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There are no doubt many explanations for the trends in the chart. Here are a few off the top of my head.
1. Vehicles (and other energy using goods) are becoming more energy efficient. Real prosperity!
2. We waste less energy when energy prices are higher.
3. We use less energy when we're deep in debt.
4. We use less energy per capita when we build fewer things per capita (houses, infrastructure).
5. We use less energy when we outsource energy intensive work (manufacturing).
The last one on the list isn't really energy conservation. It simply means that some other country uses that energy instead of us.
Chinese Government: Report on the Work of the Government (2012)
We will keep labor-intensive exports stable, expand the export of high-tech and high-value-added products, and limit the export of goods whose production is energy intensive and highly polluting. We will work hard to promote trade in services and undertake more services outsourced by other countries.
Good luck on that one.
March 9, 2010
China's Pollution in Photos
The media loves a good story about how China has shed its old industrial ways and is leading the charge into a clean economy. We've even done it, with this glowing story about the Chinese solar sector. And it's probably all true. But China is a big country, and one where you can be leading the world in solar production in one place and still be pumping disgusting chemicals into their rivers somewhere else.
Bonus Thought
Note that the trend starting in November of 2011 is eerily similar to the one that started at the beginning of our last recession.
Are people hunkering down again?
Source Data:
EIA: U.S. Product Supplied of Crude Oil and Petroleum Products
St. Louis Fed: Moving 12-Month Total Vehicle Miles Traveled
16 comments:
Here is a treat from Dr. Lacy Hunt on the debt that is overwhelming everything.
A treat for the fans of Illusion of Prosperity that I formally dub the "Disillusioned".
Mr Slippery,
Dr. Lacy Hunt is definitely preaching from the illusion of prosperity pulpit.
It may seem completely counterintuitive to embrace government bonds when there is so much debt, but I have been and continue to be a believer in the theory.
1. The debt is choking growth.
2. Choking growth leads to declining real yields.
3. Declining real yields means locking in real yields before they fall further.
Citigroup Stock Chart
Citigroup Dividends
I think it is safe to say that Citigroup investors did not lock in a real yield.
I am basically betting that American real net worth per capita will struggle at least as much in the future as it has over the last 15 years. I just don't see how it can't.
Nurse: The patient is choking on a hot dog.
Evil Mad Scientist Doctor: Have him "choke down" two more hotdogs in order to clear the obstruction.
Nurse: It didn't work. He's gagging!
Evil Mad Scientist Doctor: Four more hotdogs!
Nurse: Experimental exponential hot dog treatment?
Evil Mad Scientist Doctor: Exactly!
Nurse: Still not working!
Evil Mad Scientist Doctor: INCREASE THE DOSAGE TO EIGHT HOTDOGS! MWUHAHAHA!
It may seem completely counterintuitive to embrace government bonds when there is so much debt, but I have been and continue to be a believer in the theory.
Yes, but here is the 15.770 trillion dollar question. Is US government debt ultimately good, or will it turn out to be Greece debt?
Can the US economy produce enough real wealth to pay off the debt in real terms? How about Japan, UK, Italy? I have no doubt that if G20 countries go bust, the US will be last, but being the last one to drown on the Titanic is little consolation.
"Can the US economy produce enough real wealth to pay off the debt in real terms?"
Put another way, "Can the US economy produce enough tax revenue to pay off the debt and principle in real terms?
I'm in my 40's and I can't remember another time in my life when it has been so difficult for college grads to find work and start their careers. The 18 to 34 demographic is hurting more than ever. And this is the source of future tax revenues.
Loan debt, not enough jobs to go around, settling for less job than anticipated simply to work, paying higher health care premiums every year, and working more hours for less pay. Are these folks going to provide the tax money for interest payments and then pony up the principle when the note comes due?
I wonder, especially when we are currently developing a generation of "walk-aways" from debt obligations.
I wonder, especially when we are currently developing a generation of "walk-aways" from debt obligations.
I hope the younger generation has the courage to repudiate odious debts that were foisted on them by their grandparents. It's only fair.
