Here is an article noting that the U.S. Treasury would save $147 million by switching its $1 note with a $1 coin, but that proposal faces opposition not only from the supplier of paper, but also from a majority of Americans.
From a Swedish perspective, changing to a $1 coin would seem natural considering that here the highest valued coin, the 10 krona coin, is worth more, roughly $1.5, 6 times more that of the highest valued U.S. coin and 1.5 times more than a $1 coin would be worth
Still, even stranger from a Swedish perspective is however the coins that are still around, especially the penny. The lowest valued coin here is the 1 krona coin, whose value is about 15 cents, 1.5 times more than the value of the dime , 3 times more than the value of the nickel and 15 times higher the value of the penny.
Now, it is true that it was only as recent as in October 2010 that the previously lowest valued coin, the 50 öre coin was abolished, but even that would have been worth 1.5 times the dime and 7.5 times the penny. ( Continue… )
We've all heard the fairy tale of the big spending cuts and "austerity" in Britain. Yet there is no trace of that in the British budget statistics. During October for example, spending excluding interest payments was £48.3 billion, up by 9% compared to Ovtober 2011. That reflected largely calendar effects, but if you look at the August-October period as a whole, the increase was 3.7%. And for the entire January-October 2012 period spending increased by 3.9% compared to January-October 2011. This is significantly above the rate of inflation (especially if you look at the GDP or domestic demand deflators) and also significantly above nominal GDP growth.
Because of that, and because of the fact that total tax revenue has been roughly unchanged in nominal termsm (which is to say they've fallen in real terms), the deficit has increased by about £10 billion. The increase would have been even larger if interest rates hadn't been so low due to Bank of England QE and because of the irrational investor belief in British bonds as "safe havens"., something that has caused interest payments to decline despite a rising debt level.
It could also be noted that because of a misleading accounting trick, formal net borrowing is down. What they did was to transfer the Royal Mail pension fund to a government institution, and then subtract the assets of that fund from net borrowing and net debt, while ignoring the liabilities that the fund has. This didn't really reduce the real burden of debt, but it reduced formal net debt, and for this year, formal net borrowing.
Preliminary third quarter growth data for 20 out of 27 EU countries have now been released. The data shows great divergence in Europe between different countries in economic growth. A slight majority, 12* out of the 20, had smaller economies than a year earlier, with Greece again suffering the biggest slump, followed by the other Southern European countries as well as Czechia and Hungary. Latvia was the star performer, followed by Estonia, Lithuania and Slovakia. Note the big divergence in growth between the two countries that once formed Czechoslovakia.
Rapid Boom: (More than 5% growth): Latvia
Significant Growth (1.5% to 5% hrowth ): Estonia, Lithuania, Slovakia
Barely Growing (0 to 1.4% growth): Germany, Bulgaria, Austria, France
Mildly Contracting (0 to 1.4% contraction): Britain. Romania, Holland, Belgium, Finland.
Significantly Contracting ( 1.5% to 5% contraction): Czechia, Hungary, Spain, Portugal, Italy, Cyprus
Depression (more than 5% contraction): Greece
*=some would perhaps object to my inclusion of Britain in the mild contraction category since they had zero annual growth. But considring that this first of all means that per capita growth is negative and secondly that the third quarter number was artificially and temporarily boosted by the Olympic Games (numbers for September that has been released indicates indeed that growth turned negative again once the Olympics ended)
California, once the state of the anti-tax Proposition 13´in 1978 and both Richard Nixon and Ronald Reagan, has now become one of the most leftist states in America. This reflects mainly the large influx of immigrants from Latin America and Asia, who vote Democratic by over 70%, but to a lesser extent also the exodus of White conservatives to nearby states with lower taxes.
The latest election illustrated this shift even more than previous elections. Not only did Barack Obama in the Presidential election, and Diane Feinstein in the U.S. Senate election win landslide victories in California, but voters went for the liberal side in all three referendums, including the one approving a big increase in taxation on top earners. And as if that wasn't enough, Democrats now gained enough seats in both legislative chambers to get the two thirds majority to raise taxes. The check on taxation and government spending created by the two thirds requirement that was part of Proposition 13 has now been overcome by the Democratic tidal wave in California.
Meaning that taxes are likely to rise even beyond the increase approved in the aforementioned referendum.
Latvia continues its strong economic recovery, with GDP increasing during the third quarter this year by 1.7% compared to the second quarter and with 5.3% compared to Q3 2011. Compared to the cyclical low in Q3 2009, GDP is up by as much as 15.7%. If you consider the drop in its population, real GDP per capita is up as much as roughly 18% in three years.
This must clearly be due to the fiscal stimulus and devaluations that Keynesians in 2009 assured us was necessary for the Latvian economy to recover....oh wait, I forgot, they didn't do that and instead reduced government spending and maintained a fixed exchange rate.
Two days from now, there will be Presidential elections in the United States. The only two candidates with a chance of winning are of course incumbent President Barack Obama and Republican nominee Mitt Romney.
