American Economics Thread

[Bernard]

Think of all the US athletes, celebrities, and IT venture capitals as well.

Did not think about that honestly. Like in baseball were most players get payed a million+ just to play a sport. And the minimum amount for full time player is $500k.

 

[plawolf]

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I just read in the Chinese economics thread that China just surpassed America in Billionaires. I don't know how that makes sense with just a huge difference of millionaires between U.S and China, with China being sixth on the list.

Thank you for that Bernard, I was looking for exactly statistics along those lines.

With this new information, I think it reinforces my earlier theory that China's sudden and massive increase in billionaires in the last few years is a distortion caused by the rapid development of China's financial sector.

A fair number of stock market floatations of large Chinese companies that happened in that period, raising billions at a time. Each time that happens, a few of the founders become billionaires overnight.

The Chinese government and major banks also made a staggering amount of loans in wake of the Wall Street Crash, as the Chinese government was effectively filling the void left by evaporating western consumer demand with government and bank loans.

That money largely was spent on major infrastructure projects, while most were central or provincial government projects, the private developers were not slow to jump on the band wagon and hoover up as much of the cheap loans as they could.

To illustrate, as an example, a private developer could borrow $100m from the banks, buy the land and build a few apartment buildings with that money, sell the flats out for a total income of $500m (much of it is also funded by private mortgages taken out by citizens from the very same banks that gave the developers their loans), pay the bank back its $100m with nominal interests and pocket the profits.

Do that a few times and you got yourself a newly minted billionaire.

I have a nasty feeling that a great many of China's new billionaires are paper billionaires in that their wealth is largely unrealized.

The vast majority of the wealth of listed company founders are in the form of the stock options they hold. It might be worth billions now based on the share price of those companies, but unless someone buys the whole company, those founders are in reality unlikely to be able to unlock even a fraction of the value of their stock options without triggering a massive fall in the share price and/or loosing control of their own company.

Given the real estate market conditions in China in recent years, I am also very sceptical that many of the new real estate billionaires have actually sold enough properties to have billions in the bank.

Most likely, they are sitting on large numbers of unsold flats, which they are pricing too high to sell, but they are in fact doing a bit of "fancy" accounting, and recording those flats as assets at the inflated selling price to make themselves billionaires.

If the banks call in their loans, they could go from billionaire to bankrupt overnight.

This millionaires club data is a far more broad based and accurate assessment of wealth distribution within countries rather than looking at billionaires, who's small number means even a small increase in the number of billionaires could significantly skew any attempt to use them to assess inequality.

Although the same questions surround just how realisable their wealth really is, like with the billionaires' also likely apply to the millionaires. Which is why I really wish they provided year on year comparatives in that graph, to allow us to do some trend analysis to check if there was also a sudden leap in Chinese billionaires in recent years.

 

[janjak desalin]

I wasn't aware that the USD has been gaining value, steadily, on the FOREX, since about the second quarter of last year. Last week it was s high as it's been in 13 years, since the beginning of 2003. I'll have to research the discussion as to whether this is more attributable to actual strength of USD/US economic fundamentals, or if it's simply relative to the general international economic malaise. Nevertheless, I'm lovin' the $1.60 for a gallon of gas.

This, first, site gives some historical statistical metrics of the USDX.:

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This, second, site has a long-term historical graph of the USDX:

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Of some relevance to the USDX metric is this news:

Oil declines on supply glut, cut in U.S. oil rigs caps falls​

from:

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Sun Nov 22, 2015 7:27pm EST
(Reporting by Meeyoung Cho; Editing by

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); Reuters

Crude oil futures lost ground on Monday in early Asian trading, as the global supply surplus pressured prices, but a cut in the number of U.S. oil rigs for an 11th week in the last 12 limited the falls.

Benchmark front-month Brent futures for January LCOc1 fell 16 cents or 0.36 percent at $44.50 a barrel as of 0011 GMT after it ended up 48 cents at $44.66 a barrel on Friday.

U.S. crude's West Texas Intermediate (WTI) January contract CLc1 also shed 31 cents or 0.74 percent at $41.59 a barrel against its previous settlement at $41.90.

U.S. crude's December futures CLZ5 which expired on Friday ended 15 cents down at $40.39 after hitting a low of $38.99, the cheapest since Aug. 27.

