Sunday, May 11, 2008

More in the sky isn’t falling category, American trade numbers improve.

The Democrat hopes for a first quarter recession, which they had, of course, claimed was occurring, were dashed on the heels of positive, albeit anemic, growth. We have been trying to engage the Dems in a debate about the real economy. The libs don’t bite much on the bait, however.

It’s not as if we have held the Dems and their liberal running dogs in academia to the generally and traditionally accepted definition of a recession as two consecutive quarters of negative growth (“contraction”). We here at TRS have engaged the Dems on the broader, but less traditional and accepted, definition of two quarters of contraction in any calendar year. Of course, the United States hasn’t even experienced the predicate of that initial contraction so time is running out if they are going to get a recession since the one Bubba left seven and a half years ago.

So let’s start the week with some more good news. It looks like there was a significant and better than expected improvement in the US balance of trade. The improvement in trade, in turn, presages an upward adjustment of first quarter growth figures, pushing us even further from recession.

But the Democrat economic fear mongering is not to be long denied. Even though the real economic data indicates otherwise, you’ll notice that the liberals are now calling the absence of a real recession a “growth recession” in which economic growth is insufficient to prevent unemployment from rising.

The problem with that theory is the actual decline in unemployment from a low 5.1% to an even lower 5% last month.

You’ve got to just love a party that so consistently invests its political so completely in American failure. And you wonder why we call them the party of despair?


Claire said...

The only reason our trade numbers are good is because the U.S. dollar is weak. Dust off that high school macroeconomics book and give it a read.

vlad the impaler said...

Hate to say it, Teddy, but Claire is right here. A weak dollar will necessarily lead to a better trade balance.

It kills the domestic economy but at least foreigners can afford to buy our shit.

Claire said...

Um, Re-read my comment. That's exactly what I just said.

Anonymous said...

Funny Franken Ad:

RF said...

Speaking of weak dollar, that is one of the big additional reasons for oil & gasoline prices hitting us very hard. For those earning euros or other currencies, the rise in oil prices has been much less significant. The weak dollar is driving a lot of investors to oil and other commodities like grains, driving the prices even higher. When you add to that pure rampant speculative investing, no wonder most analysts believe there is a lot of extra price in oil beyond just simple supply and demand dynamics. – In short, nice little mess we have.

Art A Layman said...


You can't seem to let this go can you?

There might be an upward revision to the first quarter growth numbers but there might not be. It will depend on what numbers or estimates of the trade data were used in the 1st quarter GDP numbers.

Keep in mind that the most significant growth in exports in the latest period has been in the agri sector, food, feed, etc. The decline in imports would tend to represent a shrinking demand which is a precursor of diminishing GDP.

To Claire's point, and others, the weak dollar has been a the major factor in increasing exports. At the same time it has been debilitating to the American economy because it has been a huge factor in rising oil prices. It was less impactive in March because oil imports were lower, they ain't gonna stay that way. The 40% increase in oil prices in April and May alone might send the trade deficit back to it's more normal trend, which is up.

I have suggested to you before that your euphoric reliance on the monthly unemployment data is folly. The monthly data collection process is, to use a kind phrase, very noisy. The quarterly numbers are better but only marginally so. When you have a net job loss of 240,000 jobs in the last three months a decline in the unemployment percentage is highly questionable. Regardless, the unemployment rate has been rising for over a year which does not portend that happy times are here again.

The published growth of .6% for the first quarter was due primarily to inventory growth not increased consumption. Inventory growth can result from a number of factors. Principal among those is that many businesses do not want to panic and go through the logistical and financial costs of production shutdowns and layoffs until they have a better handle on where the economy is headed. Barring a long downturn, which few are predicting, inventories are readily available for sale so the risk is minimal.

