Analysis Topic: Economic Trends Analysis
The analysis published under this topic are as follows.Saturday, June 15, 2019
Will the US Economy Fall into Recession? Or Will It Accelerate? / Economics / US Economy
The current economic expansion has just equaled with the longest boom in the US history. Is that not suspicious? We invite you to read our today’s article, which provide you with the valuable lessons from the 1990s expansion for the gold market and find out whether the US economy will die of old age.
Lessons from the 1990s Expansion for the Economy and the Gold Market
The current economic expansion has just equaled with the longest boom in the US history. Unless the sky falls in the next few weeks, we will celebrate a new record in July. Is that not suspicious?
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Friday, June 14, 2019
The American Dream Is Alive and Well - in China / Economics / China Economy
Home ownership has been called “the quintessential American dream.” Yet today less than 65% of American homes are owner occupied, and more than 50% of the equity in those homes is owned by the banks. Compare China, where, despite facing one of the most expensive real estate markets in the world, a whopping 90% of families can afford to own their homes.
Over the last decade, American wages have stagnated and U.S. productivity has consistently been outpaced by China’s. The U.S. government has responded by engaging in a trade war and imposing stiff tariffs in order to penalize China for what the White House deems unfair trade practices. China’s industries are said to be propped up by the state and to have significantly lower labor costs, allowing them to dump cheap products on the U.S. market, causing prices to fall and forcing U.S. companies out of business. The message to middle America is that Chinese labor costs are low because their workers are being exploited in slave-like conditions at poverty-level wages.
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Wednesday, June 12, 2019
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus / Economics / Asian Economies
In the Shangri-La Summit, the Trump administration introduced a new, muscular Indo-Pacific strategy. It is fueled by private interests of corporations, defense contractors and foreign governments - not by the interests of the United States, China or emerging Asia.Recently, the Pentagon and State Department informally notified Congress of a potential $2 billion deal with Taiwan, which includes the first-time sale of one of the US Army’s top tanks, drawing protests from China.
In the Shangri-La Dialogue, which took place only days before, Acting Defense Secretary Patrick Shanahan pledged the United States would no longer "tiptoe" around Chinese behavior in Asia and warned about the new US “toolkit of coercion.”
Here’s the real key to the new Indo-Pacific stance, however: While emphasizing US commitment to the region, Shanahan urged US allies and partners to increase defense spending. What the Trump administration calls “burden sharing” is predicated on the idea that Asian economies should increasingly "buy American" military hardware from Pentagon contractors, even if it would split the region and undermine the promise of the Asian Century.
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Friday, June 07, 2019
US China Trade War Will Start a Recession, or Worse… / Economics / Protectionism
The logic of Donald Trump’s multi-front trade war, if there is any, is increasingly obscure.
The tangled mix of policies isn’t accomplishing its stated goals and seems unlikely to ever do so. Meanwhile, it hurts the Americans it should supposedly help.
Regardless, it’s happening, and it has consequences… none of them good.
The president’s latest move to impose escalating tariffs on imports from Mexico is the trade equivalent of “going nuclear.”
Judging by his tweets, Trump thinks it will solve multiple problems: trade, drugs, immigration, and crime.
Thursday, June 06, 2019
Trump Is Making the Same Trade Mistake That Started the Great Depression / Economics / Great Depression II
We all wonder if Trump’s trade actions are as random as they appear or if there is a broader strategy.
Some of my contacts argue that the relatively strong US economy allows the administration to take a harder line than would normally be advisable.
The thinking is that we can ride out a trade war better than China can.
Wednesday, June 05, 2019
US Inflation and House Prices Trend Forecast / Economics / Inflation
Official US CPI inflation remains marginally below the Fed's 2% target at 1.9%. Generally where house prices are concerned the higher the inflation rate the better as long as the economy is growing. Nothing much screams out from this chart other than at 2% inflation on balance is supportive of house prices.
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Tuesday, June 04, 2019
Recession Is a Psychological Thing: It Will Happen When We Say It Happens / Economics / Recession 2020
We haven’t had a recession in a while in the United States.
The last one was pretty bad, so it stands to reason we might want to avoid a repeat of that experience.
President Trump is working very hard to ensure that we do not have a recession (at least until the 2020 election). The Fed no longer seems to believe that inflation is the greater risk. We are basically running the economy at full speed all the time.
It is hard to have a recession when monetary and fiscal policy have buried the needle.
Tuesday, June 04, 2019
Could the Trade War Help Ignite the Coming Recession? / Economics / Recession 2020
Dear Reader,
Another of the many moving parts in the economy right now is the escalating trade war between America and China.
The costs are starting to be felt. In fact, the latest tariffs should cost the average American household $831 this year, according to the Federal Reserve Bank of New York.
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Monday, June 03, 2019
How China Wins Trade War / Economics / Protectionism
The trade feud between the US and China has deteriorated into trench warfare, with tariffs used as bayonets to bludgeon the other’s economy into submission. China’s Huawei has been blacklisted and US firms ordered to stop doing business with the telecom giant, further souring the bilateral relationship. For Part 1 of this series read:
US is winning trade war with China...for now
Recent decisions made by the Trump and Xi administrations to either pile on more tariffs or increase the rate on existing ones, mean there is virtually no more tariff leverage either side can exert on the other, to extract the concessions needed for a deal.
