"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Thursday, June 9, 2011

US International Trade In Goods And Services, April 2011

International Trade is another term for trade surplus (or deficit).  This is one of those important economic measures, because it directly impacts GDP - by definition, a trade surplus is directly added to GDP and a trade deficit is directly subtracted from GDP.  So the market keeps an eye on this figure and reacts accordingly.
Last month, March was reported to have had an expectation-missing trade deficit of $48.2 billion.  And nobody (in the US, anyway) was happy.  This month, the Econoday-surveyed analysts are expecting to see April be even worse, with a trade deficit widening to $49.0 billion.  Are they right?  Let's go to the joint US Census Bureau and US Bureau of Economic Analysis news release to find out.
In short, the analysts are wrong.  The trade deficit narrowed substantially to a level of $43.7 billion.  What's driving that?  Well, we have a $2.0 billion increase in industrial supplies and materials exports, a $1.2 billion increase in capital goods exports, a $2.8 billion decrease in automotive vehicles and parts imports, and a $1.5 billion decrease in industrial supplies and materials imports.  We did see some sectors come in with reduced exports and/or increased imports, of course, but the gains outweighed the losses this month.
So this minor mid-day rally we're seeing in the markets?  Yeah, I'm ascribing it (at least in part) to this better than expected news.

First Time Jobless Claims

It's Thursday!  And Thursday means unemployment!  Well, specifically, it means the Department of Labor's statistics on initial (and, to a lesser extent, continuing) unemployment claims.
Last week, the week ending 5/28, the news was sad and expectation-missing, but not outright terrible[1].  The advance figures for initial jobless claims came in at 422,000, with the unadjusted figure coming in at 377,421 new claims.  The total number of people claiming benefits in all programs (for the week ending 5/14) fell to 7,682,830.
So that was last week.  For the week ending 6/4, the Econoday-surveyed analysts are feeling marginally optimistic.  They're calling for first time claims to fall to only 418,000 new claims.  And so, with that prediction firmly in our minds, we turn to the Unemployment Insurance Weekly Claims Report for the week ending 6/4, and I'll pause for a second here to let you look it over yourself if you're playing the home game.
*whistles softly*
All right.  So, it's not good.  The "422,000" figure for the week ending 5/28 has been revised upwards to a level of 426,000.  Then, the advance figure for seasonally adjusted initial claims for the week ending 6/4 increased by 1000 from there, coming in at an expectations-missing 427,000 new claims.
Can you say ouch?
Interestingly enough, the unadjusted advance number of initial claims comes in at 364,507, a decrease of 12,914.  Yes, that's right, seasonal adjustment does some peculiar things.
The total number of people claiming benefits in all programs for the week ending May 21 fell to a level of 7,601,344, meaning that 453,343[2] people stopped claiming any form of unemployment benefits.  Unfortunately, we know from last week's Employment Situation report that May only added 54,000 nonfarm jobs, an average of 1742 jobs per day or 12,194 per week.  So, assuming that none of the new jobs for the week ending 5/21 went to brand new entrants into the labor force, that means that only 2.69% of the people who stopped claiming unemployment benefits did so because they returned to work.
[1]  "Outright terrible" was saved for the employment situation report.
[2]  5/1 had a level of 7,682,630 people claiming benefits in all programs.  The unadjusted number of initial claims for the week ending 5/21 was 371,857.  The Total number of claimants for the week ending 5/21 was 7,601,344.  7,682,630 + 371,857 - 7,601,344 = 453,143.

Wednesday, June 8, 2011

World News, In Which The Possibility Of A US Debt Default Is Explored, And In Which US Debt Holders Express Certain Concerns