I am planning on getting about half of what the government promises for social security and maybe 60% of what my pension promises.
I wonder what effect a Treasury Secretary that doesn't pay his taxes has on IRS collections. I strongly suspect it has a negative effect.
1. The debt is choking growth.
Well, I wouldn't say that exactly.
There is no growth, the low-hanging fruit has been picked 1950-now.
But we don't need growth, not at all. How come a $15.5T economy isn't big enough for 240M people?
1995-2005 was a particularly productive time:
http://research.stlouisfed.org/fred2/graph/?g=7H6
but the profits were largely captured by the 1%.
We've got $65,000 of wealth production per person. Are we really *consuming* that much wealth per adult???
What the System is avoiding now is the ugly implications of the necessity to raise taxes -- double them probably.
That is a world that's going to be a lot different from now -- rents and housing prices would be halved, if my thesis holds.
And when you cut the income side, you've got to adjust the asset valuation similarly, too and when you cut the valuation side, you've got to look at the debt used to acquire the assets, and this debt is also somebody's assets.
So, a rational tax level -- on the order of Denmark's -- to pay for our nifty full-service government would wipe out the financial system as we know it too -- TBTF, all the pension funds, everything but people holding our sovereign debt.
Finland, Norway, France, Belgium, Sweden, Denmark are paying 44 - 49% of their GDP in taxes.
We're at 27%. Greece is at 33.5%. That 6.5% is a trillion dollars.
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP
Jeb Bush came out for the 1:10 solution -- 10c tax rise for every dollar in cuts.
Should be the other way around. There's a lot that can be cut, but nobody wants to make those cuts.
Here in Fresno, home of FreeRepublic, everyone was crying about possibly losing our ANG wing.
"WHEREAS, The closure of the 144th Fighter Wing would have a devastating impact on the economies of Fresno and Riverside, which already suffer from unemployment rates that are well above the national rate. The 144th Fighter Wing employs 1,046 airmen and women who have 1,642 dependents. The Air Force spends over $70 million dollars per year on the 144th Fighter Wing"
passed the state house unanimously.
nation of children.
Here is a treat from Dr. Lacy Hunt on the debt that is overwhelming everything.
that guy is largely full of it but I'll just pull out this from that interview regarding the future retirement burden:
"which would mean we would have to transfer 15% of our GDP from our working households to our retired households"
this is a simply failure to have an accurate model of how the economy works. Retirees are going to spend their pensions, and there will be millions of health sector jobs needed to care for all 80M+ of them.
It's going to be a great cycle of employment, if it can be funded.
Our economy is going to be a lot different ca 2025 when the baby boom has all hit 60.
Don't get me wrong, getting to there from here isn't going to be easy, and I doubt we actually can address what needs to be fixed (cough raise taxes back to pre-Reagan levels).
But a large part of the problem is all the BS in our discourse, and that interview was repeating a lot of it. The anti-tax crowd is playing with neutron bombs, they're winning the debate, and I don't plan on being anywhere near this place when everything blows up in consequence.
Mr Slippery,
Can the US economy produce enough real wealth to pay off the debt in real terms?
The debt will never be paid off. It was never intended to be paid off. It's not a bug. It's a feature.
All that really matters is what the interest on the debt does between now and the next major extinction event (or for me personally, my own death).
He who dies with the most toys *and* the most debt wins!
There's no sweeter victory than having $200k+ toys with $200k+ debt at the time of one's death. It's the ultimate free lunch!
I say this half seriously and half tongue-in-cheek.
Fritz_O,
I'm in my 40's and I can't remember another time in my life when it has been so difficult for college grads to find work and start their careers. The 18 to 34 demographic is hurting more than ever. And this is the source of future tax revenues.
I hear that. We're heading down the full FUBAR path.
Troy,
The anti-tax crowd is playing with neutron bombs, they're winning the debate, and I don't plan on being anywhere near this place when everything blows up in consequence.
Two words: Capital Flight
You don't plan on being around if taxes aren't raised. Others don't plan on being around unless taxes are lowered.