The United States earlier this month raised tariffs on $200 billion worth of Chinese goods from 10% to 25%, effective June 1; China retaliated with $60 billion worth of 25% tariffs on American products. The Trump administration is reportedly “very strongly” considering tariffs on the remaining $325 billion of Chinese imports.
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Wednesday, May 29, 2019
US is Winning Trade War with China...for Now / Economics / China US Conflict
The ongoing battle between the United States and China for economic supremacy isn’t only being fought in the gilded ballrooms of Washington, as trade negotiators from either side parry over automobile parts content, intellectual property rights, government subsidies and the like.
Casualties and victories are also borne out over the decks of hulking freighters that carry the commodities which make up the nuts and bolts of international trade.
Indeed, shipping statistics are often sought by economics and traders trying to predict the health of a country’s economy or the world economy. The Baltic Dry Index (BDI) is one such leading indicator. Another is the Purchasing Managers’ Index (PMI). PMIs are a monthly survey of supply chain managers across 19 industries. An economy with a PMI of over 50 is considered to be growing; under 50 means an economy is treading water or possibly drowning.
This article is concerned with the Baltic Dry Index and other shipping statistics - such as cargo volumes through West Coast ports - that we can use to determine who, at this stage, China or the US, is winning the trade war.
The overall conclusion we, at Ahead of the Herd, came up with, is that the United States is winning, in terms of raw economic data, but at a cost to both economies of roughly $165 billion in two-way trade. The losers also include US consumers who are paying more for imported goods, and companies in both countries that can’t afford 25% tariffs for an extended period of time.
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Tuesday, May 28, 2019
What Will Trump’s Immigration Fight Cost You? / Economics / Immigration
Just like investors tend to buy high and sell low, politicians tend to react to most major issues (ahem… immigration) by doing the wrong thing at the right time.It’s no secret that almost all developed countries, and China in the emerging world, are slowing in workforce and demographic growth – many outright declining. Rodney talked about this just last Thursday. Five of the six smaller ones (which include Australia and New Zealand) that aren’t have one thing in common: strong and high-quality immigration.
You would think, with clearly predictable further slowing in demographic trends, that the developed countries would be competing for the best global immigrants. But most are restricting or fighting against it just as we need them the most. The U.S. fought against immigration going into the Great Depression. It’s doing it again now…
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Sunday, May 26, 2019
The Three M's of Hyperinflation : Milosevic, Mugabe, And Maduro / Economics / HyperInflation
What do Slobodan Milosevic, Robert Mugabe, and Nicolás Maduro have in common? Other than being leaders who kept the Communist Manifesto at their bedside, all three ushered in devastating hyperinflations.
Hyperinflations are rare. They have only occurred when the supply of money has been governed by discretionary paper money standards. No hyperinflation has ever been recorded when money has been commodity-based or when paper money has been convertible into a commodity.
The first hyperinflation occurred during the French Revolution (1789-96) when the mandat collapsed and the monthly inflation rate peaked at 143% in December of 1795. More than a century elapsed before another episode of hyperinflation occurred. Not coincidentally, this period of currency tranquility occurred during the heyday of the gold standard. With the emergence and adoption of fiat currencies, the 20th century ushered in currency instability and inflation. Indeed, since 1900 there have been 57 episodes of hyperinflation. And, five of those episodes can be claimed by Yugoslavia, Zimbabwe, and Venezuela. All are featured in the Hanke-Krus World Hyperinflation Table below, which first appeared in The Routledge Handbook of Major Events in Economic History (2013).
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Saturday, May 25, 2019
Employment - The Good and the Bad of Job Automation / Economics / Employment
People are worried robots will take their jobs. That’s a legitimate fear sometimes, but it’s not new. It is just another step in a process that started long ago.The bigger question is whether job automation is good.
If we want the economy to grow, the math is pretty easy. It’s a two-factor equation:
- The number of available workers, multiplied by
- The value of goods and services the average worker produces.
Increase one or both of those and presto, GDP will rise. Automation helps raise the second one. But then it gets complicated.
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Thursday, May 23, 2019
Capitalism Works, Ravenous Capitalism Doesn’t / Economics / Economic Theory
For more than a century, capitalism has proven to be successful in expanding the efficient manufacture of goods and agricultural products, increasing jobs and incomes, promoting technological innovation, decreasing poverty and improving the general welfare of humans globally. By contrast, socialism and communism with its centrally planned economy and collectivism historically have produced misery, war, need and poverty through oppressive totalitarian governments.