No matter which definition of recession you choose to adopt, most experts agree that the NBER is the final arbiter. NBER does not follow the technical or traditional definitions. They base their determination of a recession on "significant" declines in a combination of key statistics over a period of months. They are the ones who have determined March 2001 as the beginning of the 2001 recession. Admittedly, based on massive methodology changes at BEA in 2003, revisions were made to the 3rd Qtr 2000 estimates that reflected a negative GDP growth. The 4th quarter 2000 reversed and we had good GDP growth. The 1st quarter 2001 turned negative again, giving you your definition of two quarters of negative growth, although not in a calendar year, which I presume was a mistake.

Might I presume you discarded the more technical definition of two consecutive quarters of GDP decline because you would have lost any grounds for blaming Clinton?

I will give you that growth was slowing in the last half of 2000. After 8 years of solid economic growth a downturn in the business cycle was not surprising. But surely it must have been Clinton's fault. Could the March '01 downturn have been a concern about Dumbya being elected?

Should it turn out we are in a recession you will be one of the first to exclaim, "well, the president doesn't control the economy, so you can't blame it on Dumbya (you probably won't say Dumbya)".

No matter which recession definition you chose we will not know whether we are there until months after. By the time we get a determination we likely will be back on the upswing.

Of course you want to cling to the skimpiest of differentials to proclaim that the Bush expansion is alive and well. I'm sure that the fact that your stance benefits your political agenda is merely coincidental. The truth is if it walks, talks and feels like a duck, chances are it is a duck.

As you know you don't win elections by telling the populace that they are crazy and to ignore the man behind the curtain.

The monthly/quarterly statistical data are simply indications, the real test is in the trends and one month or one quarter does not a trend make.

As an economist/businessman you make a good lawyer/politician. Clearly the converse is not true.

Realize this is a long post but you were sorely in need of an education.

Anonymous said...

Apparently a course in economics isn't required for the obtaining of a law degree. Stick to divorce laws and stay away from that which confuses you Uncle Ted.

The Real Sporer said...

History rarely supports the position Claire-in a few pithy words and Art in twenty paragraph rant, advocated.

Only those interested in foreign travel could find the present dollar position universally harmful to the economy.

Art, does the nihilism of your self loathing allow for the existence of cycles within historic economies?

Does not a weak dollar make American investment a good buy? More importantly, doesn't it make American products a better buy. Cars for example? Why do you disregard the effect of a weak dollar on the sale of automobiles?

American ag products sell a lot better during when our currency seeks.

Since much of our economy is entirely dependent upon exports a weak dollar is net beneficial at this point in history and the larger economic cycle.

As for Art, I'm sure you found ways to spin freshman economics into conviction that Jimmy Carter was a good steward of the economy.

Art A Layman said...


I'm sorry. I thought I was dealing with a reasonably intelligent adversary. Your latest post gives a lie to that assumption.

Art, does the nihilism of your self loathing allow for the existence of cycles within historic economies?

Now that has all the earmarks of an interesting question if one could only figure out what it is you are asking. I would ask you to explain further but I doubt that even you understand the question.

Does not a weak dollar make American investment a good buy? More importantly, doesn't it make American products a better buy. Cars for example? Why do you disregard the effect of a weak dollar on the sale of automobiles?

If you are investing in companies that have a lot of exports then there are some good buys. Of course that's only for people who have excess funds to invest. The rest of us are too busy paying high gasoline and food prices driven up by the cheap dollar.

The low dollar only has a favorable effect if you are buying American products while living overseas and paying and earning with the local currency. If you are living in the US, being paid in US dollars, the weak dollar means nothing to you other than the likelihood that you will pay more for imported goods.

Read the damn detail of the GDP estimate! Auto sales were down! Jesus!

American ag products sell a lot better during when our currency seeks.

Let us assume that you meant "sinks" not "seeks". That was a brilliant statement as long as you intended to include "American ag products sell a lot better..." overseas. The weak dollar causes we residents of the US to pay higher prices for ag products because the weak dollar drives up overseas demand, ergo, increased exports.

Since much of our economy is entirely dependent upon exports a weak dollar is net beneficial at this point in history and the larger economic cycle.

