Monday, November 14, 2011

Monday Morning Economic Assessment

The US Industrial economy (if pipeline scheduling is correct) technically took a break last week, while consumer spending came back to life.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) dropped for the first time in five weeks, dipping to 119.9 (vs last weeks 120.3). In its raw dailies (above), the measure started the week flat but strengthened sharply mid-week. The dip in the "Official" 28-day average was entirely due to a stronger week dropping off of the back-end of its four-week moving average, and in its dailies it was clearly stronger than the prior week.

The Consumption Index, conversely, reversed its two-week slump and advanced, gaining to 139.6 (from last weeks 136.6). In its dailies the week was very firm throughout.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index), continues to re-accelerate downwards.

The weeks numbers (in spite of that "technical" weakness actually looked quite good, as the re-ignition in consumption (late in the prior week) looked to reignite production Monday Morning on.

---Position on Trade---

I was challenged over the weekend on trade. Specifically, whether I am suggesting (by my mention of the linkage with the economy with the trade deficit) I was suggesting the US go "protectionist". Quite the contrary... I believe strongly in a free-trade concept globally, and I believe it would be reprehensible and disastrous to close off free-trade.

Ending free trade would effectively cut out $600 billion plus (per year) of goods from US consumers (lowering the standard of living in an instant), and unleash instantaneous waves of inflation in the US (as the laws of supply and demand forced prices higher to cope with that $600-billion cut). (Ending free trade would plunge many parts of the world into depression as well, as the loss of US demand would chill all of the worlds export-economies... and absolutely crush economies such as China and India who have not yet found the capability to balance off their own economies without the presence of the US-Jumper-Cables).

Further, from a Christian standpoint (trying very hard to keep the "religious" stuff out of the posts but can not on this point) I believe the US has been very much been blessed by God, and (as the old scriptural adage goes)... "To whom much is given, much is required"... Meaning I believe there is an "expectation" of us all not to get to "greedy" and "self-centered". The US has been a blessing to many in the world (by way of opening its borders to both trade and employment to others), and I would not like to see that stop.

Yes, free trade can lead to "exploitation" of workers in other countries. But will shutting down free trade elevate those under-$2-an-hour labor rates to $10-an-hour plus? Or will it push folks out of those $2-an-hour industrial jobs and into 25-cent-an-hour agricultural jobs?

(That is not to say we should "give-away-the-store" either. Rather, we should begin to set aside emotion and pursue logic and reason in both politics and economics) (Yes, I said it, I see more "Emotion" than "Logic" and "Reason" in both... with only forms of contrived "Logic" and "Reason" thrown in to justify "Emotion" in present day US politics and economics)

Maybe I am just too pragmatic, but I see better ways of doing things.