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from Air America.
I recommend watching it on mute so you aren’t distracted by clever music.
Time-Lapse Visualization Of US Unemployment |
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| By: Elliott Monday November 23, 2009 2:30 pm | |
Time-Lapse Visualization Of US Unemployment |
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| By: Elliott Monday November 23, 2009 2:30 pm | |
from Air America.
I recommend watching it on mute so you aren’t distracted by clever music.
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24 Comments
sobering.
Even worse than sobering. Downright chilling.
Brilliant and horrifying.
Thanks elliott. Chilling indeed.
That map should remove all doubt about the disaster at hand. Food for thought is one thing… food for the table is quite another for those whose last paycheck is a distant memory.
I don’t see our government having the wherewithall to provide food, clothing and shelter for the millions upon millions of unemployed. Somehow, I don’t expect the Chinese to provide it either. I hope we can get some innovative solutions going, but as we’ve come to learn, hope is not a strategy. If you have a way to grow food, you’d better have it ready for spring planting. Fall:2010 will take on new meaning when the map goes entirely dark.
As they say…
hope for the best, prepare for the worst.Oh, and when China’s investment bubble pops… expect three years of synchronized global deflation. 2012 may not be the end of the world, but it will seem like it. Of course, that’s the time when the real recovery begins.
Now is the time to figure out how to get there from here. Elective collectives and networking for progress are simply new terms to describe working together. Nature’s way is continually sustainable change. Of course, folks are entitled to their own point of view, it’s just that the status quo is not natural. That is what has to change. And it is.
[Who knew that hitting preview followed by a page refresh was the same as Submit Comment! *g*]
Am rewriting A Christmas Carol for the times, so Scrooge is proved to be a genial innovative thinker working on population control for improved resource management.
I hope this gets front paged. It makes the point I just made over at Morning Swim.
it actually kind of resembles epidemic contagion models.. I like how unemployment appears to spread westward and eastward toward the Great Plains Dead Zone.
look on the bright side.. Politico is reporting that failed TV shot Dobbs is considering a run for president. Perhaps he’ll save us…. Not.
http://www.politico.com/blogs/glennthrush/1109/Dobbs_2012_presidential_run_not_crazy.html
The problem with this is that there really isn’t persuasive evidence of the vaunted Chinese equity market bubble. Their banks are still better capitalized than anyone else’s, despite their splurge of lending. Their equity market PEs aren’t particularly high given growth rate, and even more importantly, market captalization isn’t that big as a proportion of GDP. China, in nominal dollars (the conservative way to look at it), has a GDP of around $4.3 trillion at the current exchange rate. It has a total equity market capitalization of $3.5 trillion.. 80.6% of GDP, with a fast underlying earnings growth rate. The US? $14.2 trillion GDP and equity market capitalization of $53 trillion, with not so much of an earnings growth rate. Where were you sayin’ the bubble is?
Good response — let me ask if there was persuasive evidence of an investment bubble prior to our tech meltdown starting in 2000. I don’t have the GDP stats in front of me for that but you might. I’m talking the perspective of foresight, not hindsight.
If we go back to 1990, the height of Japan’s investment bubble seemed equally impressive. Some saw it as speculative overreach, but not an all consuming macroeconomic bubble which would lead to protracted deflation for decades…
Given China’s foreign currency reserves, industrious population and adept leadership, it would be surprising to see them come to grief in the manner I suggest, but…
The evidence is that their export market is fast collapsing and the overcapacity which slackened demand exacerbates will exceed domestic consumption in a structural way. So the question in my mind that you’ve also identified — how does it come apart?
China’s rise has been fueled by World consumer demand. American over-consumption of cheap imports elevated China’ centrally-planned economy from G8-eighth in the mid 90′s to G8-second now. This ascendancy was export driven and is fast approaching crisis. Their current account is still positive so that masks the structural weakness implicit in a positive feedback failure mode. Especially since the free market moderators are simply not able to offset the driving force of the central planners.
It isn’t clear what will prick [what I perceive to be] the Chinese equivalent of our (and Japan’s) tech bubble(s), but it could be political or military or judicial. The trigger for our meltdown was the anti-trust action against Microsoft.
Earnings growth may not keep the torrid pace you suggest when the export markets curtail their demand. Protectionist tariffs will make that worse in that a trade war would surely starve the growth engine. I’m looking for a trigger here because I believe the effect will be immediate and dramatic. The flaming meltdown I envision would stem from widespread insolvency of banks (inadequate capital ratios), collapse of foreign markets and an inability to service debt to the sovereign.
So, overcapacity is the bugaboo from my point of view. How that plays out is known. What triggers it has yet to manifest. Any ideas? Our foresight is all we have for this analysis. (Which is pure speculation, for sure!)
