White House economist (CEA
Chairwoman) Romer today said the economy in the future will see business
investment and exports filling the hole left by consumer spending (and fiscal
stimulus) as households save more. The economy, Romer said, would be less
dependent on consumption as the savings rate reverts to the 1990â€™s level at 66%
down from 70% currently. She also said households would no longer tap
home equity to finance current consumption to the extent of the last
decade. Government is filling this whole now with mainly fiscal policy
and some aspects of monetary policy â€“ more like drop in the bucket that private
consumption filled until last September.
She probably is right in the
long run, as in anything is possible the more years one allows for something to
happen like exports and business investment to pick up the slack from reduced
But this is not possible for
the next several years at least. Not even China can direct its economy from savings to consumption
overnight and its government holds all the marbles. If China canâ€™t transition to a demand-led economy how can the
US export its way to prosperity ahead? Germany and the Euro Zone will go American? This is a
world of lessons learned and if there is any lesson learned it is donâ€™t count
on leverage to buy ones way to happiness. Having a savings for a rainy
day is wise, not cheap. Europe for the most part (excluding the UK which did behave very American-like in the last
decade) does not need to learn a lesson it already knowsâ€¦the wisdom of
US high tech exports have a world marketplace to sell into but quasi
adversarial states like China mean only some tech exports ever make it to China. Europe has adequate domestic tech substitutes
in hardware and software and outside things like video games, higher education
and Hollywood movies, there is not much else Europe wants that is American â€“ in
time maybe golf clubs and fishing rods when China discovers leisure and
respects as well as enforces property rights.
Sadly the $787bln fiscal
stimulus and $1.8trln projected budget deficit for FY2009-2010 will not fill
the hole left by a household in mean reversion and in a world where net wealth
has collapsed. What has helped fill the hole indirectly has been the
massive provision of liquidity by the Fed via conventional and unconventional
means and we all agree this is unsustainable without a Zimbabwe-like ending.
And with the US consuming
much of what the world makes, when this stops happening as it has, the rest of
the world does not have the income to support the level of imports that high
levels of exports helps support.
Global output gap is
enormous as happens in world recessions. And a world recession brought on
by a sudden collapse in credit flow does not allow for more typical business
cycle adjustments. Instead it is feast and famine overnight leaving firms
heavily exposed to excess inventory (or employment if service-based
firms). What business wants to expand capacity? Well surely there
are some like those in green technology, but this part of the economy is still
insignificant and not a major factor in growth, and not even with government
Business investment is
likely to remain depressed as long as or longer than household savings rates
I think todayâ€™s US trade
report shows just how badly global trade is hurt when US consumption collapses. Looking at the table
below I have highlighted the change in bilateral US trade deficits with major regions using Q1 2009 data
compared with Q1 2008 data (note bilateral data are seasonally unadjusted and
hence year-over-year comparisons are more meaningful than month-over-month
comparisons). Only the bilateral deficit with China is holding up
relative to the rest of key trading partners (down 8% Q12009/Q12008) suggesting
massive substitute effect â€“ Chinese made goods for rest of the world made goods
(and a stronger case for yuan appreciation). Mexico and Canada have seen their surpluses with the US implode. So has the EU. And Japan as
well. Auto demand (lack thereof) is surely a key driver in the reduced
imports into the US from major auto producing nations. And OPEC has seen its oil
exports hit by reduced consumption and lower prices compared with a year ago.
BALANCE March Feb
Jan-Mar09 Mar08 Jan-Mar08
Q109/Q108 (negative is US deficit growth, positive US deficit growth as in SK or US surplus growth as in Brazil)
-830 -1,915 -5,290
-71.8% (this number
screams sell C$...Chrysler and GM plant closings to cripple Cdaâ€™s exports and
-41.7% (if you like risk,
would be more inclined to be long Asia FX/asset risk than Mex or even Brazil)
-44.9% (sell euros â€“ see stocks
rolling over, export-led economic model leaves Europe little scope to absorb global
recession, and no scope for firm EUR)
-8.0% (best of the
-56.5% (what safe havenâ€¦new
lost decade in store hereâ€¦next major yen rally on collapse in risk, go short)
+28.8% (better of risk currencies)
of risk currencies â€“ best in class)
255 +364.7% (warning signal low but audibleâ€¦long
My point is Romer may be
right in some distant point in time, but not in the next decade at least.
Which means the private sector will not come roaring back on the coattails of
exports and business investment. And as government finds it canâ€™t keep
throwing borrowed dollars at the problem (just as Japan did in the lost decade),
outside of the Fed generated money creation, there is not much in the cards
that will drive US growth much above flat to 1.5% when the recession ends (well
into 2010 at the earliest).
My question is how long can
export-led economies hold out when global trade is under such intense
pressure? Protectionism is inevitable and there are signs of it
already. When Germany, Spain and Italy adopt cash for clunkers and auto sales surge, the US will follow (bill already in works in Congress),
this is a form of protectionism if indirectly.
China may be in fine shape to throw resources at its slowdown. But China canâ€™t afford to throw money at China at the rate that will trickle down to the developed
world and restore world trade.
We may be seeing green
shoots on the macro landscape. But green shoots in a draught will not
bear flowers or fruit.
Where does growth come from
ahead? The government until it finds it canâ€™t keep it up and then it is a
hobbled private sector (earnings starved firms, income/wealth starved
households in need of deleveraging and banks filling own holes and
recalibrating leverage) that yields a US version of Japanâ€™s lost decade.
Forex Trading News
Daily Forex Market News Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Forex News Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Actionable trading levels delivered to YOUR charts in real-time.
Mon 23 July 2018 A 14:00 US- Existing Homes Sales Tue 24 July 2018 AFlash PMIs Wed 25 July 2018 A 08:00 DE- IFO Survey A 14:00 US- New Homes Sales A 14:30 US- EIA Crude Thu 26 July 2018 AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless A 12:30 US- Durable Goods Fri 27 July 2018 AA 12:30 US- GDP A 14:00 US- Final University of Michigan
John M. Bland, MBA co-founding Partner, Global-View.com
Global-View Affiliate Program
We are starting an affiliate program to market some of our products.
Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.
Put the word "affiliate" in the email subject line.
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.