Super hedge fund manager Ray Dalio, the president of Bridgewater Associates, the very successful and largest hedge fund in America recently released a thoughtful and timely report stating that “capitalism is broken” - pointing to, among other things, the gross income disparity between high and low earners. Ray Dalio’s judgment of broken capitalism relates to his observation that the vast majority of wages going to the top 5% wage earners does not benefit the overall economy, destabilizes society and is destructive to capitalism. The fact that a true-blue capitalist wrote the article should alert industrialists, globalists, bankers and all capitalists that perhaps “capitalism with American characteristics” has veered off its previously successful course. Capitalism does work; but ravenous capitalism is indeed self-destructive. The bounty of capitalism must be shared not only with its owners or investors, but also with its other “significant partners” – the nation’s workers.
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Saturday, May 18, 2019
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher / Economics / US Economy
Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Later in today’s program we’ll hear from Axel Merk of Merk Investments. Axel breaks down the trade war with China and gives us some keen insights on the likely strategy being employed by President Donald Trump there, and also tells us why he sees inflationary pressures returning in the economy and the affects it will have on gold prices. Don’t miss another wonderful interview with the highly respected Axel Merk, coming up after this week’s market update.
As markets continue to gyrate on global trade and tariff threats, precious metals are struggling to capture investor interest.
Lately, the big push in alternative assets has been in Bitcoin. The cryptocurrency has doubled in price over the past two months, though it remains well below its old high.
Gold was the sole metal to show strength amidst the recent selloff in stocks. However, its momentum petered out mid week and turned lower on Thursday. As of this Friday recording, gold prices are down 0.8% for the week to trade at $1,277 an ounce.
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Friday, May 17, 2019
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red / Economics / Recession 2019
The yield curve isn’t the only sign recession is coming. Rising corporate misconduct says the same.
Business scandals seem to peak at the end of every growth cycle. I think that’s because CEOs are human, and humans get overconfident when everything is going well.
- In the late 1980s, we had the savings & loan crisis, followed by recession in 1990–91.
- The early 2000s brought both a deep recession and scandals at Enron, Tyco, WorldCom, and others.
- The Great Recession exposed Bernie Madoff’s fraud scheme. A couple of years earlier, commodity broker Refco went bankrupt after its CEO had concealed millions in bad debts.
Allegations of negligence and/or misconduct at public companies now seem to be growing again…
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Thursday, May 16, 2019
It’s Not Technology but the Fed That Is Taking Away Jobs / Economics / Employment
You’ve likely heard of the term “income inequality.” It means wealthy people are making a larger share of our collective income.
In one sense, it’s nothing new. The people with the highest incomes have more of the total. Math guarantees it.
But the top’s share has largely grown in recent decades, as has the share of assets owned by the wealthiest.
In fact, Ray Dalio of Bridgewater Associates says that income inequality is now at the same level it was in the Great Depression.
Let’s review some charts from my friend Bruce Mehlman’s latest fascinating slide deck. It does a good job of explaining the drivers of this trend and its striking scale.
Tuesday, May 14, 2019
Breaking Down Today’s Inflation / Economics / Inflation
I recently had dinner with my extended family. Afterwards, my parents mentioned they were surprised at how expensive the meal had been. It was a nice restaurant, but nothing fancy. It worked out to roughly $50 apiece, before tip. As we left, we separately climbed into our newish cars, which all cost more than $40,000. My brother-in-law’s pickup tops out over $50,000.But don’t worry, the government tells us, there’s not much inflation.
We could have chosen a cheaper restaurant, and less expensive cars, which is exactly the point the government tries to make…
The government wants us accustomed to the chained consumer price index (CPI), where prices move higher and we’re chained to a falling standard of living.
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Sunday, May 12, 2019
US Stock Market Leading Macro Economic Indicators Update / Economics / US Economy
Instead of trying to predict when the economy will deteriorate in the distant future (which countless experts have tried and failed), we simply look for deterioration among the leading indicators. Instead of predicting the next 10 steps, we seek to predict the next 1-2 steps for the economy.
Here’s a brief summary of the leading economic indicators we track
Positive factors
- Labor market
- Corporate profits
- Financial conditions
- Loans
- High yield spreads
- Inflation-adjusted new orders
- Heavy Truck Sales
Negative factors
- Housing
- Yield curve
- Inflation-adjusted retail sales
- Earnings revisions
- Average weekly hours
Friday, May 10, 2019
Make America’s Economy Great Again / Economics / US Economy
A lot of Americans find themselves in a quandary over Donald Trump. On the one hand they can’t stand the braggadocious billionaire for his lack of principles, business ethics, exorbitant wealth, his treatment of women, minorities, the list goes on and on. But they also have to admit, the economy is in better shape now than when Barack Obama was installed in the White House.
Can Trump justifiably take credit for the economic expansion of the last two and a half years? Why is the US economy growing? In this article, we’ll take a deep dive into the question, “Why is the American economy great again?”
The sweet spot
The facts would appear to support that notion - the evidence shows that the economy has done extremely well since Trump was inaugurated as president in January, 2017.
In the first quarter, the US economy barreled along at 3.2%. A year ago it was at 4.2%. That’s not the highest growth the American economy has seen historically, but it’s pretty good. Taking a look at the chart below by Trading Economics, we can see that economic growth peaked in 2014, at close to 6%, when Obama was president, then dropped under 1% as the US election cycle began, in 2015. Since Trump has taken the helm, the trend line is clearly up.
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