Succinct Summation of Week’s Events (6.10.11)
Succinct summation of week’s events:
Positives:
1) US exports hit record high in April (somewhat old news I know) and lower than expected deficit will help Q2 GDP
2) AAA said gasoline prices fell another .05 to the lowest in two months
3) ECB says they will raise rates again to further adjust relative to inflation
4) Canadian unemployment rate falls to 7.4%, the lowest since Jan ’09
Negatives:
1) Initial Jobless Claims disappoint again, staying above 400k for the 9th straight week
2) May Import Prices rise at the fastest pace since Sept ’08 with the help of the growing cost of doing business in China
3) Germans vs the ECB, Schaeuble vs Trichet in a smackdown showdown has European credit markets fast losing patience, CDS in Greece, Ireland and Portugal reach fresh record highs
4) ECB says they will raise rates again when some in the region certainly can’t handle it, euro reverses lower due to this concern and #3 above
5) The Hang Seng index in Hong Kong closes at 12 week low as property worries spread.
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June 10th, 2011 at 4:19 pm
Is your voluble hunger for vengeance satiated with this petit poisson, Fabrice Tourre, on the SEC’s hook? … or is a Vampire squid bouillabaisse the only item that’ll fill your enraged gullet?
Lefties? Is Obama liberal enough again?
Righties? Can you please drop the “no one’s been prosecuted” meme, when everyone from Raines and Mudd to the Tan Man having cut deals, your typically slipshod rhetoric has no shred of fact.
June 10th, 2011 at 5:02 pm
Next time you travel, put your shorts on first and it may pay for your trip:)
June 10th, 2011 at 5:46 pm
Although increasing exports contribute to a positive GDP change, a common fallacy is that decreasing imports or a lower trade deficit increased GDP as well. However, imports are not part of the GDP.
The GDP equation is,
GDP = C + I + G + E – X (1)
with C – consumer expenditures, I – business expenditures, G – government expenditures, E – exports, and X – imports. One could think at first look that decreasing X increases GDP, and taking this term by itself it’s mathematically true.
However, all the expenditure terms in the GDP equation have a domestic and an import component. Let’s use the indices d and x for those, respectively. Thus,
GDP = Cd + Cx + Id + Ix + Gd + Gx + I – X (2)
and following is valid:
Cx + Ix + Gx = X (3)
Because of these import components of the expenditure terms, it is that X has to be subtracted in the GDP equation. GDP is supposed to measure only the domestically produced good and services.
Therefore, any change in X is accompanied by an equal change of the sum on the left side of equation (3). They cancel each other out in the GDP equation, and whatever the magnitude of the change in X is, the effect on the GDP change is nil. At least in theory. In practice, all the components are statistical estimates. In practice import changes will cancel with the import components of the expenditure terms only if the statistical estimates of all the terms are sufficiently accurate. But this is another issue.
June 10th, 2011 at 6:36 pm
“No one goes there any more, it is too crowded”. Yogi Berra.
Thanks for letting us in on one of the great American humorists.
June 10th, 2011 at 11:42 pm
BR
Sorry to go off topic
Last week on your post on trends in overall economy you displayed a figure
http://www.ritholtz.com/blog/wp-content/uploads/2011/06/report1_9231_image001.png
Was in reference to rich getting richer essentially
However if you look at the graph carefully you will notice that the separation in curves between rich and poor essentially occurred during the two biggest bubbles in the past 100 years. Since it would make sense that the rich with the disposable income would profit most from the tech and housing bubbles and be hurt the least perhaps the true cause of the rich getting a bigger and bigger piece of the buy has been bubblemania and not tax breaks, rich taking direct advantage of poor etc.
I am curious to see if there is a way to tease out how much of the rich’s bigger pie was due to the bubbles. Maybe if you reproduce the income graphs without including capital gains it will subtract out most of the bubble profits (buuble profits usually more likely to be capital gains). If after subtracting capital gains the spread between elites and masses does not occur I think we can blame the bubbles.
And if in fact bubbles were to blame maybe it is not a failure of trickle down economics but simply poor policy making that continues to hurt the masses moor than the rich. (no doubt the rich were the first to put their money back into stock market after collapse while masses held onto treasuries. Looks like your graphs include capital gains on Income discrepancies so bubble
June 11th, 2011 at 10:08 am
if corporations needed to borrow at a bank(s) from (pooled) savings to expand and not allowed to issue their own currency under their own rules of dividends and usage thereof … what do ya think of that motfool?