Trade Deficit Shrinks; Exports Hit 23-Month High

[rdean]

(AP) The trade deficit narrowed significantly in July as exports climbed to the highest level in nearly two years, reflecting big gains in sales of U.S.-made airplanes and other manufactured goods while imports declined.

The July deficit fell 14 percent to $42.8 billion, the Commerce Department reported Thursday. That was much lower than economists had forecast. The lower trade deficit should give a boost to overall economic growth.

Trade Deficit Shrinks; Exports Hit 23-Month High - CBS News

 

[william the wie]

Very good news but someone will consider it bad news.

 

[rdean]

Very good news but someone will consider it bad news.

"right"

 

[loosecannon]

well it was mainly due to a once a year trade show in France and the resulting airliner, military sales.

So it kinda falls short of ecstatic news.

 

[william the wie]

The strengthening of the Yen and to a lesser degree the Yuan is combining with a food shortage to to maybe extend this gain. Putting the printing press on afterburner with QE II (scheduled for November) is interesting as well:

Will the bond bubble bust?

Will the PIIGS go bust when the dollar goes down?

Tune in after the election for the next exciting episode of "Central Bankers Churn the World Economy" brought to you by our sponsor

You need a Mechanical Moron Robotics Inc.

 

[loosecannon]

The strengthening of the Yen and to a lesser degree the Yuan is combining with a food shortage to to maybe extend this gain. Putting the printing press on afterburner with QE II (scheduled for November) is interesting as well:

Will the bond bubble bust?

Will the PIIGS go bust when the dollar goes down?

Tune in after the election for the next exciting episode of "Central Bankers Churn the World Economy" brought to you by our sponsor

You need a Mechanical Moron Robotics Inc.

You are gonna have to explain this to me because I just don't see the emergency here that others do. I think the PIIGS bond "crisis" was promoted to drive down the Euro.

>the PIIGS are clearly selling dubious bonds
>most of those bonds are being held by EU banks, mostly German banks, probably even being used as those banks reserves
>so their reserves are declining in value and the banks need to be recapitalized*

But the risk of PIGGS default sounds overblown because the PIIGS are still selling bonds to roll over their debt

>Greece sold 1.5 billion just yesterday, no problem
>the EU banks have to keep buying them to keep themselves solvent while austerity reduces PIIGS debt
>the inflation brought on by a weaker Euro was supposed to boost the economy and buy a window for recovery to help the ailing PIIGS economies, reduce their debt, reduce wages making them even more competitive and ease the challenge of paying their debts down

...but that isn't working

Meanwhile far away, the EU banks were already bailed out with fairly massive loans from the US Fed and the ECB to cover huge losses from US mortgage securities that went sour in Sept 08.

Those loans begin to come due in about another year, meaning the ECB has to roll them over with new loans or the banks face a real crunch.

Meanwhile phony stress tests have been carried out that calm the public's concern and reduce the possibility of bank runs.

The ECB has to refinance the loans next year, so they will.

I can't see this coming apart unless the economy NEVER recovers. Or unless deflation sets in, insidious, intractible deflation.

But with so many forces mounting to relieve deflation eventually, like the renminbi decoupling from the dollar as well as all of the quantitative easing, it doesn't really seem possible that inflation can be suppressed forever in Japan, the US and the EU.

So what's the real danger here?

IMO this is the case for depegging the Yuan.

And how could the US bond market bust in the face of all of this? It is still the second best safe haven on earth, behind the YEN(????).

And the Yen has the second highest debt to GDP ratio of any currency on earth!

It's all topsy turvy; up is down and down is west.

 

[william the wie]

I definitely understand your confusion but here's the problems:

Most of Eurasia is well below ZPG and even parts of Africa are depopulating. Since people are the ultimate reason for economic activity that means that domestic consumption is declining along with birthrates.

Industrial automation is the only way to make up for the laborforce shrinkage in most of the world. This is why China is growing old without growing rich and the US is still the world's largest manufacturing country despite ever lower levels of industrial employment.

Automation means fewer middle skill jobs plus no doubt many other changes that cannot be predicted but as labor input shrinks as a fraction of production labor tournaments will become the rule. Five investment bankers hired to win out on the one job that is truly available with the four losers getting the boot and the lower fifth of the existing labor force being fired annually at the top. At the other end of the scale the janitors and such will also get small stock and/or option bonuses. (This was true at Lehman Brothers, Microsoft and Walmart in the past decade and no doubt at other places I am unaware of.)

This means income will become less important and wealth more so. Being grossly overleveraged as the US population is makes the US extremely vulnerable to transitional effects as economies try to figure out how to deal with this sea-change.

