Thursday, January 26, 2012

Who is winning the GOP Primary: Obama

This graph showing the betting in the Iowa Elections Market, and educational stock market were people can trade stocks in political outcomes.  Though there have been a lot of missed projections in this market over the years it does generally represent the sentiment of the population.

Since there is real money at play here, if someone thought the odds were wrong they could make money buying and selling stocks in candidates.  So overtime the market should reflect a consensus valuation in a candidates odds.

For example right now a share of Obama runs about 60 cents, a share of GOP about 40 cents.  At election time the person holding a winning share will get a full dollar.  So the odds on Obama are set presently about 6 out of 10.

The drop in the GOP over the past 6 months shows, in part, the negative impact the primary is having on the party.  Unlike with the Democrats in 2008 this year the primary process is working against the party out of power.  
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Wednesday, January 25, 2012

Unemployment in an age without memory

We all know the story, Germany's economy has managed to play everything right while the UK and other 'information age economies' messed everything up.  Germany is the model the United Kingdom needs to follow.

Certainly the last couple of years would indicate this.  German unemployment has been amazing while the UK unemployment continues to rise.

But take a view of about 20 years and the story looks very different.  In 1995 UK unemployment went under German unemployment and stayed their for the better part of 15 years.  Today it is common among conservatives to call this a bubble, but the longer term trend shows more stability in the UK employment market than the German.

Certainly re-unification has been a major problem for Germany.  But what ever the causes UK unemployment has shown far more stability than Germany, and even after the 2008 collapse the UK rise was far less dramatic than repeated German rises in the 1990s (a lost decade for Germany) and massive rises between 2002 and 2006.  Only over the pas t5 years has German unemployment been coming down, but even in this it shows the radical swings that have plagued the economy for decades.

Certainly the United Kingdom needs to reflect upon its economic policies, current austerity alone is proving to not be a solution at all.  But the German model is not only not valid for a nation that whipped out most of its industrial base years ago, but given Germany wild ride on unemployment over the past 20 years would probably not be wise.

I note also that British society and community is not as strong as German.  If the UK entered the kind of up and down insanity of unemployment as is normal for Germany you would likely see more social problem than you do in Germany.  This social element is sadly missed.  Morally the economy only exists to serve the society, but that ideas has been turned around in the minds of modern European leaders, where society must be transformed to serve the economy.

Tuesday, January 24, 2012

A generation lost to austerity

Above IMF projections on unemployment, in reality the US has done much better and the UK has done much worse, and austerity is the major reason.
IMF got it wrong.  The above data has checked lines for projected unemployment between the United States and the UK.  The prediction of the IMF at the start of 2010 they saw UK unemployment staying stable, despite the coming austerity, at just under 8%.  US unemployment for starting 2012 for the US was going to be 9%, UK was going to be 7.8%.

In reality 2012 has opened with US unemployment at 8.5%, UK unemployment at 8.3%.  So in both cases the IMF was off.

As an evaluation of austerity, the UK has embraced austerity strongly in 2011 more than the US.  The US economy has outperformed IMF projections by a 0.5% on unemployment.  The UK has under performed IMF projects by 0.5%.

So how come the IMF was wrong?

Mostly because the IMF failed to fully understand the destructive impact of austerity.  The assumption the IMF had was that the blow to unemployment in 2008 would be followed by a slow recovery, what the IMF failed to take in to consideration is the danger of government change in the UK.  The UK was previously ruled by Brown's government, one of the most accomplished macro-economic leaders in the west (I know that does not say much) but Brown was able to keep the impact of the recession lower in the UK.

The UK public rewarded this amazing accomplishment by, typical to their self destructive style, putting in a rich right wing government which the Occupy Movement would call the 1%.  This government has only one policy: austerity.  This austerity policy reversed the track of the recovery

The above graph shows just how conditions under the new government have harmed employment.  Austerity had assumed a growing private service sector would make new jobs for public sector workers, thus painlessly accomplishing the long held free market fetish of dismantling public sector work, the public sector being a major employer of women and ethnic minorities thus reducing their power as well.