  • Want to avoid getting eaten by a shark?  Listen to AC/DC while swimming.  The vibrations from their songs appear to make Great White Sharks less aggressive and more inquisitive.
  • In a White House meeting with Crown Prince Sheik Salman bin Hamad al-Khalifa, President Obama called on Bahrain to respect universal human rights and to hold accountable anyone who violates them.
  • 47 doctors and nurses, arrested in March for treating people injured during Bahrain's brutal (and Asudi Arabian-supported) suppression of pro-democracy protests, have appeared in a military court to face charges of attempting to topple the monarchy.
  • Airports closed by the eruption of the Puyehue-Cordon-Caulle volcano range have begun to reopen in Buenos Aires (Argentina) and Santiago (Chile).
  • Chinese central bankers are not amused by the possibility of a US technical default[1].  "I really worry about the risks of a US debt default, which I think may lead to a decline in the dollar's value," said Li Daokui, an adviser to the People's Bank of China.
  • China has settled a trade dispute with the United States by agreeing to stop subsidizing wind power companies that use domestic parts.  The subsidies were grants to Chinese wind turbine manufacturers that used components manufactured in China.
  • General Chen Bingde, head of the General Staff of the People's Liberation Army, has confirmed that China's first aircraft carrier is under construction.
  • French TV and radio has been banned from using the names of social networking sites such as Facebook or Twitter, because it violates "the provisions of Article 9 of the decree of 27 March 1992 forbidding covert advertising".  They can still use the sites, and still refer their audiences to those sites.  They just can't say their names.
  • Debt restructuring is back on the table!  Germany, in a letter to its EU partners, is demanding a "quantified and substantial" contribution from bondholders to support Greek economic relief.  This would take the form of "a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence".  Rating agencies have warned that, even if this is done voluntarily, they would classify this step as a default.
  • Two wild elephants went on a rampage in Mysore, killing at least one person and leaving "a trail of destruction" before being captured.
  • The government of Turkey has called on Syria to "change its attitude towards civilians and... take its attitude to a more tolerant level as soon as possible".  They also stated that they would not turn away refugees fleeing Syria.
  • France is calling for the adoption of a UN Security council resolution condemning Syria for its crackdown on (and by "crackdown on" we mean ""brutal murder of") protesters.  The potential sticking blocks are Moscow (which sees no grounds for such an action) and Beijing (which feels that official sanction would not defuse tension), both of whom have veto power.
  • Syrian and international human rights groups called on the prosecutor's office of the International Criminal Court to investigate the deaths of more than 1000 civilians in Syria.  It turns out that there is a technical problem with this, though.  Damascus is not a signatory to the 2002 Rome Statute that created the ICC, so the ICC has no jurisdiction unless the UN Security Council refers the case to them.  Amnesty International has already asked the Security Council to do so, but any such action faces the threat of a Russian veto.
United States
  • With the US debt ceiling in the news, here's a little something else to consider:  according to USA TODAY, the government has $61.6 trillion in unfunded obligations, most of which derives from retirement programs like Medicare and Social Security, which are not reported as actual debt until payment is required.  That comes out to $527,000 per household.
  • A growing number of Republicans are drinking the "technical default"[1] kool-aid[2], acting under the belief that it would be a way to force the Obama administration to accept deep spending cuts.  These include presidential candidate Tim Pawlenty, Senator Jeff Sessions and Pat Toomey, and Representative Paul Ryan, all of whom are united in a belief that a technical default would not cause economic chaos both domestically and internationally.  Bond investors do not agree, fearing that even a technical default could harm confidence in the US financial system and drive investors to other markets.
World Bank
  • In the Food Price Watch, the World Bank has observed with concern that international food prices have risen by 15% between October 2010 and January 2011, driving an estimated 44 million people into poverty and helping to aggravate unrest in the Middle East.  They have called on the G20 to address the problem during this week's meeting.
[1]  Technical default?  As defined by Investopedia, a technical default is "a deficiency in a loan agreement that arises not from a failure to make payments as promised, but from a failure to uphold some other aspect of the loan terms.  Technical default indicates that the borrower may be in financial trouble, and can trigger an in crease in a loan's interest rate, foreclosure, or other negative events."
[2]  Yes, I'm aware that they actually drank Flavor Aid at Jonestown.  Figures of speech are rarely factually accurate.

Tuesday, June 7, 2011

World News!