One interesting take-away from a Chinese financial crisis would be the weakening of the Renminbi. So if the Chinese hold to the dollar-peg, the upside pressure could result in recriminations which trigger the crisis and thus weaken their currency to the point where the peg would be more or less equivalent again.
Call that irony.
One last thing — If you were to apply your economic analysis to the US in the 2007 run-up to the crisis — low unemployment, strong international capital access, earnings growth in financials, etc. Where was the foresight to call out the meltdown? Answer — here on FDL.
Having been an active member of the industry where that bubble occurred, you’re going to have to explain that statement to me.
Some review of Capital Adequacy Ratios would be in order as part of the discussion regarding a putative bubble circumstance in China.
As the link in my first comment suggests, China is rightly concerned that their banks are inadequately capitalized and they seek to raise the ratio to 13% — Much higher than the 10% stipulated in the Basel accords. Our banks have been shown to have a lousy 8% CAR in that the quality of capital has diminished along with the pseudo-AAA ratings sold by the ratings agencies. Our transition to “mark to market” transparency has removed the fig-leaf that securitization emplaced. The information asymmetry problem is worse in country where there is no political basis for openness. So I don’t believe their Tier 1 assets are all that great (except US treasuries, of course).
You mentioned that their forward Price/Earnings ratios aren’t especially exuberant given the expected growth. The last time I heard forward PE’s looking tame was just before the lights went out. If their growth expectations diminish due to deflationary pressures, I don’t believe forward PE’s will be considered a reliable indicator of equity risk. With the risk denominator blowing up, asset valuation will implode and there you have it — an inability to service debt on a massive scale.
So what? They can just print more currency! True, and maybe that will keep the system from imploding. I’ve heard that argument alot lately.
If that happens, along with the Bank of China claiming a superior CAR of 13%, who will believe them? At that point it will be incumbent on the government to shore up the quality of their assets. By that I mean… hostile takeovers in a military sense. Wouldn’t Taiwan’s technological infrastructure look good on the Bank of China’s balance sheet?
Kind of gives new meaning to the term “trade war”.
@12 Thanks for asking. Here is the defining moment for the US Tech bubble — US vs. Microsoft
I remember March 20, 2000 as the date of the inflection point so there may have been an early leak. For sake of brevity in this comment see:
The bubble bursts
Where were you when the bubble popped? I was a self-employed engineer. Soon to become self-unemployed.
[The wiki link pegs the peak on March 13 so my memory is a bit off there.]
I was working for one of those fabled “dot-com” companies that had taken in massive amounts of investment, and hadn’t so much as produced a plan to profitability, let alone actually posting a profit.
I just have a hard time correlating an anti-trust action against Microsoft with the market realization that all this money was going into something they hopelessly misunderstood, and vastly overestimated.
New Cookbook needed:
a collection of international “sustenance” meals.
Bahamas/Carribean: Peas and rice
India: Lentils/rice
Middle East: Chick peas, flat bread, and yogurt
And lots of spice. It satisfies hunger. Olive oil would be good to have a storage of.
Can unemployment benefits be paid for a couple of years? or will people just end up with NO income?
Yay for dotcoms! I can’t remember how many domain names I’ve registered and let expire!
So the point about Microsoft is well taken. It wasn’t until after the meltdown that traders were heard to have said, “Well, if Microsoft can’t make money in this market, who can?”. That stuck in my mind as an anecdotal pivot point, but the structural reasons likely had more to do with the buildup to Y2K — since that was a hard target in the public mind.
Once the Y2K scare passed, all that angst was released and the wall of worry came tumbling down. So it is fair to say the meltdown was about overcapacity and flawed business models as much as anything else.
But that is essentially my point — the underlying incentives — both then and now, are irrationally skewed to improperly constructed expectations, i.e. hope. Plus, I’m looking for the anatomy of a future triggering event which I argue US vs Microsoft provided in the US meltdown.
Here is the problem — say you’re a CEO (sounds like it to me!) and you are looking at the marketplace for your product — whether you make widgets or lend money — you have inside information about the nature of the market that is not publicly known. Now your options may be underwater because things took a turn for the worst but the shareholders/bondholders trust you to pull through this thing.
If you act aggressively, you may be able to recapitalize because your PR efforts are supported by a broader consensus of hope and recovery. Your ability to create personal/corporate wealth has an upside if the risk tolerance is repaired. The downside scenarios are all about the same — your options stay underwater but you didn’t get fired in the meltdown so you expect to stick around regardless.
That is pretty much the moral hazard conundrum faced by the banksters in the last meltdown and was also a typical dot com rationale… until the VC/(TARP) well ran (runs) dry.
That is what I see happening in China. They have endured a loss of market for exports and they realized that their GDP would suffer more if they didn’t encourage domestic consumption. The lending spree/stimulus has produced alot of non-performing loans, but the banks are used to the legions of insolvent debtors so they don’t act with alarm. They take the government money and lend aggressively looking to fattened spreads/margins to pad their earnings.