So yeah big seismic shifts are coming from out of left field, the weak links everywhere are going to break worldwide and they will do so soon because the Far East, India, Russia and Europe are in various forms of demographic death spirals. America is doing outstandingly well compared to the rest of the developed and developing world but we are still doing pretty crappy.

 

[uscitizen]

See Bush's tax cuts are working

 

[loosecannon]

I definitely understand your confusion but here's the problems:

Most of Eurasia is well below ZPG and even parts of Africa are depopulating. Since people are the ultimate reason for economic activity that means that domestic consumption is declining along with birthrates.

Industrial automation is the only way to make up for the laborforce shrinkage in most of the world. This is why China is growing old without growing rich and the US is still the world's largest manufacturing country despite ever lower levels of industrial employment.

Automation means fewer middle skill jobs plus no doubt many other changes that cannot be predicted but as labor input shrinks as a fraction of production labor tournaments will become the rule. Five investment bankers hired to win out on the one job that is truly available with the four losers getting the boot and the lower fifth of the existing labor force being fired annually at the top. At the other end of the scale the janitors and such will also get small stock and/or option bonuses. (This was true at Lehman Brothers, Microsoft and Walmart in the past decade and no doubt at other places I am unaware of.)

This means income will become less important and wealth more so. Being grossly overleveraged as the US population is makes the US extremely vulnerable to transitional effects as economies try to figure out how to deal with this sea-change.

So yeah big seismic shifts are coming from out of left field, the weak links everywhere are going to break worldwide and they will do so soon because the Far East, India, Russia and Europe are in various forms of demographic death spirals. America is doing outstandingly well compared to the rest of the developed and developing world but we are still doing pretty crappy.

That may have been one of the most profound posts I ever read on the internet boards. In a rare class.

But I really do NOT see how the shrinking labor force is the driving force behind automation. Automation which began to really gain pace in the 80's.

The rest of your post makes perfect sense if i reframe it in terms I am more familiar with like globalization's quest to disempower and marginalize labor.

On the other side of the coin nations with very poor yet capable populations are doing extremely well ("esp" not "even") in this recession.

You are basically saying what my understanding anticipates: that this recession could trigger a massive, pole shift type adjustment in the world economic order.

The third world becomes the new upwardly mobile while the first world reels into relative chaos. Wheels come off buses, heads and hearts explode. Because they must.

 

[william the wie]

I left out one thing and you caught me on it the birth dearth began in the 60s with the introduction of the pill and centralized birth control in India, China and Japan. Some countries such as Japan, Germany and Greece may never make it back because they passed the point of no return so long ago but other factors also matter.

The loss of potential moms in the transfer of brides from poor countries to wealthy countries has been growing since WWII. If you are single and maybe even if you are not in most parts of Latin America a man with American citizenship is a hot commodity, which can be a bit offputting if that's not what you are there for.

The differential abortion of girls in many countries does go back to the 70s and 80s.

Automation really kicked in when these trends started to really take off in the 80s.

However there are some oddball components of these trendlines. China's labor force will officially be shrinking until at least 2026 assuming the one child policy is reversed tomorrow but its population is expected to increase until 2060. How can this be? Well, China imports brides from N. Korea and presumably other countries to overcome its tendency to female infanticide. Also if a woman dumps her husband plus leaves the kid with him she can have another child even though it is technically illegal to do so. No one keeps track of the mail order brides and serial mommies in China so I can't tell you how widespread this is but population growth numbers are higher than can be reasonably explained given the number of women in China of child bearing years.

 

[uscitizen]

And imports are dropping indicating less consumer spending.

 

[loosecannon]

I left out one thing and you caught me on it the birth dearth began in the 60s with the introduction of the pill and centralized birth control in India, China and Japan. Some countries such as Japan, Germany and Greece may never make it back because they passed the point of no return so long ago but other factors also matter.

The loss of potential moms in the transfer of brides from poor countries to wealthy countries has been growing since WWII. If you are single and maybe even if you are not in most parts of Latin America a man with American citizenship is a hot commodity, which can be a bit offputting if that's not what you are there for.

The differential abortion of girls in many countries does go back to the 70s and 80s.

Automation really kicked in when these trends started to really take off in the 80s.

However there are some oddball components of these trendlines. China's labor force will officially be shrinking until at least 2026 assuming the one child policy is reversed tomorrow but its population is expected to increase until 2060. How can this be? Well, China imports brides from N. Korea and presumably other countries to overcome its tendency to female infanticide. Also if a woman dumps her husband plus leaves the kid with him she can have another child even though it is technically illegal to do so. No one keeps track of the mail order brides and serial mommies in China so I can't tell you how widespread this is but population growth numbers are higher than can be reasonably explained given the number of women in China of child bearing years.