What has actually happened is the private sector has found demand reduced as 100s of thousands of public sector workers pull back for fear of losing their jobs.

What is most disturbing about this double dip graph has been the failure of the UK government to even consider a course change.  Austerity still remains the only economic policy of the government.  The UK, like much of the EU has no strategy from growth.  And the EU is learning that investors in job creation are not really that interested in public debt compared to growth.

Economies with massive debts have boomed before.  The USA in the 1980s had a long period of prosperity in a massive explosion of debt.  With the UK able to borrow money at about 2.3% for an ENTIRE 10 years (0.23% per year) while unemployment grows and business close there is no logic at all for an austerity only program.

The Debt Lie

Over the past few years a myth has developed in Europe that nations presently facing austerity caused the problem by too much government debt during the good years.

This chart that shows dept levels of Ireland, United Kingdom debt per GDP vs the World, the EU and the Euro area shows this simply not to be true.

In reality Ireland, Spain and the UK had very low levels of debt, not only compared to the EU but to the entire world before the 2007 recession.

But it does not stop there: Spain continues to have low levels of debt by both a European and EU standard.  The United Kingdom's debt has risen but is still only at the global average.  Only Ireland has seen its debt rise well above the EU level.

Much of this raised debt caused by the slow down of the economy, but in the case of Ireland, and to a lesser degree the UK a banking collapse had a lot to do with it.  In all three a major housing boom also contributed to the raised debt.

So in the EU outside of Greece, which is a minor economy but gets a lot of attention because it confirms the conservative bias of governments, the cause of raised government debt was NOT previous high spending on government services.  In fact the PIIGS + UK economies show a tendency to have had solid debt performance in the years running up to the collapse.  The issue was a dependency on banking and property to drive the economy.

In fact with the collapse of banking and property as engines of growth, and the lose of industrial production in much of the west, economies like Spain, the UK and Ireland are now precisely more dependent upon government to keep them from collapsing further.  It will takes decades to rebuild industry, if that is even possible, and probably a decade or more to rebuild the value of housing, and the banks are in terrible shape.  In the case of the UK and Ireland the economies have turned to debt spending to keep themselves alive.  The problem has been public finances are being used to secure the incomes of a small minority of very wealthy people who work at banks while cutting support to the poorer elements in society.

This austerity, built more upon a myth than a reality, means that the banking sector retains its power and the members of it retain their status and wealth while the people suffer unemployment, poverty, and even in growing cases homelessness, cold and hunger.  It shows the negative extent to which the free market fetish as distorted our moral and social values, where the mistakes of the rich and powerful are paid for by the innocent and poor.

In the UK among Tory voters I have witnessed first hand a really ugly brand of social hatred that always turns my stomach.  Well off Tory voters are now prone to rant about abuses of upper middle class, about their over spending and their pursuit of fun from 2000 to 2008 as an excuse for further cuts, cuts that are more likely to hit the people who not only did not enjoy the fruits of that time, but actually saw their own status fall.

Austerity has imposed a cruel anti-social injustice upon the societies in which it has taken hold, were the haves justify austerity by pointing to their own waste to justify even further inequality.

But something happened to this, like to most myths: it has collapsed.

Tuesday, January 17, 2012

Stop complaining you are still rich

American and Europeans have seen a significant drop in their per average GDP, but in context Europe and especially Americans are vastly wealthy compared to China.  China's per person GDP in 1990 was only a few dollars a day, Sub-Sahara Africa levels.  Even today the average Chinese still does not make a half what the Average Spanish person made 20 years ago!

The Myth of Debt Labour

In the UK a common myth is generally held to be true by people about the nature of the debt.  The myth is that the United Kingdom under Labour regimes of Blair and Brown had run up too much debt during the good times, and that when the economic crisis came the UK government was already so in debt that it did not have the resources to deal with the economic collapse.  Cameron became Prime Minister running on the government debt and nothing else.

The above graph shows how false this claim is.  In the years running up to the 2008 collapse the UK had significantly less debt as share of GDP than the world average.  and far less than Germany.