Which one of these should you root for, or perhaps even vote for if you're an American citizen (which I'm not)?
Personally, I root for Romney, because while he is unsatisfactory in many ways he is a somewhat lesser evil compared to Obama. He says he wants to reduce marginal tax rates and pay for those rate reductions by abolishing various deductions and loopholes, and wants to reduce non-military spending to close the deficit, while Obama is focused on tax increases. And in foreign policy he wants to end Obama's policy of apologizing and appeasing of the enemies of the West. ( Continue… )
Today Germany published its trade statistics for August. It showed that its overall trade surplus continued to increase, from €7.9 billion in August 2011 to €11.1 billion August this year.as exports increased 5.8% while imports rose only 0.7%.
However, if we look at trade with other euro area countries alone, we can see that last year's surplus of €300 million turned into a €1.1 billion deficit in August this year as exports to the rest of the euro area fell by 3.1% while imports from the rest of the euro area rose 1.1%. The rest of the euro area thus slightly increased its share of German imports while sharply decreasing its share of exports.
This means that Germany is in fact doing what others have called upon them to do: helping to reduce the deficits of the crisis struck countries in Southern Europe by selling less to and buying more from them. That however doesn't mean that Germany's overall surplus has to fall, it has in fact increased due to rising surpluses both with non-euro area EU countries like Britain and Sweden and to non-EU countries.
The last few years has been the by far worst for the British economy since the 1930s, in fact by some measures it has in fact been even worse than the 1930s, with GDP being 4% lower in Q2 2012 than in Q2 2008 (adjusted for terms of trade) and with per capita GDP being 7% lower as population has increased by 3%. Yet despite a drop in per capita GDP by a cumulative 7% in four years, unemployment is a relatively moderate 8.1%. While that is significantly above the roughly 4% it was at during the previous boom, it is far lower than in for example Ireland, Portugal, Greece and Spain. So how come British unemployment has risen so little?
Simply because productivity has been falling. Output per hour for the whole economy was 3.5% lower in Q2 .Output per worker, a variable that also depends on average hours per worker, fell slightly more, 3.9%. That number if of course basically the same as the 4% drop in GDP. So the drop in per capita GDP can be almost entirely attributed to two factors: the increase in population and a big drop in productivity, with a smaller part being due to a small drop in the average work week. However, the absolute number of employed are basically the same now as when the slump started. When the crisis began both employment and productivity fell. In 2010 and early 2011 there was a moderate recovery in both, but since the second half of 2011, the two has diverged as employment has continued to recover while productivity has started to drop again.
I have received a somewhat unexpected criticism regarding my previous post. It's not about any of the statistical facts in it, nor about the point that U.S. inflation is increasing and will likely continue to increase, but about the fact that I, in addition to stating the monthly changes in consumer- and producer prices, also "translated" those monthly changes in to annualized rates. The critics argued that such translation meant that I thought that this would be the yearly change during the coming year, something they argued was implausible, a forecast that I basically agree with as, while it is likely that inflation will increase sharply, it is unlikely to increase that much.
But that was not at all what I meant. The reason why I also stated it in annualized terms was that some people mainly or only think in terms of annual or annualized change, so that any change less than 2% is low inflation. By only stating it in terms of the actual change, such readers would get the wrong impression, so by stating both, you create a greater understanding of recent changes. Stating it in terms of the 12 month change would also create a misleading impression since it would include the relatively low inflation months of late last year and early this year.
Now,since I myself don't think that way, I would have otherwise prefered not to make that addition. But if I had simply disregarded the objective of making as many as possible understand and simply expressed it in the way I myself like best, I wouldn't have written any of this in English in the first place, då skulle jag ha skrivit det på svenska.
But since, unfortunately, few people outside of Sweden and certain parts of Finland (plus perhaps Norway and Denmark due to the similarity of their languages to Swedish) understand Swedish, I still write here in English (däremot kan det för svenskspråkiga läsare som eventuellt missat det påpekas att jag på detta ställe bloggar på svenska). Similarly, since some people think in annualized I also express it that way to make them understand, even though I don't think that way.
First we hear that U.S. producer prices rose 1.7% (annualized 22.4%) compared to the previous month in August.
Then Ben Bernanke said that wasn't enough, so he will take his helicopter, model QE3/QE5, out for a round.
Then the Fed stated that money supply rose 0.3% the latest week alone, causing the annualized 3 month gain to increase to 8.6% and the yearly gain to increase to 7%.
And then the U.S. consumer price index rose 0.6% (annualized 7.4%) in August.
And as a result of Bernanke's new Helicopter tour, the dollar has plunged, while commodity prices have soared while the yield spread between regular and inflation protected U.S. treasuries have soared. The yield on the 5-year inflation protected "security" is now by the way as of this writing -1.66% (do note the minus sign), illustrating the point I've repeatedly made that the only thing safe about them is that those who invest them will lose part of their savings.
So, it is clear that unless the European debt crisis again worsens and again causes a surge in demand for dollar assets, there will be a big increase in price inflation soon.