D
Deleted member 15949
Guest
There will be no inflation
American Economics Thread
- Thread starter Bernard
- Start date
Lmao sure thing mate
I love it when members come here putting out 1 line sentences to bs the common people
Inflation is coming for everyone. Copper has just hit a 10-Year high. Guess what products copper is used for? EVERYTHING
U.S. Personal Incomes Soar by Most on Record on Fiscal Stimulus
U.S. personal incomes soared in March by the most in monthly records back to 1946, powered by a third round of pandemic-relief checks that also sparked a sharp gain in spending.The 21.1% surge in incomes followed a 7% decline in February, Commerce Department figures showed Friday. Purchases of goods and services, meanwhile, increased 4.2% last month, the most since June.
The personal savings rate jumped to 27.6% from 13.9% in February. Disposable income, which exclude taxes and are adjusted for inflation surged 23% in March.
While it's definitely helpful to clarify the definitions of YOY & QOQ growth rates - China and US publish both figures, although the US likes to use annualized QOQ rates which gives a better sense of short-term momentum and China prefers to use YOY which tells more accurate picture of the actual growth.
It's more important to go beyond the headline growth rates to interpret the numbers and understand the implications. For that, you need broader context and some drilldown.
The US economy is more driven by consumption (70+% GDP), not investment or export. Therefore the quickest way to revive the growth of the economy is to stimulate the demand side. That's why we see the US often resorts to tax cuts, stimulus checks and other transfer payments. Investment takes longer to have any effect. The US economy suffers from long term neglect of investments, which are reflected in the state of infrastructure and hollow-out of manufacturing. The US economy is set to bounce back very strong from the hit of pandemic, maybe too strong. It is essentially fueled by the huge increase in debt and deficit, including the $0.9 trillion spending from Trump administration + $2.1 trillion from Biden administration. That's roughly 15% of US GDP, which likely buy the US 6+% YOY GDP growth. I'm not even including the $2.2 trillion stimulus spending early last year. The US is getting a short-term boost by worsening the long-term prospect.
China's economy is almost the opposite of the US's. It's consumption is around 40% of GDP, while investment + export are much bigger drivers of the economy growth. They're also quicker to have impact during a downturn because the Chinese government controls of or have levers over a significant portion of the economy (state-own enterprises and state-owned banks). The current recovery of economy is more driven by investments and export, although the consumption has largely recovered, but not yet at the pre-pandemic level. You'd expect more incremental growth come from consumption going forward. The long term structural problem of China's economy is insufficient consumption, relative to investment + export. To be fair, Chinese consumption in aggregate and growth is pretty good, it's just that is overshadowed by the strong performance in investment and export. Put another way, China's growth would have been still good but not as impressive without the extraordinary performance in investment and export in the last two decades (taking advantage of the entry to the WTO and the globalization).
Here is a question: If it were you, would you prefer a more balanced (around 50% consumption) but much smaller Chinese economy, minus the shining infrastructure and the globally competitive manufacturing industry including many hi-tech ones?
Or put it another way: neither the US or Chinese economy is perfect structure-wise, if you have to pick one, which one would you rather to choose from an economic structure standpoint? Note that I'm talking about structure not GDP size of GDP per capita etc.
It's more important to go beyond the headline growth rates to interpret the numbers and understand the implications. For that, you need broader context and some drilldown.
The US economy is more driven by consumption (70+% GDP), not investment or export. Therefore the quickest way to revive the growth of the economy is to stimulate the demand side. That's why we see the US often resorts to tax cuts, stimulus checks and other transfer payments. Investment takes longer to have any effect. The US economy suffers from long term neglect of investments, which are reflected in the state of infrastructure and hollow-out of manufacturing. The US economy is set to bounce back very strong from the hit of pandemic, maybe too strong. It is essentially fueled by the huge increase in debt and deficit, including the $0.9 trillion spending from Trump administration + $2.1 trillion from Biden administration. That's roughly 15% of US GDP, which likely buy the US 6+% YOY GDP growth. I'm not even including the $2.2 trillion stimulus spending early last year. The US is getting a short-term boost by worsening the long-term prospect.
China's economy is almost the opposite of the US's. It's consumption is around 40% of GDP, while investment + export are much bigger drivers of the economy growth. They're also quicker to have impact during a downturn because the Chinese government controls of or have levers over a significant portion of the economy (state-own enterprises and state-owned banks). The current recovery of economy is more driven by investments and export, although the consumption has largely recovered, but not yet at the pre-pandemic level. You'd expect more incremental growth come from consumption going forward. The long term structural problem of China's economy is insufficient consumption, relative to investment + export. To be fair, Chinese consumption in aggregate and growth is pretty good, it's just that is overshadowed by the strong performance in investment and export. Put another way, China's growth would have been still good but not as impressive without the extraordinary performance in investment and export in the last two decades (taking advantage of the entry to the WTO and the globalization).
Here is a question: If it were you, would you prefer a more balanced (around 50% consumption) but much smaller Chinese economy, minus the shining infrastructure and the globally competitive manufacturing industry including many hi-tech ones?
Or put it another way: neither the US or Chinese economy is perfect structure-wise, if you have to pick one, which one would you rather to choose from an economic structure standpoint? Note that I'm talking about structure not GDP size of GDP per capita etc.
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It is going to be VERY interesting to see how China copes in the future with the, as you accurately described, the problem of the US consumption based model.
IMO, currently the US growth is smoke and mirrors. If you throw trllions and trillions of dollars into the economy then even a ghost would manage to grow the US economy.
What is more important is how much growth is generated per unit of debt.
So does 1% debt of Gdp ratio translates to 1% growth of gdp (obviously impossible but I am just giving a theorytical example).
From my point of view the US has been loaded with LOTS of debt to only generate some extra points of gdp. Was this the correct way to grow the economy??
Contrast this with China who took debt but not much and it also helped its SME businesses a lot. So it avoided big debt and it also got LOTS of growth for this little debt.
IMO The US is cornering itself and is increasingly out of options. All this FED debacle and inflation is just one example of it.
Got to admit though, that given a busted hand by that buffoon Trump, 'Sleepy' Joe is actually 'Beast Mode' Joe. He is doing excellent work so far
What has the debt been used for?
From what I can see, most of the US debt has been saved or gone into financial instruments.
The next biggest category is funding purchases of consumer goods or necessities.
My view is that if government borrowing is required, it should really go into real investments or new technologies, which should pay off in the future. So theoretically, this sort of government spending might not generate as much immediate GDP growth. But it sets the stage for much higher sustained GDP growth in the future.
Very good point my friend. I am sure that China would prefer a 0.1% GDP growth on strategic industries (AI, Chips, EV, Biotechnology etc) than a 1% growth on "garbage" industries such as coffee shops, supermarkets, financial instruments, Stonks, etc
D
Deleted member 15949
Guest
No, the numbers are seasonally adjusted.
China is also making massive investment in infrastructure (HSR, 5G, highways, bridges, hydro power, solar and wind powers, high voltage power lines) and rural revitalization ( rural roads, rural development and education). I would also consider poverty alleviation as a form of investment too, in that it enabled and motivate people to seek wealth instead of living as subsistence farmers).
manqiangrexue
Brigadier
I see now if I look for the seasonally adjusted quarter on quarter growth, I get this:
But something doesn't add up. For China's 4 quarters in 2019, the numbers are 2.0, 1.2, 1.2, 1.2 while America's numbers for those 4 quarters are 2.9, 1.5, 2.6, 2.4. Basically, America's numbers are all higher across the board but for 2019, China's GDP growth was 6.1% while America's was 2.3%. How can this be?