Venezuelan oil minister Eulogio del Pino said on Sunday that OPEC cannot allow an oil price war and must take action to stabilize the crude market soon. When asked how low oil prices could go in 2016 if OPEC doesn't change its policy, he said: "Mid-20s."

Algeria's energy earnings are forecast to fall to $26.4 billion next year while foreign exchange reserves will dip to $121 billion after low oil prices cut into the OPEC nation's economy, Finance Minister Abderrahmane Benkhalfa said on Sunday.

U.S. crude were briefly supported on Friday as U.S. drillers removed 10 oil rigs in the week ended Nov. 20, the biggest weekly decline since late October, bringing the total rig count down to 564, oil services company Baker Hughes Inc (

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) said in its closely followed report.

Markets eyed on developing geopolitical tensions in the oil-producing Middle East as Jordan's King Abdullah, a U.S. ally, will hold talks in Moscow on Tuesday with Russian President Vladimir Putin on how to tackle "terror groups" led by Islamic State in Syria, an official source said.

Shares in major equity markets gained on Friday and the euro weakened against the dollar as investors anticipated actions by U.S. and European central banks next month. [MKTS/GLOB]

A top Fed official said on Saturday that there is a "strong case" for raising interest rates when Federal Reserve policymakers meet next month, as long as U.S. economic data does not disappoint.

 

[Equation]

US economy grew 2.1% in third quarter

Washington (AFP) - The US economy grew more strongly than first thought in the third quarter on higher investments in businesses and housing that offset a bit less momentum in key consumer spending.

In the July to September quarter, gross domestic product -- the broad measure of the economy's output of goods and services -- expanded at a 2.1 percent annual pace, the Commerce Department said.

GDP growth in the quarter was initially estimated at 1.5 percent, and though now seen stronger, it still marked a slowdown from the robust 3.9 percent expansion in the second quarter.

The upward revision was slightly higher than analysts expected, but overall the fresh data was less positive. The revision was largely due to a smaller decrease in private inventory investment from the second quarter than previously estimated, which offset downward revisions, notably to consumer spending.

The report came three weeks before the Federal Reserve holds its final monetary policy meeting of the year. Market expectations are high that the Fed will raise its benchmark interest rates on December 16 from near zero, where they have been pegged since December 2008 to support the economy's recovery from the Great Recession.

"Bottom line: Stronger growth but a weaker mix, with the biggest changes in inventories, revised up, and consumption, revised down," said Chris Low of FTN Financial.

"From the Fed's perspective, the revision doesn't mean much. It's strong enough to allow a rate hike, but not strong enough to demand one," Low said.

- Plow-horse economy -

Though growth has been volatile this year, with only a 0.6 percent rise in the first quarter, the overall pace has been that of a plow-horse economy, plugging along despite a global slowdown.

Consumer spending, which drives about two-thirds of the activity in the US economy, rose 3.0 percent in the third quarter, a notch less than the 3.2 percent previously estimated.

Business investments grew 2.4 percent, three tenths more than previously estimated. Investments in housing jumped 7.3 percent, revised up from 6.1 percent.

The Obama administration highlighted the growth in investment in the housing market, one of the bright spots of the economy.

"Over the past four quarters, residential investment has grown 9.2 percent -- the strongest four-quarter growth rate since the bounce-back from the financial crisis in 2012 and 2013," said Jason Furman, head of the president's Council of Economic Advisers.

"Housing demand is expected to continue to strengthen as household formation rises, credit availability improves, and the labor market continues to strengthen."

Exports were weaker than previously thought, rising only 0.9 percent after a 5.1 percent jump in the second quarter.

By contrast, imports, which represent a drag on GDP growth, increased 2.1 percent as the stronger dollar kept import costs relatively low.

Inflation has remained muted amid the recovery, in part due to falling oil prices. The personal consumption expenditures price index, closely watched by the Fed, rose at an annual rate of 1.3 percent in the third quarter.

That was a tenth point higher than previously estimated, but inflation nevertheless remained well below the central bank's target of 2.0 percent for price stability.

"The details of the revision to GDP made the composition a bit less favorable, but even a 2.7 percent pace for real final sales is solid. We continue to forecast a 2.7 percent pace for overall real GDP in Q4," said Jim O'Sullivan, chief US economist at High Frequency Economics.