  • In commentary that was quickly removed from the Chinese State Administration of Foreign Exchange, Guan Tao advised that China should guard against "economic and political risks in excessive holdings of US dollar assets".  "The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home."
  • In the wake of the worst drought along the Yangtze River in 50 years, floods have killed 14 people in Guizhou province and forced the evacuation of 45,000 more.
  • Inspired by China's extraordinary internet controls, and driven by the realization of how instrumental the internet was in the recent "Arab Spring" uprisings, Iran is creating a "Halal Internet" which will be extensively censored and monitored.
  • The Japanese Nuclear and Industrial Safety Agency has announced that more than twice as much radiation as originally reported probably escaped the Fukushima nuclear plants - 770,000 terabecquerels[1], instead of the original estimate of 370,000 terabecquerels.  This is still only about 15% of the total released at Chernobyl, but it is also far worse than originally reported.
  • NATO airstrikes on Tripoli are reported to have hit the Popular Guard and Revolutionary Guard compounds.  NATO's position is that the attacks on structures a few hundred miles from the fighting between loyalist and rebel forces are justified under the UN resolution allowing the use of force to protect civilians, as they are targeting command and control installations, which "degrade[s] his ability to attack the population of Libya."
  • The Mexican army has seized and destroyed four "narco-tanks" - trucks covered with inch-thick steel plates - after a firefight in Camargo.  The trucks were believed to have been used by the Gulf drug cartel in their current war with the Zetas drug cartel over control of smuggling routes into the US.
  • The Syrian government is sending an armor column supported by ground troops to "suppress armed terror gangs" in Jisr al-Shughour, responding to a weekend in which 120 "security personnel" were killed in the town.  The cause of the deaths is officially unknown, with the Syrian government laying the blame on "armed terror gangs" and the residents blaming a mutiny among security troops sent to suppress civilian protests.
United States
  • Arizona continues to burn, with 0.32% (365 square miles) now on fire.  Smoke from the fires is visible in New Mexico, Iowa, Nebraska, Kansas, and Colorado.
  • Dominique Strauss-Khan has officially pled not guilty to charges of attempted rape and sexual assault.  The next court date is set for July 18.
[1]  "Terawhatsnow?"  Terabecquerels.  According to Wikipedia, a becquerel (Bq) is "the activity of a quantity of radioactive material in which one nucleus decays per second".  So a terabecquerel (TBq) is 1,000,000,000,000 nuclei decaying per second.  There.  Don't you feel better knowing that?

FAO Food Price Index

The FAO is the Food and Agriculture Organization of the United Nations.  The FAO Food Price Index is, according to their web site, "a measure of the monthly change in international prices of a basked of food commodities."  Nice and straight forward, right?
The Food Price Index obviously tracks overall changes in the other five indices, which are:
  • The Meat Price Index, which tracks the average of of two different poultry products, three bovine meat products, three pig meat products, and one ovine meat product.
  • The Dairy Price Index, which tracks butter prices, cheese prices, casein prices, SMP and WMP prices.
  • The Cereals Price Index, which tracks 9 different types of wheat, 1 type of maize, and 16 types of rice.
  • The Oils and Fat Price Index, which tracks 11 different oils.
  • The Sugar Price Index, which tracks - wait for it - the price of sugar.
There  are no analyst expectations for this, but trends in food prices are still important to track.  Why?  For their impact on GDP - specifically, for the amount of money food expenses drain away from other economic activities.  To get a sense of this, you can have a look at Table 1358[1] from the US Census Bureau's 2011 International Statistics section of The 2011 Statistical Abstract.  As of 2008, US residents spent (on average) 6.8% of their income on food, and it goes up rapidly from there (7.5% Ireland, 8.1% Singapore, 8.9% United Kingdom, 9.0% UAE, 9.1% Canada, and so on, all the way up to Azerbaijan's 48.5%).  As food prices go up, particularly if they go up faster than wages, that will only increase the income percentage spent on food and reduce the amount of disposable income individuals have.  This grinds consumer spending down, impacting GDP.
So, with the possibility of a "farmageddon" looming, how are things looking?  According to the FAO press release, the Food Price Index is down 1% to a level of 232 for May 2011, mostly driven by declines in cereals and sugar prices..  On the other hand, the index is still 37% higher than it was in May 2010.  So that's a pretty significant bite.
The Cereal Price Index fell 1% from April, but remains 69% higher than it was in May 2010.  The Oils/Fats Index remained unchanged for the month, and was 52% higher than it was in May 2010.  The Meat Price Index rose 1.1% in May, the Dairy Price Index was little changed, and the Sugar Price Index fell 10% from April.
[1]  Percent of Household Final consumption Expenditures Spent on Food, Alcohol, and Tobacco Consumed at Home by Selected Countries: 2008.

Monday, June 6, 2011

World News Is All Up In UR Internetz!

