impact of offshoring, so the same principle applies here:

          Each $1 of American consumer spending generally travels through several layers of intermediaries before coming to 'rest'.

          As per the economic term "velocity", this $1 has considerably larger effects than its individual value.

          As consumption drops, each $1 less spent by an American will then leave a consumption 'hole' equal to this velocity times $1.

          The $9.5T is thus composed of parts whose sizes depend not just on the initial expenditure in them, but also on the velocity times 'spent money'.

          Calculating the specific component of each - even if possible - would be a fascinating exercise, but for the purposes of this thought discussion the point is that it is a big number not easily replicable in any other nation - doubly so for China and India.

          To borrow from a well known saying:

          For wont of a dinner bought a week, a restaurant closed down. For wont of the demand from the restaurant, a food distributor closed down. For wont of a job in said distributor, a home was foreclosed on. For wont of equity in home, the neighbor of the foreclosed home also lost his home. For wont of tax base, a neighborhood turned into West Oakland :rolleyes:. Too many Oaklands, you get Detroit!

          Comment


          • #6
            Re: Global decoupling? Then answer this conundrum

            imo, it depends what you mean by decoupling.

            Will Chindia make up for a recession in the west, keeping the west in clover? Of course not - they can't support that many fat middlemen, agents, scalpers, etc.

            Will Chindia decouple from the west with their billions of internal consumers (who want a western lifestyle) making up for the demise of the tapped out western consumers? In time, quite probably, because only a small fraction of that $9.5T ends up in Chindia. Thus only a small fraction actually needs to be replaced.

            Comment


            • #7
              Re: Global decoupling? Then answer this conundrum

              Originally posted by renewable View Post
              imo, it depends what you mean by decoupling.

              Will Chindia make up for a recession in the west, keeping the west in clover? Of course not - they can't support that many fat middlemen, agents, scalpers, etc.

              Will Chindia decouple from the west with their billions of internal consumers (who want a western lifestyle) making up for the demise of the tapped out western consumers? In time, quite probably, because only a small fraction of that $9.5T ends up in Chindia. Thus only a small fraction actually needs to be replaced.
              an even smaller fraction than we thought...
              China's economic muscle 'shrinks'






              China's economy, the world's second largest, is not as big as was thought, a report by the World Bank has claimed.

              According to the bank, previous calculations have overestimated the size of China's economy by about 40%.

              Comment


              • #8
                Re: Global decoupling? Then answer this conundrum

                Originally posted by renewable
                In time, quite probably, because only a small fraction of that $9.5T ends up in Chindia. Thus only a small fraction actually needs to be replaced
                True, the actual amount of imports into the US from China is only $287.1B in 2006.

                http://www.usitc.gov/tradeshifts/200...ifts_china.htm

                But unfortunately a large component of the $9.5T is revenue and profit from the middlemen in this trade: the multinational companies.

                Thus should China replace the $287.1B with internal consumption - a mere US$280 per person, it would likely mean serious profit declines for a lot of people and companies.

                And then where would the $60B+ in FDI (2006) come from?

                Comment


                • #9
                  Re: Global decoupling? Then answer this conundrum

                  global decoupling? lol... i read a whole bunch of stuff on the housing bubble blog today about banks in australia, europe, and japan all being affected by what's being termed the "US subprime mess."

                  I wonder what will happen should the RE markets in europe start to tank. (or should i say when they will?)

                  Comment


                  • #10
                    Re: Global decoupling? Then answer this conundrum

                    Originally posted by DemonD View Post
                    global decoupling? lol... i read a whole bunch of stuff on the housing bubble blog today about banks in australia, europe, and japan all being affected by what's being termed the "US subprime mess."

                    I wonder what will happen should the RE markets in europe start to tank. (or should i say when they will?)


                    Australia and Europe are badly affected by subprime because most of the money that went into high risk MBS and REITs came from there.

                    Comment


                    • #11
                      Re: Global decoupling? Then answer this conundrum

                      Originally posted by metalman View Post
                      an even smaller fraction than we thought...
                      I'm extremely skeptical.

                      If a chinese person pays 1/10 the cost of a Brit for daycare, these statistics say the Chinese day care should be counted as 1/10th the value for GDP calculations?

                      (aside from the fact that I bet a lot of Chinese work is still done for free (like child care) but in the West is commercialized, so it gets counted as zero in western-style "GDP" calculations.