The government will publish its final estimate for third-quarter GDP on December 22, a week after the Fed's December 15-16 meeting.

The central bank has forecast US economic growth of 2.1 percent in 2015, cooling somewhat from the 2.4 percent expansion in 2014.

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[Bernard]

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Why The American Economy Is About To Boom Again: Private Domestic Investment Is Exploding

 

[B.I.B.]

I hope the booming economy in America won't delay the expected delivery time.

Even after we were told to expect a delivery time of 6 months or more from the official release date,my brother and I, recently put down a deposit on a 2016 Ford Mustang manual 5L V8 Fastback for our father's birthday present.
We were told the wait time in Australia is nearly a year where Ford had nearly 3000 fully paid up orders.

The V8 version is proving to be the more popular than the economy model, which goes to prove that people still prefer a car that looks good and goes VROOOM VROOM

 

[Equation]

The Fed had just raise the interests rates today. Let's see how this goes.

WASHINGTON (Reuters) - The Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signalling faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis.

The U.S. central bank's policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.

"The Committee judges that there has been considerable improvement in labour market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective," the Fed said in its policy statement, which was adopted unanimously.

The Fed made clear that the rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.

"In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate," the Fed said.

New economic projections from Fed policymakers were largely unchanged from September, with unemployment anticipated to fall to 4.7 percent next year and economic growth at 2.4 percent.

The statement and its promise of a gradual path represents a compromise between those who have been ready to raise rates for months and those who feel the economy is still at risk.

The median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point rate hikes next year.

To edge that rate from its current near-zero level to between 0.25 percent and 0.50 percent, the Fed said it would set the interest it pays banks on excess reserves at 0.50 percent, and said it would offer up to $2 trillion in reverse repurchase agreements, an aggressive figure that shows its resolve to pull rates higher.

Financial markets had expected the rate hike, bolstered by recent U.S. data showing job growth continuing at a strong pace.

A Dec. 9 Reuters poll showed the likelihood of a hike on Wednesday was 90 percent, with economists forecasting the federal funds rate to be 1.0 percent to 1.25 percent by the end of 2016 and 2.25 percent by the end of 2017.

The rate hike sets off an immediate test of new financial tools designed by the New York Fed for just this occasion, as well as a likely reshuffling of global capital as the reality of rising U.S. rates sets in.

The impact on business and household borrowing costs is unclear. One of the issues policymakers will watch closely in coming days is how long-term mortgage rates, consumer loans and other forms of credit react to a rate hike meant not to slow an economic recovery but nurse monetary policy back to a more normal footing.

The Fed emphasized it would move gingerly into its tightening cycle. That was enough to produce a unanimous vote on the policy-setting Federal Open Market Committee, as even members who had argued publicly for delaying a rate hike delay went along with Fed Chair Janet Yellen and other policymakers.

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[delft]

The Fed had just raise the interests rates today. Let's see how this goes.

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The Fed is careful to keep its interest rate well below the inflation rate resulting in an effective interest rate of below ZERO, illustrating its belief in the strength of the US economy.

 

[Equation]

Chicago (AFP) - General Motors will be placing a big bet the American public is willing to drive a car built in China when it unveils the Buick Envision.


General Motors will be placing a big bet the American public is willing to drive a car built in China when it unveils the Buick Envision on Sunday night

The largest US automaker is certainly not trying to bring it to market quietly: Buick's latest sport utility vehicle will be introduced at a lavish party on the eve of the Detroit auto show in the hopes of maximizing media coverage.

"We expect it to be a great success," Molly Peck, US marketing director for Buick, told AFP.

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[Steve Smith]

well the US economy is on its all time low and for 2016 and beyond, all official U.S. economic forecasts call for stronger growth ahead. But, economic output is not the only variable on the rise. Inflation, debt levels, interest rates, and market valuations are also increasing. What does this mean for investors?????????????????????

And the

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for 2016 has cleared all the doubts regarding the flatten economy that has created a huge loophole in the system and if the situation continues to be the same unemployment will surely be on the cards.The Federal Reserve is more optimistic. Current forecasts call for unemployment to be in the range of 4.8% to a high of 5.1% by the end of 2017. Therefore, the headline unemployment number is expected to decrease slightly