Wednesday, August 10, 2016

87. Recent Decline in US Intellectual Property Investments

Total US investments in plant and equipment has declined, with a shift from business to residential investments.  At the same time the intellectual property investments, as a share of business investments has also declined, as shown in the following chart:

CONCLUSIONS: Intellectual property (IP) is ultimately the originator of economic growth. That does not bode well, because we can observe its current decline.

86. Declining US Producitiy

The growth in GNP per capita is ultimately driven by productivity, which is measured as total output per hour of the economy. These numbers may be questionable if  one considers that the proper measure should be total output (in $s) divided by the average cost per labor hour (in $s).

 There are two variables that may affect this ratio: 1. The number of hours worked in the economy  has been declining as the % of workforce participation decreased.  Year-to-year changes in labor productivity shown here would not be affected.  2. The average cost per labor hour would change as wages increase or decrease. Again, that would not alter the slope of the productivity line.

CONCLUSIONS: These charts show that the economic viability of the US has been deteriorating. Productivity changes of less than 1% cannot support GNP growth of substantially more than 1%.


Tuesday, August 9, 2016

85. Growth on Gross National Income per Capita

There has been a steady decline in the GNI/Capita for the USA, Euro and Japan, whereas the same indicator has increased materially.

Implications: At current rates China will surpass other economies and become the world's dominant power.

Monday, July 4, 2016

84. Life Expectancy for US Population

In 2012 the US age groups were evenly distributed at a population of about 20 million for each five year age group. As the population ages, about 4% of the population is lost between 20 to 39 years. However, that life expectancy is made up by a rise in longevity between the ages of 40 to 54.

Afterwards the population starts declining at the age of 55 to 59 up to 28% losses at the age of 74. At the age of 75 life expectancy gains for seniors over the age of 85.

SOURCE: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2012.

Implications: Life expectancy of the US population is not a linear trend line but varies from a decline during the rising maturity (ages 20 to 39) followed by a 10-year rise while reaching full maturity (ages 40 to 54).

The surprising finding is the abrupt reversal from a 30 year morbidity decline after the age of 59 to a rise in life expectancy after the age of 75.

Friday, June 10, 2016

083. US Wealth per Capita from 2006 through 2016

The Federal Reserve has recently provided data about the decline in the household net worth in 2008.  However, this data did not reflect what has happened meanwhile with inflation. The consumer price index has increased from 202.6 in 2006 to 238.0 in the first quarter of 2016. The Federal Reserve also does not reflect what has happened  to the US population that increased from 297.6 million in 2006 to 323 million in 2016.

After adjusting for inflation and population growth, the most reliable indicator of US prosperity is the increase in per capita wealth. That dropped precipitously by 21.7% in 2008 and did not fully recover until 2015 -2016,  the election years.

CONCLUSIONS: It took ten years for the average household wealth to increase by 4.55%, even though the increased share of this average to the top 10% of the population raises question whether the median, rather than the average, should be used for judging economic conditions.

The damage from the recession to the households was also more severe than indicated by stock market averages or employment numbers.

One can only conclude that the effects of the 2008 recession can be seen as a major set-back to US households as economic progress was arrested.


Tuesday, June 7, 2016

082. Review of Current Global Commerce Indicators

The growth in international trade has peaked in 2008, but has now declined by 14% as increases in financial services reduced their share of international trade.
The share of goods in international trade has also leveled off.
<40% of GDP for goods and services now appear to be the “new normal.”

OBSERVATION: The dominance of financial services in international trade has now declined.  A rise in services has not compensated for the reduction of participation of the financial sectors.

The international trade in goods has not grown over its 2007 peak levels of 25.6%.
The growth in international trade of goods is currently at 67%, still exceeding  prior global GDP growth rates of 10.1% and 7.5%.
Much of the recent decline in the growth in goods can be attributed to a drop in commodity prices and as the appetite for raw materials such as steel, copper, and agricultural goods has  been reduced, particularly in China.

OBSERVATION: International trade remains as a significant  contribution to GNP, even though its role is now diminished.

Foreign direct investment (FDI) and foreign loans have shown a precipitous drop.
Since the end of WWII much of the growth in GNP was propelled by capital from developed and particularly from the USA. That has come to an abrupt contraction because of a dropping in the profitability of new international investments.
Whether that has been created with increasing nationalism is not well understood, but it is certainly one a new political force in international trade.

OBSERVATION: Retrenchment from international investors reflects rising difficulties with domestic profits.

3.4% of the world’s population lived outside the country of their birth in 2013 increasing rapidly while the total global population has declined to a growth rate of only 1.2%.
The refugee population increased to 20 million/year.
There are now 4.5 million international students, mostly in the US and in OECD,
The movement of people is dominated by a steadily growing population of over 1.1 billion, with a large rise in the number of Chinese tourists.

OBSERVATION: With a global population of 7 billion the international movement of people is still small .

Countries with the largest trade – USA and China – have also a relatively smaller of trade-as-a-% of GNP than countries with annual trade of less than one billion.
USA stands out with only 35% of GNP in international trade, which has the lowest such ratio.
Countries with a relatively high trade ratio – such as Singapore, Ireland, Switzerland, S. Korea, Belgium and Netherlands show they operate diversified economies.

OBSERVATION: The USA, China have large domestic markets and therefore do not have to depend on international trade. However, the USA dependence on Financial Services and China’s dependence manufacturing make them vulnerable.

Monday, June 6, 2016

081. Uses of Cash by US Non-financial Enterprises

Falling interests in the last decade drove up stock valuations on account of stock repurchases and dividend payouts. Investors, and particularly the rising proportion of risk averse senior citizens, favor stock appreciation immediately over capital spending that may pay off only in the future.

SOURCE: Wall Street Journal, June 6, 2016, C2

Implications: A reduction in business investment in favor  of financial manipulation (e.g. share repurchases) and dividends indicates an economy that is in process of liquidation.