Much of our economy? Try 11.7% of GDP was due to exports in 2007. I understand to a lawyer that might be much. To an accountant it is a pittance.

Now the latter part of the sentence, "...a weak dollar is net beneficial at this point in history and the larger economic cycle.", leaves a lot to be desired if communication is the objective. As I understand the "net beneficial" remark I believe that most of us would prefer a higher trade deficit and lower gas prices. Have no frigging idea what, "this point in history and the larger economic cycle", has to do with anything.

You're posting to a blog not trying to find filler for a court brief.

I can only guess that you like to drink a little when you blog. Shit! Looks like drink a lot.

Ah! Comes the coup de grace! The final thrust providing victory for sporie and leaving Art to dangle on the point of sporie's stinging blade.

As for Art, I'm sure you found ways to spin freshman economics into conviction that Jimmy Carter was a good steward of the economy.

The level of economics comprehension you exhibit would render you incapable of knowing whether Jimmy Carter was a good steward or not. In fact, your complete incoherence of matters economic would attest to your inability to even pass freshman economics.

Might I suggest that you stick to more obscure, ambiguous things like politics. When you drift into areas with precise, rigid definitions your lack of knowledge shows up on the computer screen in 3-D.

The Real Sporer said...

Art, is that what they taught in first year of junior college, or is what you remember from high school?

Here’s a little more 21st Century style application of theory to facts.

Yes, many of the ills you describe are real, or at least are known, if somewhat quaint (here's a quiz you can research, define the difference between "macro" and "micro" economics?) strains of macroeconomic theory.

The weak dollar has not had any significant or long term affect on food costs. Most of my food is domestic, and frankly, since higher prices aren’t much of an option right now, I’m guessing agri importers will begin buying more domestically, which sounds good to me. Ag exporters benefit as we, do they not?

Did you like the massive outsourcing of jobs in the 90s? There is almost complete unanimity of thought among economists that the bullish dollar produced much of the outsourcing. Even libs acknowledge that very real downside of higher rates of exchange.

…….. and so on. The rigid truisms that you express completely ignore both the historic and contemporary benefits of a weaker dollar. Get used to currency swings. Like everything else in the post modern world, change happens.

Oh, as for intelligence, moderate or otherwise, when I sign my name bucko it still says Juris Doctor and yours still says…………………………………”bean counter”.

Anonymous said...

Forget it, Art. You're not going to get anywhere here with this. Shit heels like this goon Spearer, that bring in upwards of a quarter of a million a year, they have no concept of economic reality. No concept of what the working middle class have to shell out in taxes, food prices, or for gas. I don't begrudge Spearer for making all that jack - shit, more power to his ass. He and I generally agree on a lot of things anyway. I'm just saying that egg-headed fucks like this asshole don't have the first clue for what it's like out here for the mainstream.

My name is Richard Roma

Art A Layman said...


I think it might have come from a three day seminar I attended once. If so, it was a much better introduction to economics, micro and macro, than you seem to have gained from your years of education leading to your vaunted Juris Doctorate.

Simplistically, when I studied macro and micro economics, macro was a national phenomena and micro was a local one. No doubt the boundaries of those definitions have altered significantly. The basic “laws” of economics have little changed. The base of their application has changed dramatically.

Between those who meet the obscure definitions of unemployed and those working part-time for economic reasons and those who have dropped out believing there are no jobs for them coupled with those who have been forced to take lower paying jobs, “quaint” may not be their adjective of choice. Even those working folks with one or two wage earners per family who have no means to increase their income or wealth might consider your use of “quaint”, as, well, “quaint”.