Where is the incentive to become cautious? They’re success scenario is not based on holding back and the only way they’ll be in-the-money is if things continue to improve. Sounds like a Ponzi scheme in the making.
But I wish I could answer Blub’s question more directly. For me, the answer is psychological in that the numbers themselves don’t reveal the defects in the business model, or the skewed incentives that dull the mind to the obvious conflicts. That is an animal spirits issue for which the explanations get all hand-wavy.
So, @16
You’ve nailed it. Lots of palatable stored energy. Nothing else will do when the wall of worry gives way to panic.
I believe that history is a continuous function of human nature. Our nature doesn’t change so much as cycle through stages of growth – wisdom – despair – ignorance – reconciliation – exuberance – growth.
The period of oscillation seems to be about 10 years. The next inflection point is likely an international or exogenous trigger which I’m trying to pre-consider. The period of reconciliation that will follow is parallel to the deflationary denouement that Japan experienced in the 2000-2003 period when the toxic bank assets were purged through a form of nationalization. Oh heck, through seizure.
From the data I’ve been seeing, we are about to enter our own period of reconciliation. That should last about three years. It would be worth some star-gazing in preparation… from my point of view.
To me, what you are describing is not so much a bubble as real recession in growth fundamentals – exports and domestic consumption and government spending cannot support reasonable return horizons on the current level of capital investment, and things “adjust” accordingly. That is, of course, possible for China, perhaps even likely and quite possibly very painful for them, but that’s not a bubble. That’s cyclicality.
The dotcom bubble was largely caused by irrational exuberance without corresponding capital investment – people were coming up with vaporware concepts and instead of accessing capital markets to convert those concepts into earnings and the industrial infrastructure needed to sustain those earnings, they were pocketing the proceeds. That’s a very different thing.
I think there was a lot of evidence about 5 years ago that there was a property bubble in China, and, in fact, that bubble burst on them.. and hurt them really badly by 2007 to 2008. There may be a bit of an equity bubble now, but more likely it’s just an increase in risk that they could be caught with their pants down, on a cyclical downspin, when their stimulus doesn’t pan out quite the way they want it to.
And btw, the great banking and debt-driven failures of 2007-2009 weren’t a surprise. Internal research at all the bulge brackets, including the white shoe firm I used to work for, going back to the early 2000s, warned of just this scenario. The problem is, nobody wanted to do anything about it.. we were too busy making money to care about the consequences. And our leaders were too corrupt to care.
Thanks for taking the time to explain your understanding of the situation.
I don’t want to sound like a blow-hard with fact-free ruminations based on a misunderstanding of an economy I have no direct knowledge of. And I’m sure that another long comment on my part will place me square in the troll category so I’ll try and keep this brief. Plus, I’m happy to hear what folks have to add to the conversation.
I have no point to defend. I’m looking to evaluate whether China is really susceptible to a dotcom style bubble meltdown and if so, what are the consequences for the synchronized global economy. Since I’m not sure how to press the argument for irrational exuberance in China, the skeptic in me says it may just be possible that there won’t be anything more than a self-correcting adjustment. That is very plausible. Personally, I see something more than cyclicality in this scenario. But that’s just me.
As for the capitalization in the dotcom meltdown, I’d argue that it was overcapitalized in that the success of the dotcom business plan was predicated on monopolizing market share. Since so many companies were vying for limited markets, the free and easy money led to widespread overcapacity and poof… end of easy money. If plant and equipment is what constitutes capital investment, then i’d say that was overcapitalized as well. All that dark fiber was thought to be an asset at the time. Given the pace of obsolescence in the tech biz, any deferred earnings are forgone earnings. I agree with this assessment though…
Would similar circumstances produce similar results in a different economy? My sense is yes, but I am neither a lawyer nor an economist (in any proper sense anyway). So cyclical downturn or bubble meltdown — I think we’ll know within six months. That’s pure speculation on my part however.
Just to be a little subversive about carrying on the conversation, here is a technical piece about the Chinese Balance of Trade situation.
China, the Renminbi, and Global Imbalances: A Quantitative View
The article suggests that revaluing the Chinese currency won’t fix the trade imbalance. The Chinese have to import more US goods (which they are penalized for doing) and foreign investment has to dry up, too.
The comments in the linked thread are pretty amazing. There is quite alot of repartee amongst the participants which illuminates the discussion… (get out the cherry picker here…)
If the stimulus policy fails to elevate the Chinese middle class into a sustainable economic force then “debt deflation” is the failure mode. Without democratization of the government, the putative middle class will fail to sustain the animal spirits required for prosperity. Without massive consumption to fuel the engine of growth, the lack of continuing world demand will overwhelm the system’s ability to self-sustain.
