Posts Tagged ‘mitt romney’

The hurricane delayed things. The latest report on US consumer confidence was due on Tuesday, but in the end it had to wait until Thursday. When it saw the light of day, the news was good.

Last month US consumer confidence, according to the Conference Board, hit its highest level since February 2008. If these things interest you, the index hit 72.2.

Actually, QE may have something to do with it. When the Fed goes out and buys bonds via quantitative easing, it forces up bond prices. As a result, equity prices rise (probably) and house prices stop crashing (maybe).  US consumers like it when their equity holdings rise in value, hence the jump in their confidence.

But there was more good news from the US. The latest Purchasing Managers’ Index (PMI) from ISM was out yesterday too, and while it was not exactly the stuff that runaway booms are made of, it wasn’t half bad either. In fact the headline index rose to 51.7, from 51.5 in September and 49.5 in August. Okay, they’re just numbers.  “How are you feeling today?” “Today I feel three?” It makes no sense. Consumers’ confidence is 72.2, manufacturers’ 51.7. You might ask 51.7 what? Wishes perhaps?

But it’s the history that makes these numbers mean something. For the PMI, any score over 50 is meant to suggest growth, and the reading for October was the highest score since May.

This evening (2 November) the latest US jobs report will be out. The last one had US unemployment falling to 7.8 per cent, pretty much back to the level it occupied when George Dubya and Dick Cheney moved out of the White House.  (And someone called Obama moved in). If the data is good, Barack will surely be chuffed.

Not that he must look too chuffed. It does seem as though the world is divided into three. Those who think Barack gets pushed around, does not speak up for himself, and needs to do the political equivalent of punching Mitt Romney on the nose. Then there are those who say he looks Presidential and rises above that kind of nastiness. Then there are those who just don’t like him.

Returning to the US economy, house prices may be the key. Back in 2006 residential investment as a share of US GDP was 6 per cent. In 2012 it stood at just 2 per cent. No wonder Uncle Sam lost a shed load of jobs.

Of course, the fall in US house prices mattered for two other reasons. As prices fell, consumers lost confidence (and by the way in July 2007 the US consumer confidence index passed 110), and it mattered for another reason.

What was it now? Thinking…

Oh yes, that’s right, it led to the subprime debacle, followed by a global banking crisis.

According to Keith Wade, Chief Economist at Schroders: “The number of residential properties in negative equity at the end of the second quarter was 10.8 million (22.3 per cent), down from 11.4 million (23.7 per cent) at the end of the first quarter….around 1.3 million households have moved out of negative equity since the beginning of 2012, although 2.3 million remain in ‘near-negative’ equity (less than 5 per cent equity in the property). For these homeowners the incentive is to pay down debt before looking to borrow again.”

The truth is that US house prices have been rising of late – not much, but the downward trend seems to have reversed. Mr Wade put it down to QE. He said: “Whilst QE may not be stimulating stronger borrowing, it is helping to drive investors out of low yielding cash and bonds and into higher yielding assets such as property.”

Meanwhile, devastating though Hurricane Sandy was, at least America seems to be waking up to the reality that there is something odd going on with the climate. Who knows for sure whether the storm was down to climate change, but there has to be a chance. New York Mayor Michael Bloomberg reckons there is a connection, hence his Road to Damascus type of conversion to back Obama for the election.

But moving away from the US economy, while Sandy might have given a shock to climate change sceptics, the ‘Daily Mail’ recently ran a piece rubbishing the whole idea of manmade climate change. Apparently global temperatures have not risen since 1997. Except of course, the data was distorted by an El Nino at the beginning of the period in question and La Nina at the end of the period. Strip out the effects from the El Nino and La Nina from the data, and in fact global temperatures have very much been on an upwards trajectory since 1997. Anyway, talking about rubbish, here is a link to the ‘Daily Mail’ article, see: Global warming stopped 16 years ago, reveals Met Office report quietly released… and here is the chart to prove it

And here is a rebuttal from the Met office:

The ‘Mail’ makes the case for some kind of censorship of the press in pretty impressive fashion.

And finally, here is a piece by yours truly covering a rather shocking idea to put forward by Martin Wolf at the ‘FT’. He has suggested that the Bank of England needs to start buying foreign bonds so that sterling will tumble in value. See: Is it time the Bank of England started buying foreign debt?

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Barack Obama has told tales. So fed up is he with China and its trade policies that he has told teacher, or the World Trade Organisation.
He said: “Today, my administration is launching new action against China – this one against illegal subsidies that encourage companies to ship auto-parts manufacturing jobs overseas….Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It’s not right; it’s against the rules; and we will not let it stand.”

And then he stuck his tongue out.

But sitting next to him in class was a jeering Mitt Romney.

“President Obama has spent 43 months failing to confront China’s unfair trade practices,” said the man who hopes to be the next US president. He added: “I will not wait until the last months of my presidency to stand up to China, or do so only when votes are at stake. From Day One, I will pursue a comprehensive strategy to confront China’s unfair trade practices and ensure a level playing field where our businesses can compete and win.”

And he then stuck his tongue out at Obama.

China is used to it. When election season comes round, it knows that the boys and girls who want to live in the White House can gain lots of playground support through China bashing. And boasting about how they are going to do it.

It is just that the US is being a tad hypocritical; after all its own trade policies are not exactly the paragon of fairness.

A reaction against free trade remains one of the single biggest risks to the global economy. After all, the last Depression led to protectionism, followed by something else. What was that now? Oh yes, that’s right, World War 2.

For as long as it’s just talk, the anti-China rhetoric may not matter, but one of these days the US will have a president who actually carries out his pre-election promises. That will be a great day for democracy, and an awful day for world peace.