Economics

[winston]

Trade Deficit & Our “Addiction to Oil”

On the other hand, I would not count on a repeat of this sort of massive contribution again in the first quarter or for 2011 as a whole. About half of our overall trade deficit comes from our addiction to imported oil. Unfortunately, a weaker dollar is not likely to help significantly on this front — when the dollar weakens, the price of oil tends to rise.

However, if we can start to replace imported oil with domestically produced energy we could substantially boost the overall rate of economic growth. While ultimately we would want to do that with renewable sources, such as wind and solar, they mostly produce electricity, and oil is mostly used as a transportation fuel.

We do, however, have very abundant supplies of natural gas, and the technology for using natural gas as a transportation fuel is already very well established. We need to take steps NOW to transition to the use of more natural gas as a transportation fuel to replace oil.

Ethanol really is not that good of an answer since the production of corn to be made into ethanol for fuel requires using a lot of oil. However if we can move to ethanol made from things like saw grass, or the corn stalks that are left over from the corn harvests, that would be a major step forward. Bio-fuels based on algae are also another promising area.

A weaker dollar would help significantly on the other half of the trade deficit, the part that is made up of all the stuff lining the shelves at Wal-Mart (WMT: 56.70 -0.87 -1.51%). King Dollar is a tyrant and needs to be deposed. It will help on reducing imports as foreign goods become relatively more expensive and producers fill demand from domestic production. That does not happen overnight, however.

The trade deficit is a far bigger economic problem than is the budget deficit, particularly over the short and intermediate term. The fact that we are making significant progress in bringing it down is extremely welcome news.

[winston]

Luo Suo ...


The Takeaway: Fair to Middling Report

Overall, this was an OK, but not great report. The headline number was clearly much lower than expected, but the quality of growth was extremely high. The change in inventories, the lowest quality part of growth has gone from being a big part of overall growth in the third, and especially second quarters, to being a big negative factor. One where we are showing significant growth despite the inventory change, not because of it.

I would expect that the change in inventories will be much less of a factor in the first quarter. All else being equal, that would mean a big acceleration in the rate of growth.

Of course, all else is not likely to be equal. Net exports are likely to be a contributor again in the first quarter, but a much smaller one. That should offset much of the better growth from inventories being less of a drag.

The growth coming from the Consumer was impressive, and is probably sustainable, although it too might be a somewhat smaller contributor in the first quarter, but will still be a force for growth.

Building, both residential and non-residential, should be more or less a non-factor again in the fourth quarter, but that is better than being a big weight tied around the ankles of the economy.

Historically, Residential Investment is what pulls the economy out of recessions. Investment in non-residential structures tends to come much later in the economic cycle.

The drag from State and Local Government spending is likely to accelerate it in the first quarter, and we do not need to compound that with a major drag from Federal government spending.

Having the overall government being a non-factor at this stage of the economic cycle is probably about where we want to be.

Overall, a solid but not spectacular report, but one that lays the foundation for more growth ahead.

http://www.dailymarkets.com/stock/2011/ ... came-from/

[winston]

Every bit of it is about economics. Every bit of it, without exception.

Everything about religion is about economics. Everything about politics is about economics.

And everything about economics is personal satisfaction.

Everyone is personally motivated to do the best that they can possibly do for themselves.

--- Abraham

Excerpted from the workshop in Boulder, CO on Saturday, June 12th, 2004 # 294

Source: abraham-hicks.com

[winston]

"An economist is someone who sees something happen, and then wonders if it would work in theory."

—Ronald Reagan (40th U.S. President, 1911-2004)

[winston]

What Data Can We Trust? by charleshughsmith

Modern investing offers the promise that investors who "do their homework" and use data more intelligently than the herd can gain a valuable edge.

But what if the underlying data available to the investing public is fundamentally flawed?


http://www.chrismartenson.com/blog/what ... rust/74361

[winston]

The 30 Day Reading List that will Lead You to Becoming a Knowledgeable Libertarian

The list below will not make anyone a scholar in libertarianism or an expert in Austrian Economics, it is designed to introduce to the busy individual the essence of libertarianism.