The remaining method for the central government to enforce growth during the scenario of failed exports and insufficient internal demand would be be imperialism — Communist expansionism and subjugation. Starting with Taiwan and other satellite regions. Notably, the middle east.
We tried that ourselves in the days following our tech meltdown. The tragedy of that experience continues…
To this day we still continue to look towards the Congress to fix this problem. They were the ones who created it, so it is insanity to think they will do the right things to fix it.
Many saw the stymulus when it was passed as wasteful spending that would give poor results, but people had hope. False hope as it was.
Nothing has been done that actually would put the country back to work. Nothing is even being talked about that would. Nothing will be done so we will have to hope and wait to see if by some miracle things pick up.
The sad thing is they could have put the country back to work and solved any number of our major problems at the same time, but they won’t listen.
They continue to think taxes and tax policy will be the end all, while the taxes are becomming less and less as more people are out of work, and business is down. Yet their spending is growing by the day.
From the president to the Congress we are blessed with a bunch of ignoramuses that no idea how to fix a problem, create jobs, or put the country on the road to recovery.
It could be done, and could have been done with less money than they already spent. They just won’t attack a major problem and try to fix it, instead they make more problems.
You want healthcare? What better way then if the country was booming, everybody was working and business had more business than they could handle.
I’m not sure how to bring back prosperity either. Personally, innovation appeals to me the most, but there is a price to pay when the technology creates more waste product than the goods and services it facilitates.
Looking to government in the long run seems misguided yet it is always there.
Of course, the electorate wants fair representation, low taxes and minimal interference in personal decisions, but that system seems to have been disrupted by “special interests”. Government by lobbyist seems to be the norm today. It will be hard to shake the monkeys on our backs but democracy need to do that to avoid being co-opted by either the military-industrial complex, the oil companies, or the health care monopolists.
I’d rather have the chaos and indecision of our democracy over the less malleable systems under monarchs, dictators and politburos.
I guess our first amendment right to speak our mind is about the best thing going even though the monied interests hide behind such freedoms to shroud their disingenuous behavior. I guess if you opine that a certain security is as safe as a T-bill then the first amendment protects you from from the ramifications of being quite wrong. Still, I’d feel bad if someone took away the right to disagree.
We’ve been through alot in the last 10 years. We’ll go through alot in the next 10 years. After that, who knows. I don’t feel good unless I’m solving problems. Part of that problem solving process is to identify the problem you’re trying to solve. It is just that the big problems, or what you could call the “living problems” aren’t solvable in the engineering sense. We can cope but the expectation is to “prevail”. That isn’t in the cards like the outcome of a game. The laws of thermodynamics still apply — you can’t win; you can’t even break even; and you have to play the game.
Aw heck, I’d rather just go work in the garden. At least Nature knows how to make it happen. There’s alot of benefit in them herbs and spices.
Normally I’d prefer not to link to a Murdoch publication, but this Barrons article is too tempting. Kind of like raw meat actually…
It would be so simple to follow the playbook of the inflationary 1970s. Today’s deflationary threat is more dangerous, however.
The article in the link is interesting not because of the author’s view, but because of the quotes he pulls starting about halfway through the piece. The article sets up the economic end game that I’ve been alluding to in my comments. Only these guys have real jobs.
These issues won’t go away until a real global recovery kicks in. That is not what I expect given how fragile things are at the moment.
This unwinding would really pull the rug out from under our stock market. That is the flaming meltdown scenario I fully expect next year.
I’d like to differ a bit with the next statement… note my emphasis…
My thesis depends on the weakness being similar to the pre-bubble circumstances in the US. The notion that China is post-bubble is much closer to Blub’s assertion that the real estate bust in China was a real bubble and that is the driving dynamic. If that is true, I’m all wrong with regards to a looming bubble in China now. So that is where my point of view may be flawed. But I don’t give up that easily…
Protectionism is a symptom. The cause, to my way of thinking, will be a run-up in the price of energy. The current dollar weakness hasn’t fully coupled into oil like it has gold. There may well be a resurgence in oil prices due to the temporal weakening of the dollar, increased domestic and international demand and political tensions wrt Iran, India-Pak, China, winter in Europe, Russia-Georgia-Ukraine, you name it…
Translation — Our near term recovery peaks when the trigger/inflection point arrives due to what will be an unmistakable signal that the US recovery is unsustainable. It could be as simple as the Fed declining to buy any more mortgage backed securities. Or an oil shock. Maybe a Republican coup. Ha! Maybe all three! Would that be so strange?
Hey Elliot — next time you use the word “visualization” in the title of a post, well, you’ll get my attention!!
Just when you think you’re done… let the competitive devaluations begin…
Vietnam Weakens Dong, Raises Rate to Combat Inflation
Why am I getting flashbacks to Rollover?