OK, I will accept that. I was actually working in Auto parts manufacturing in the very early 80's and our firm hired a Ford engineer to guide thru the early phases of introducing robotically manufactured parts into our process.

The upfront costs were huge, esp the retraining costs and actually higher labor costs.

But there was simply no way that humans could make parts anywhere near the quality of robotically made parts.

Tho all that was driven by Japanese auto makers who pioneered all the robotics for completely different reasons.

 

[Trajan]

The strengthening of the Yen and to a lesser degree the Yuan is combining with a food shortage to to maybe extend this gain. Putting the printing press on afterburner with QE II (scheduled for November) is interesting as well:

Will the bond bubble bust?

Will the PIIGS go bust when the dollar goes down?

Tune in after the election for the next exciting episode of "Central Bankers Churn the World Economy" brought to you by our sponsor

You need a Mechanical Moron Robotics Inc.

You are gonna have to explain this to me because I just don't see the emergency here that others do. I think the PIIGS bond "crisis" was promoted to drive down the Euro.

>the PIIGS are clearly selling dubious bonds
>most of those bonds are being held by EU banks, mostly German banks, probably even being used as those banks reserves
>so their reserves are declining in value and the banks need to be recapitalized*

But the risk of PIGGS default sounds overblown because the PIIGS are still selling bonds to roll over their debt

>Greece sold 1.5 billion just yesterday, no problem
>the EU banks have to keep buying them to keep themselves solvent while austerity reduces PIIGS debt
>the inflation brought on by a weaker Euro was supposed to boost the economy and buy a window for recovery to help the ailing PIIGS economies, reduce their debt, reduce wages making them even more competitive and ease the challenge of paying their debts down

..

the journal has an article speaking to the euro zone debt...they claim the july stress tests were set up and didn't take into account the biggest problem, sovereign debt., many banks and some biggeys would have failed if they had tested them correctly and faithfully.

 

[loosecannon]

The strengthening of the Yen and to a lesser degree the Yuan is combining with a food shortage to to maybe extend this gain. Putting the printing press on afterburner with QE II (scheduled for November) is interesting as well:

Will the bond bubble bust?

Will the PIIGS go bust when the dollar goes down?

Tune in after the election for the next exciting episode of "Central Bankers Churn the World Economy" brought to you by our sponsor

You need a Mechanical Moron Robotics Inc.

You are gonna have to explain this to me because I just don't see the emergency here that others do. I think the PIIGS bond "crisis" was promoted to drive down the Euro.

>the PIIGS are clearly selling dubious bonds
>most of those bonds are being held by EU banks, mostly German banks, probably even being used as those banks reserves
>so their reserves are declining in value and the banks need to be recapitalized*

But the risk of PIGGS default sounds overblown because the PIIGS are still selling bonds to roll over their debt

>Greece sold 1.5 billion just yesterday, no problem
>the EU banks have to keep buying them to keep themselves solvent while austerity reduces PIIGS debt
>the inflation brought on by a weaker Euro was supposed to boost the economy and buy a window for recovery to help the ailing PIIGS economies, reduce their debt, reduce wages making them even more competitive and ease the challenge of paying their debts down

..

the journal has an article speaking to the euro zone debt...they claim the july stress tests were set up and didn't take into account the biggest problem, sovereign debt., many banks and some biggeys would have failed if they had tested them correctly and faithfully.

But you still go to work with the banks you have, unless there are bank runs.

I am sure the fed stress tests failed to fully account for derivatives exposures too, but Our banks didn't fail.

 

[william the wie]

LC, with the exception of Deutsche Bank EU banks were in even worse shape as a result of the US meltdown than the average US bank. Banco Santander may be another exception but even though it is headquartered in Spain a lot of it business and usually most of its profits are in Latin America. Also the Scandinavian housing mess of the 90s, tax law changes in the UK and Germany targeted at American film companies and integration of eastern Europe are other unresolved problems. For example, the Rolling Stones refuse to tour the UK because of tax law changes intended, in part, to keep Hollywood from financing US films with British and German taxes. (Long story but let's just say a lot of Indian lawyers make their living explaining EU and Commonwealth tax changes to American and Japanese executives in a lot of fields but especially the popular arts.)

The unintended consequences of this economic tweaking of tax codes include the fact that a lot of EU banks are locked into the future and past costs of industries that no longer exist. Take ebooks and direct movie downloads which are industrial revolutions already in the pipeline. That will take out about 1.2 million jobs in the US and vacate maybe as much as 1T of real estate (mostly in ancillary employment in industries not directly associated with films and books.) But the hit in the EU is going to be much bigger and that will have consequences for banking.