Economy Archives - Page 107 of 133 - the patient investor

October 1, 2012

David Murray: Australian government spending on alarming trajectory

David Murray, former Chairman of the Future Fund and former CEO of the Commonwealth Bank warns growing debt-funded entitlement could end with a Europe-style debt crisis.

Hat tip to Unconventional Economist at Macrobusiness.com.au

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

October 1, 2012

Steve Keen on Post-Keynesian Macroeconomics

Prof Steve Keen’s presentation to the UMKC Post Keynesian conference in 2012.

Paul Krugman would argue that Income = Aggregate Demand when the economy is in equilibrium.
Steve Keen shows that the economy is not in equilibrium when aggregate debt is rising or falling:

Income = Aggregate Demand + Change in Debt

He illustrates (at 13:20) how, while GDP fell from $14.5 to $14.0 trillion, the US economy went from $18.5 to $11.5 trillion because of private debt contraction.

US GDP compared to GDP + Debt Change

This does not seem entirely accurate as my earlier chart of US Debt shows that Domestic (Non-Financial) Debt growth slowed but at no stage contracted during the GFC. I suspect that Steve has omitted Government Debt which acted as an important counter-weight to Private Debt contraction during the GFC.

US Domestic Debt Growth

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 28, 2012

China’s rail cargo volume declined further in August

by Zarathustra

Rail cargo volume growth fell further from -8.2% yoy in July to -9.2% yoy in August, worst since the financial crisis. Cargo volume transported by the railways amounted to 304 million tonnes in August 2012, slightly below 305 million tonnes in July.

via China’s rail cargo volume declined further in August.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 28, 2012

Bachelor Padding – By Roseann Lake | Foreign Policy

By Roseann Lake

As a result of the real estate boom, reports in Chinese media indicate that the average property in a top-tier Chinese city now costs between 15 and 20 times the average annual salary, though J.P. Morgan reports indicate something closer to 13. For purposes of comparison, in most of the world’s cities, the housing-cost-to-income ratio hovers between 3-to-1 and 6-to-1, rounding out at about 3-to-1 in the United States. This is especially problematic in China, where thanks to still-prevalent Confucian ideals of the male as the “provider,” home ownership has become an unspoken prerequisite to marriage. It’s a tough, competitive life for men in China these days, in part due to the aftershocks of the one-child policy, which has left the country with a gaping gender imbalance of 120 boys for every 100 girls……

via Bachelor Padding – By Roseann Lake | Foreign Policy.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 27, 2012

Obama's economic saviour savaged as Keating lets rip

By Peter Hartcher

In a speech to a closed gathering at the Lowy Institute in Sydney on Thursday, Paul Keating gave a starkly different account of Geithner’s record in handling the Asian crisis: “Tim Geithner was the Treasury line officer who wrote the IMF [International Monetary Fund] program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis.” In other words, Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.

For the record, Indonesia’s GNP fell 83% by July 1998.

via Obama's economic saviour savaged as Keating lets rip.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 27, 2012

There's No Solving Europe's Debt Crisis Without Solving the Jobs Crisis – Bloomberg

From the outside it looks like these [Eurozone] countries are faced with a debt crisis. From the inside it looks a lot more like a jobs crisis. Check out the chart below…….

via There’s No Solving Europe’s Debt Crisis Without Solving the Jobs Crisis – Bloomberg.

Hat tip to @10yearBonds

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 26, 2012

Philadelphia Fed: Worrying drop in state coincident indicators

Tom Porcelli, economist at RBC Capital, points out a worrying drop in the Philadelphia Fed survey of state coincident indicators. The Monthly Index has turned up but the 3-Month Index continues downward. Reversal of the Monthly Index in the next few months would be cause for concern.

Philadelphia Fed State Coincident Indicators Diffusion Indexes

When we look at the index over the last 30 years, down-turns of the Diffusion Index below 50 normally precede a recession. The only false signal (so far) was the recent 2011 dip of the Monthly Index (DI1) to 20 and the 3-Month Index (DI3) to 46.

Philadelphia Fed State Coincident Indicators Diffusion Indexes - Long Term

The Federal Reserve Bank of Philadelphia calculates monthly coincident indexes for each of the 50 states. The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

For further details of Diffusion Index performance in predicting recessions, read Marking NBER Recessions with State Data by Jason Novak (2008).

Hat tip to Pedro da Costa at Macroscope.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 26, 2012

If You Want to “Soak the Rich,” Keep Tax Rates Low « International Liberty

by Dan Mitchell

I’ve pulled evidence from IRS publications to show that rich people paid a lot more to Uncle Sam after Reagan reduced the top tax rate from 70 percent to 28 percent…….. The United Kingdom saw similar dramatic results when Margaret Thatcher lowered the top tax rate from 83 percent to 40 percent. Allister Heath explains.

During the 1970s, when the tax system specialised in inflicting pain, the top one per cent of earners contributed 11pc of income tax. By 1986-87, with the top rate down to 60pc, that had increased to 14pc. After the top rate fell to 40pc in 1988, the top 1pc’s share jumped, reaching 21.3pc by 1999-2000, 24.4pc in 2007-08 and 26.5pc in 2009-10. Lower taxes fuelled a hard-work culture and an entrepreneurial revolution. Combined with globalisation and the much greater rewards available for skilled workers, Britain’s most successful individuals earned a lot and paid a lot in tax.

via Evidence from England Shows that If You Want to “Soak the Rich,” Keep Tax Rates Low « International Liberty.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 25, 2012

Tim Harford — Don’t take growth for granted

By Tim Harford

Economic growth is a modern invention: 20th-century growth rates were far higher than those in the 19th century, and pre-1750 growth rates were almost imperceptible by modern standards. Many have seen this as an encouraging trend, but [economist Robert Gordon] draws a different lesson: growth is a recent phenomenon, so why assume that it will last?

……Demographics and debt accumulation have both speeded up growth in the past and, as the pendulum swings back, demographics and debt repayment will reduce it in the future…….

via Tim Harford — Don’t take growth for granted.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 25, 2012

Fiscal consolidation in Sweden: A role model? | vox

By Martin Flodén, Associate Professor at Stockholm University

Fiscal austerity was effective during the Swedish economic crisis, but that insight is not particularly helpful today. Austerity would have been more complicated both economically and politically if it had not been supported by currency depreciation and strong external demand, and crisis countries today do not benefit from such developments. Attempts to consolidate before growth had resumed failed in Sweden. One possible interpretation of these observations is that prospects to consolidate are bleak until competitiveness has been restored in crisis economies…….

via Fiscal consolidation in Sweden: A role model? | vox.

Hat tip to Delusional Economics

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.