There are 30 articles listed below. If one reads one article, slowly and carefully, per day, by the end of 30 days one should have a very strong grasp of libertarian principles and a basic understanding of Austrian economics.

The list contains articles on a variety of topics, but does not cover all possible libertarian topics. More than anything it provides an overview of libertarianism and how libertarians think about issues of the day.

http://www.economicpolicyjournal.com/20 ... d-you.html

[winston]

A Titan For Freedom and Prosperity by Alexander Green

Had he lived a few years longer, Tuesday would have been the 100th birthday of one of my heroes: Milton Friedman (1912-2006).

Someone once quipped that economists are people who are good with numbers but don't have the personality to be accountants.

Friedman was the glaring exception, a brilliant and tireless advocate of individual liberty and free markets - and a true intellectual giant.

Many historians regard diminutive James Madison - the third President and Father of the Constitution - as the brainiest of the Founders, one with "an astonishing ratio of mind to mass." Friedman - at five foot three - was the modern-day economic equivalent.

A winner of the Nobel Prize in Economics, the Presidential Medal of Freedom, and the National Medal of Science, there simply was no greater voice for economic freedom in the second half of the 20th century.

His 1971 book, A Monetary History of the United States changed the way we think about money. His classic Capitalism and Freedom (1962) described the morality of an economic system based on persuasion not force.

And his popular 10-part PBS series Free to Choose, demonstrated to millions the transformative power of capitalism.

[winston]

continue ...

Yet his influence - and an understanding of the beauty of the free enterprise system - is fading in some quarters today.

According to the Pew Research Center, only 50% of Americans have a favorable view of capitalism. This might be expected after years of financial bubbles, a weak economy and declining household wealth.

But capitalism, best understood as the economic expression of liberty, has remade our world for the better.

Two hundred years ago, 85 percent of the world's population lived on the equivalent of less than a dollar a day. Today less than 15 percent do.

What is responsible for the enormous spike in material prosperity? Part of the credit goes to science and technology. But it took something more pedestrian to transform the world's standard of living: the profit motive.

This is hardly a bad thing. As Adam Smith wrote in The Wealth of Nations in 1776, "It is not from the benevolence of the butcher the brewer or the baker that we expect our dinner, but from their regard for their own interest."

[winston]

continue ...

Government doesn't provide us with food, clothing, shelter, health care or the Callaway Limited Edition Diablo Octane Tour Driver. Business does.

And in the process of meeting our economic wants and needs, public and private companies develop employee job skills, build careers, support local communities, contribute to charitable organizations, pay billions in taxes and, of course, provide financial rewards for owners and shareholders.

Detractors will argue that capitalism is all about selfishness, greed and exploitation. Yet capitalism merely promises that you can have anything you want if you provide enough other people with what they want.

Economic freedom is about voluntary exchange for mutual benefit. That's why you hear two thank-you's whenever you make a retail transaction. You say thanks because you want the merchandise more than the money.

The retailer says thanks because he wants the money more than the merchandise. Capitalism is not a zero-sum game where one side wins and the other side loses. It's a win-win.

[winston]

continue ...

Unlike government, business is about freedom and individual choice, not coercion.

If you don't like a particular company or its policies, you don't have to work for them, sell to them or buy from them.

Businesses focused solely on short-term profits don't last long. If you cut corners on quality, your customers will leave. If you bargain with suppliers too hard, they won't trade with you.

If you undervalue your key employees, they will take their talents elsewhere. It is in the best interests of business owners to make sure all stakeholders - employees, suppliers, customers and communities - are satisfied.

Now, here's a news flash. Fallible human beings run businesses. Sometimes they make mistakes, breach contracts, use poor judgment, harm individuals or damage the environment.

When they do, the transgressors should be punished. But that doesn't make capitalism wrong any more than democracy is wrong when a Congressman is found with stacks of hundred-dollar bills in his refrigerator.