  • One-upping Iceland, the Puyehue-Cordon-Caulle volcano range - running about 500 miles south of Santiago - erupted over the weekend. 
  • A US judge has allowed lawsuits brought against Chiquita by at least 4000 Colombians to go forward.  The plaintiffs allege that they or their relatives were tortured and/or killed by paramilitary organizations paid by Chiquita.  The fruit company - which pretty much gave us the phrase "banana republic" - has already admitted to and been fined $25,000,000 for paying terrorist organizations, but claims it was done to protect its employees rather than to support terrorism[1] or intimidate its work force in the nation[2].
  • According to sociologist Antoine Buéno, the Smurfs are racist, sexist, Communist Nazis[3].  "The Smurfs do not have private property; their leader is Papa Smurf who shows very authoritarian and paternalistic characteristics," writes Buéno in Le Petit Livre Bleu.
  • More than 60,000 Greeks turned out in Athens to protest the austerity measures planned by the Greek government to qualify the nation for another round of EU and IMF bailout loans.  The crowd rallied outside the Athens parliament building chanting "thieves - hustlers  bankers", "take back your measures" and "Greece is not for sale".
  • "Anonymous iz in ur internetz haxx0rzn ur mailz" news:  The internet vigilante group Anonymous published over 10,000 e-mails from the Iranian government, along with usernames and passwords, on the file-sharing website The Pirate Bay.  Their stated reason is to show support for Iranians struggling against the current Iranian government.
South Africa
  • Multicellular life - roundworms, to be specific - have been found living in 118 degree water in mines 1.3 km beneath the surface of the earth.  Until this discovery, scientists believed only single-celled organisms lived that deep.
United Kingdom
  • "MI6 iz alzo in ur internetz haxx0rzn ur servers" news:  MI6 has hacked an al-Quaeda online magazine and replaced the article "Make a bomb in the Kitchen of your Mom" with cupcake recipes.  This should make news about militants attacking checkpoints in Iraq a little more... interesting.
United States
  • Wondering why gas prices are so high?  Well, according to Mississippi Governor Haley Barbour (appearing on Face the Nation yesterday), it's part of a deliberate plot by the Obama administration to, well, your guess is as good as mine.  Cripple the American economy, I guess.
  • This sounds like something from The Onion:  Two homeowners and their foreclosure attorney foreclosed on a Florida Bank of America office.  After BofA spent more than 5 months failing to pay legal fees as part of a judgment for wrongfully foreclosing on the couple's home[4], the attorney got brought a moving van and Sheriff's deputies to the office and foreclosed.  After about an hour of being locked out of the bank, watching the movers load furniture, computer equipment, and cash into the van, the bank manager managed to produce a check for the required fees.
  • Got a teenager getting ready to graduate from high school?  Peter Thiel, one of the co-founders of PayPal, may be willing to pay him or her $100,000 to skip college and go to work.  It's actually a grant from the 20 Under 20 Thiel Fellowship to mentor budding entrepreneurs, so it's not a free ride by any means, but it is an interesting alternative option to the traditional undergraduate education.
  • Are you cheerful?  Happy?  Optimistic?  Congratulations!  New research from the University of California, Riverside indicates that you will have a shorter life on average than cranky cusses like me.
  • "Lulzsec is alzo in ur internetz jumpin' ur Marioz" news:  Lulzsec, the same group that claimed responsibility for the attacks on Sony Pictures Entertainment and the embarrassing hack of PBS[3], took responsibility for an attack on Nintendo over the weekend that resulted in the theft of one file.  Nintendo states that no consumer information was compromised.
  • When asked on Sunday if Marines that do not agree with the end of the "Don't Ask, Don't Tell" policy would be allowed to resign, Defense Secretary Gates said "No."
  • 287 square miles of the state of Arizona is currently on fire.  On the up side, that's only 0.23% of the state's total land area.  On the down side, it is still the third largest fire in the state's history.
  • President Ali Abdullah Saleh left Yemen for Sadi Arabia over the weekend, seeking medical treatment.  Vice-President Abd-Rabbu Mansour Hadi is currently serving as acting president, and the rebel forces in the nation indicate that they "support the complete transfer of power to the vice-president".  Officially, this is a temporary measure and President Saleh will be back in a matter of days, but many parties remain skeptical.
[1]  And really, it's not like Chiquita stands to benefit from international terrorism.
[2]  On the other hand, Chiquita has a history of benefiting from the brutal repression of the local work force through the use of mercenaries....
[3]  "But didn't' Stalin hate Hitler, with a hate that burns with the heat of a million suns?" you ask.  Yes.  Yes he did.
[4]  The couple was not actually behind on their payments.  Largely because they paid cash for the house, and owed nothing at the time Bank of America foreclosed on them.
[5]  The one that caused a PBS news program to report that Tupac Shakur is still alive.

Sunday, June 5, 2011

What's Good For The Goose...

In what sounds like something straight out of the Onion, a couple in Florida had a Bank of America office foreclosed on after the bank failed to pay legal fees as ordered by a judge.

Really, I don't know if I can add anything to this, except to say that you can read more at the WFMY News page I found this on.