                      Comment


                      • #12
                        Re: Global decoupling? Then answer this conundrum

                        Because of some bulletin board limitation on size of posts, the tables are in several consecutive posts.

                        Perhaps this is the place to post the following table, which shows the indices of the regions of the world.

                        LOW is the 52 week low, HIGH-52 week high, IN RANGE-where the index was 1/11/08 between high and low--if it were on the low the value would be zero--on the high the value would be 100, INDEX-last value, Change-last change, %CHANGE-percentage of last change, and %Off HIGH--self-explanatory.

                        These data are from online.wsj.com. I believe they are very close to correct. http://online.wsj.com/mdc/public/pag..._topnav_2_3000 [subscription]

                        In the right-hand column the boxes denote the values that went into the calculation of the averages.

                        The BRIC or CRIB are denoted by horizontal lines.

                        These data suggest as of 1/11/08 that China, India, Russia, and Brazil are marching to the beats of different drummers compared to the rest of the world.

                        I have read that the real estate debacles were supposedly bad in Ireland and Spain. If that is correct, Ireland's market seems to be affected and Spain's much less so far.

                        LOWHIGHIN RANGE1/11/2008INDEXCHANGE% CHANGE% OFF HIGH
                        27132132DJ World Index287-2.62-0.91-10.7%
                        2597330251DJ Wilshire Global Total Market2960-26.13-0.88-10.4%
                        23729241DJ World exUS260-1.45-0.56-11.2%
                        2094296064DJ Wilshire Global exUS2651-13.38-0.50-10.4%
                        2000292069DJ Wilshire Global exUS Large-Cap2632-13.28-0.50-9.9%
                        247628731DJ Wilshire Global exUS Mid-Cap2479-10.47-0.42-13.7%
                        2543311020DJ Wilshire Global exUS Small-Cap2655-13.41-0.50-14.6%
                        337742141DJ Wilshire Global exUS Real Estate3382-45.18-1.32-19.7%
                        286332201DJ Wilshire Developed Markets2868-27.48-0.95-10.9%
                        2437558492DJ Wilshire Emerging Markets5341-7.24-0.14-4.3%
                        37AVG-0.67-11.6%
                        Last edited by Jim Nickerson; January 13, 2008, 03:05 PM.
                        Jim 69 y/o

                        "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                        Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                        Good judgement comes from experience; experience comes from bad judgement. Unknown.

                        Comment


                        • #13
                          Re: Global decoupling? Then answer this conundrum

                          Asia
                          LOWHIGHIN RANGE1/11/2008INDEXCHANGE% CHANGE% OFF HIGH
                          14217331DJ Asia-Pacific151.40-1.67-1.09-12.6%
                          153217323DJ Wilshire Asia-Pacific1538.51-14.46-0.93-11.2%
                          5491687341Australia: All Ordinaries*6054-92.90-1.51-11.9%
                          5483685236Australia: S&P/ASX*5982-97.10-1.60-12.7%
                          165554474498China: DJ CBN China 600*44294176.750.40-1.0%
                          22058999China: DJ Shanghai*5832.450.42-0.9%
                          186593195862Hong Kong: Hang Seng*26867-363.85-1.34-15.9%
                          124152087399India: Bombay Sensex*20827245.371.19-0.2%
                          16782830100Indonesia: JSX Index*283044.641.600.0%
                          14111183000Japan: Nikkei Average*14111-277.32-1.93-22.9%
                          2823630Japan: Nikkei 300*282-4.41-1.54-22.4%
                          137818240Japan: Topix Index*1378-23.78-1.70-24.5%
                          20629599Malaysia: DJ Malaysia*2944.641.60-0.4%
                          104251485479Pakistan: KSE 100*13915-168.02-1.19-6.3%
                          2884387463Philippines: PSE Index*350449.101.42-9.5%
                          1360206560S. Korea: Seoul Composite*1782-42.51-2.33-13.7%
                          23531343Singapore: DJ Singapore*268-1.84-0.68-14.1%
                          227626421Singapore: DJ Wilshire Singapore2282-15.59-0.68-13.6%
                          2355301614Sri Lanka: Colombo All Share*244611.430.47-18.9%
                          7306986028Taiwan: Weighted*8029-27.96-0.35-18.6%
                          64691556Thailand: SET*796-3.71-0.46-13.0%
                          62AVG-0.20-10.1%
                          Jim 69 y/o

                          "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                          Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                          Good judgement comes from experience; experience comes from bad judgement. Unknown.