Now we all know that currently the biggest impact on food costs has been the ethanol legislation and the use of corn to derive ethanol. That said, there is this economic thing called supply and demand, I think that was taught on the second day of the seminar. Food supplies, in the short term, are relatively fixed. Increases generally can only occur with a harvest cycle. Many poor and developing countries, needing more food, could not afford to import from the US when the dollar was strong. With the weak dollar, imports, for them, became much more affordable without the inflationary pressures – stable demand, within their countries, with increased supply mitigates prices. As more of these countries increase their demand for food imports from the US, the supply available, again, in the short term, for domestic consumption, declines; since our demand is relatively constant, the decreased supply will lead to higher prices for us. In the longer term, increased profits, and a desire for others to enjoy those profits will result in an increase in supply and prices will stabilize, although it could be at higher prices than we previously enjoyed.

Imported food will clearly see higher prices because of the weak dollar but many of those are optional foodstuffs that will be dropped of the shopping list.

Two factors add further pressure on supplies and prices. Natural disasters around the world, destroying local food production has increased the demand for food worldwide leading to higher prices. US laws require that food donated by the US gov’t be procured from US suppliers exacerbating domestic demand.

Being a farm state, perhaps you have food purchasing options not readily available to much of the nation. According to the CPI, the food price index has increased 6.9% in 2008 through April. That’s on top of a 4.9% increase for all of 2007. Even a Juris Doctor should be able to discern that this is not exactly price stability. There is no argument that higher food prices and exports benefit farmers and that is a good thing. Farmers are but a small segment of our total populace and when their benefits wreak havoc on the rest of the country it may not be a good thing overall.

Outsourcing, an action that has had a serious impact on US workers, has less of a negative impact on GDP because of increased corporate profits earned from the savings. I have not read nor heard of a rush of economists exclaiming that the strong dollar drove an increase in outsourcing. That it is an added benefit is beyond denial but it was not the motivation. Lower costs, especially labor, and less regulation leading to lower manufacturing costs was the principle incentive. Foreign exchange rates are a dynamic force, moving up and down over any given period of time. There are innumerable reasons for the changes and few, if any, of them are controllable by individual businesses. This means that fluctuations are uncertain. Uncertainty is the very essence of evil to the business community. Businesses make very few decisions based on a phenomenon which is uncertain.

Outsourcing, be it establishing a call center or creating a new manufacturing facility is loaded with upfront costs and businesses are not going to make that kind of investment simply because of the strong dollar at a point certain. It is true that most companies that build new manufacturing capacity in foreign countries do so to serve those local markets. Many others have “offshored” manufacturing to cheaper labor markets with the intent to ship their production back to the US. It is interesting that we seldom see price reductions based on their lower costs. The argument always is that prices would have risen if they had not secured lower costs. Valid, but the social and economic costs to our society have been far more impactive than the increased prices might have been. You pay no less for Levi’s after they “offshored” most of their manufacturing overseas.

It is an economic axiom that when a developed nation competes with another nation with lower labor costs, the end result will be declining wages in the developed country. Not a good sign for us in the long term.

No one is arguing that there are not benefits to the value of the dollar versus other currencies on both sides of the equation. The question is always whether the net benefit is best. It is conventional wisdom that a stable, somewhat strong dollar, is the best scenario. When a weak dollar begins to impact the prices of basic needs that is clearly not a good scene.

The advent of globalization and free trade, escalating significantly in the past decade, renders historic comparisons of the impact of exchange rates somewhat moot. Currency exchange rates have always fluctuated, that’s nothing new. Historically, the US dollar has been fairly strong for a variety of reasons. Not the least of which was the “faith” that the rest of the world placed on the US economy and good governance. Of course that was pre-Dumbya.

I am glad you reminded me about your Juris Doctor degree, I had forgotten. Maybe if you tattoo it on your bald head it will be easier to remember.

Keep in mind that in a perfect world there will be no lawyers but we will still need bean counters to balance the debits and credits and report the results.

P. S. I'll see if I can't find that seminar again so you can attend it.

Art A Layman said...


Likely sage advice but I am stubborn and I have this unbridled faith in human beings that they have a capacity for learning. sporie might be the exception but for nothing else but his lovely wife's sake I feel a duty to attempt to enlighten him.

He is deficient in so many areas.