In fact when you include in the analysis nations like Iceland, Ireland and Spain, which are all in major debt crisis now, you see a clear pattern.  EU nations that had very low levels of debt before 2009 suddenly see debt exploded.  The levels of government debt are clearly the effect not the cause here.

And this is the nightmare the Europe is facing, the conservative European governments are technically bleeding their nations to death: treating the symptom while ignoring and even hiding the cause.  The UK debt is a product of the imbalance of finance, housing and and retail over other sectors, and these sectors have collapses.  Actually there is reason to believe that low debt before 2009 was a sign of danger.  This may be because the low debts were driven by tax revenues from the boom and this certainly is the case in the US.

But it may also be possible that low levels of government debt were allowing large deposits in banks to be mis-allocated.  People generally don't think about public and private debt very deeply.  But for a nation like the UK think about it.  Public debt will go to things like building roads, schools and hospitals, paying teachers, making repairs and promoting education.  Cuts, like the vicious cuts being seen in the UK today have a negative impact on human services like education.

While government debt goes in to things that on the whole are certain to return value (schools, police, health care) private debt in a boom will go where ever.  Popular places to pump private debt is real estate, especially building high rises, overseas investments, credit card loans, and what ever new vehicle they banks can come up with.  This kind of debt has two negatives, firstly much of it returns no economic benefits (building more high rises than you need does not help the economy and only reduces the value of other assets) but also the high interest rates of private debt mean that things like consumerism leave future generations with debt.

So it is possible that these high levels of private debt and low levels of public debt in nations like the UK, Ireland and Iceland actually hurt the economies, moving the nations investment wealth out of providing solid public services in to speculation.

Thursday, January 12, 2012

Greenhouse footprints: Who are the real pigs?

We all know that Americans produce way to much greenhouse gas per person, but Canadians have been catching up in the past 10 years, and Gulf nations like Kuwait and Bahrain are even dirtier per person, while Saudi Arabia is not far behind the US and Canada.  The nations of Europe, Japan and Israel are cleaner per person, but the emerging world of Brazil, Cuba, Egypt, Nicaragua and India produce a fraction of the greenhouse gas.

Even if everyone on the planet was as clean as Japan or France the world's production of greenhouse gas would got above the current level, while if we all produced as little as the average Indian the world would be vastly cleaner.

Wednesday, January 11, 2012

The Exporters

This chart shows export growth for the world, United States, United Kingdom, Germany and China.

Not surprising the China's growth has been much higher than the global rate for most of the bast 20 years.  But there is a troubling, for China, legacy of boom and bust that might spell trouble for China, which saw a major boom in the 1990s lead to a hard landing.

It is also interesting to see that among Western nations German is currently seeing the weakest export growth, as the UK is see the strongest.  But the most telling thing is how connected trade makes the worlds major economies, when they rise they all rise together and then the fall they tend to fall together.  In the cases of global, UK, US and Germany the rates normalize after one year, with a single case of any of these nations under performing global average by more than a year or so.

Tuesday, January 03, 2012

Who is export driven? Debunking the BRICs myth

We all know about the BRICs, developing economies growing because of strong exports that put more advanced nations to shame right.

The problem is it is hard to see this in the evidence.  Above I compare the export dependency of Norway, Canada, and the UK against China, Russia, India and Brazil and find that Norway is the largest exported as percentage of GDP, with China and Russia exporting as much, as percentage of GDP as Canada and the UK, and India and Brazil lagging behind.

Also notice that massive bubble in Chinas export levels!  Is China facing a export bubble?

Sunday, January 01, 2012

Slavoj Zizek: Capitalism and Democracy are seperated

Zizeck speaks on the state of Capitalism, and the end of Capitalism's justification with Democracy in the form of a new kind of Capitalism in China.

Why is it Not the BBRICS?

Looking just at recent economic growth Belarus has done as well, recently, as Russia and Brazil.  Why is not in the BRICs. 

Russia in the BRICS?

Looking at new business formation, Russia is not performing like the emerging economies of Brazil and China.  In fact Russia is now lagging behind France, the United Kingdom, and the United States in rates of new Business Ownership.

Not really an emerging economy.