                          Comment


                          • #14
                            Re: Global decoupling? Then answer this conundrum

                            Europe
                            LOWHIGHIN RANGE1/11/2008INDEXCHANGE% CHANGE% OFF HIGH
                            350540157DJ Stoxx 50*3539-15.03-0.42-11.9%
                            3434001DJ Stoxx 600*344-1.69-0.49-14.1%
                            3904437DJ Euro Stoxx*394-1.00-0.25-11.2%
                            3906457348DJ Euro Stoxx 50*4225-12.31-0.29-7.6%
                            408950113Austria: ATX Index*4119-43.60-1.05-17.8%
                            3882475716Belgium: Bel-20*4023-28.60-0.71-15.4%
                            164219375Czech Republic: Prague*165711.200.68-14.4%
                            481853358Greece: ASE General*4858-104.18-2.10-8.9%
                            95091265733Finland: OMX Helsinki*10561-30.05-0.28-16.6%
                            5218616816France: Paris CAC 40*5371-29.02-0.54-12.9%
                            6437815275Germany: Xetra Dax*77184.860.06-5.3%
                            634399819Ireland: Irish Overall*666135.810.54-33.3%
                            37293443641Italy: S&P/MIB*3736471.000.19-15.8%
                            47356210Netherlands: Amsterdam AEX*482-2.27-0.47-14.2%
                            48860521Norway: All Share*512-11.63-2.22-15.4%
                            113021373033Portugal: PSI 20*12095-232.40-1.89-11.9%
                            5898792287Russia: DJ Russia Titans*76642.960.04-3.3%
                            136021594637Spain: IBEX 35*14458-66.00-0.45-9.3%
                            3204270Sweden: SX All Share*320-1.21-0.38-25.1%
                            807095486Switzerland: Zurich Swiss Market*8160-131.10-1.58-14.5%
                            376405886467Turkey: Istanbul National 100*51921-430.42-0.82-11.8%
                            5822675441UK: FTSE 100*6202-20.70-0.33-8.2%
                            9686122826UK: FTSE 250*983029.200.30-20.0%
                            1010115117UK: FTSE AIM All-Share*10340.400.04-10.2%
                            26AVG-0.63-14.1%
                            Jim 69 y/o

                            "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                            Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                            Good judgement comes from experience; experience comes from bad judgement. Unknown.

                            Comment


                            • #15
                              Re: Global decoupling? Then answer this conundrum

                              Americas x-US
                              LOWHIGHIN RANGE1/11/2008INDEXCHANGE% CHANGE% OFF HIGH
                              32940141DJ Americas Index359-4.79-1.32-10.5%
                              350851343DJ Wilshire Americas3563-48.65-1.35-30.6%
                              1834235148Argentina: MerVal*2083-1.62-0.08-11.4%
                              411796579184Brazil: Bovespa61942-1573.12-2.48-5.8%
                              124641464754Canada: S&P/TSX13633-10.08-0.07-6.9%
                              2730350012Chile: Santiago IPSA28220.610.02-19.4%
                              257883283642Mexico: I.P.C. All Share28724-345.74-1.19-12.5%
                              362215179413Venezuela: Caracas General38322-439.58-1.13-26.0%
                              41AVG-0.92-13.9%
                              Other Countries
                              Country: Index0
                              LOWHIGHIN RANGE1/11/2008INDEXCHANGE% CHANGE% OFF HIGH
                              6545.1410977100Egypt: CASE 30*10959-18.33-0.17-0.2%
                              2183269569DJ Islamic Market Titans2535-26.25-1.02-5.9%
                              970123772Israel: Tel Aviv 25*1162-18.56-1.57-6.1%
                              343725925795Nigeria: Nigeria Stock Indices*581310.000-1.9%
                              687111662100Saudi Arabia: SE All Share1164346.890.4-0.2%
                              246773172840S. Africa: FTSE/JSE All Share*27509-394.69-1.41-13.3%
                              4288615596United Arab Emirates: DFM General*6082-73.13-1.19-1.2%
                              82-0.71-4.1%
                              Jim 69 y/o

                              "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                              Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                              Good judgement comes from experience; experience comes from bad judgement. Unknown.

                              Comment

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