Posts Tagged ‘Graphsandlaughs’
Greener Greenback
The dollar has been dramatically strengthening against most currencies of late and this will hurt US exports by making them more expensive in local currency and boosting imports, worsening our trade deficit. It’s happening because as our economy strengthens, interest rates will rise, making our currency more desirable to hold. By contrast, interest rate increases…
Read MoreBleak Greek
While the US economy is not great, be grateful you don’t live in Greece. Unemployment there is 27.4%, youth unemployment is a staggering 58% and car registrations are down 80%. This is because GDP is in its fifth straight year of decline and by the end of 2013, will be back where it was in…
Read MoreDisappointing Data
Given a widening trade deficit, disappointing retail sales, weak inventory accumulation and now yesterday’s surprisingly bad housing starts at just 836,000 units, I’m reducing my Q2 GDP estimate to just 1%. Interestingly, single-family starts, 2-4 unit starts, and 5+ starts have all lost ground and are each at their lowest level since 8/12. Second half…
Read MoreBank on China
The recent Chinese cash crunch was a sign from the government of its intention to reign in credit growth to the shadow banking system, wasteful local governments and speculators. Part of the problem is that Chinese banks can’t offer competitive interest rates to savers. As such, savers seek riskier, speculative investments. Something else the government…
Read MoreSinking Senate
While the Senate is indeed broken, preventing the minority from filibustering presidential nominees to the executive branch will make things worse by beginning to turn the Senate into the House, where the minority party has no power. The Senate must be a check on the House. Instead, force those wanting to filibuster to speak non-stop,…
Read MoreVarying Interest
All interest rate increases aren’t created equal. A rise in 10-year treasury rates from 2%, where they are now, to 3% or 4% is a sign of improving business conditions and opportunities resulting from a strengthening economy. By contrast, a rise in rates from, say, 5% to 7% or 8% is a sign of an…
Read MoreTunnel Boring
The Friday File: The 35 mile Gotthard Base Tunnel in Switzerland will be the world’s longest rail tunnel when opened in 2016. Today, the world’s longest rail tunnel is the 33.5 mile Seikan Tunnel in Japan connecting the islands of Honshu and Hokkaido. The tunnel with the longest undersea portion is the Channel Tunnel at…
Read MoreFed Funds
While the Fed’s balance sheet has mushroomed from $850 billion in 2008 to $3.3 trillion today as a result of three rounds of quantitative easing, the last of which is not yet done, these holdings bring in considerable amounts of interest. Because the Fed must return all residual earnings to the Treasury, in 2012 the…
Read MoreOne Currency, No Leaders
The virtue of the gold standard was that countries with trade surpluses saw their gold holdings rise, which increased their money supply, raised prices and reduced exports. Conversely, countries that ran deficits lost gold, which caused their money supply to decline, pushing prices down and boosting exports. Today, euro-using Germany runs chronic surpluses, yet won’t…
Read MoreGimme Credit
Consumer borrowing rose by $19.6 billion last month, substantially more than the $12.5 billion forecast by economists (big surprise there) and up from $10.9 billion in May. Non-revolving debt, which includes car loans, student loans and mobile homes loans increased by $13 billion – $9.2 billion excluding government guaranteed student loans. Credit card debt, which…
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