Eaton Is The Latest American Corporation To Ditch The US Because Of High Taxes
High Taxes In Illinois Pushing Out Businesses, Jobs, and Residents
It's basically competitive devaluation applied to taxation.
One country weakens their currency to improve exports. Many more countries try to make their currencies weaker in response.
One country lowers taxes to attract business. Many more countries try to lower taxes in response.
That's the theory anyway. I just don't think raising taxes is going to work. I think it will stick a fork in the economy with unintended consequences.
And yet, the alternative stinks too.
This is one more reason that I am a permabear. I see plenty of problems. I don't have solutions. I see plenty of unintended consequences in all proposed solutions.
Put another way, it's easier to be an art critic than an artist. Heck, I don't even have to have any talent. It is also easy to be an economic critic. It isn't hard to spot the big warm pile of... well, you know.
Two words: Capital Flight
Go. Take your money, here's a free suitcase.
We'll print more. Just leave your real-world wealth here for us to use.
PPACA is a symptom of our problem. It's just like Medicare Part-D, it subsidizes colossal inefficiency via appropriations without any actual funding behind it.
We've been doing that since the deficit turned around in 2001.
Higher taxes on the "job creators" isn't going to damage anything. Clawing back just half of their relative gains since 1980 would bring everything back into balance.
The problem is they own everything and everyone and have the message machine to successfully fight it.
So, it's the Crab pot syndrome for us instead.
Troy,
Go. Take your money, here's a free suitcase.
We'll print more. Just leave your real-world wealth here for us to use.
In the aftermath of your proposed currency crisis, do you think real American wages rise or will they fall to match real Chinese wages?
Serious question.
My actual point was the real wealth of this nation is in its existing productive capacity, not money per se.
The scare stories about companies reincorporating in Ireland are just part of the BS flim-flam shine job being done on the electorate.
The 1% and 0.1% already have moved what they want out of this country, just look at Romney's portfolio.
What's left here is the productive assets. They can't move that, though they can continue to shelter them, given the general idiocy of the electorate.
Without redistribution from the 1% this nation is going to simulate the last unhappy minutes of a Monopoly game.
Now, I think we all need to pay much higher taxes, but that alone isn't going to solve this deeper problem.
The apartments I was leasing in the early 1990s in LA has a tax basis of $40,000 per unit now. Rents are pushing $2000/mo. A week's income pays that burden, or lack thereof.
Such massive rents being sucked out of the middle quintiles to the predatory wealthy cannot continue.
The whole thing is going to blow up a la the LA riots, and that's why I don't want to be here.
What's left here is the productive assets. They can't move that...
Other than farmland, the real productive capacity of this country is mobile. It can and has been shipped overseas. We don't exactly have a "Made in USA" glut.
What remains isn't all that pretty. Treating our sick (health care)? Serving each other fast food? Selling each other foreign goods in our malls? Renting each other stuff in ever increasing numbers? None of that strikes me as path to long-term prosperity.
Such massive rents being sucked out of the middle quintiles to the predatory wealthy cannot continue.
I absolutely agree. Income inequality, trade deficits, debt... it all matters and none of has been getting better.
I don't have a problem with "income inequality". I just have a problem with the actual flows from poor to wealthy since these are asymmetric and unsustainable without making government an enabler of them (and that's what we've been doing).
The bottom line in any economy is Maslow's hierarchy.
Foremost is food I guess. Not a problem. We can keep ourselves in cheap cheeseburgers indefinitely, until global warming and/or an aquifer failure turns our breadbasket into the Sahara.
Next is shelter. That's the area of your latest post. Renters are getting increasingly screwed but even this isn't the biggest pole in the tent, rent-wise.
The biggie is medical care -- that's $8000/capita, ~$5000 of that is economic rents, and government is the Big Enabler and Protector here.
Our economy would look a lot better if the per-capita health care cost was closer to Canada's. It's in our power to make this happen, but it's a tough row to hoe politically so it's not going to happen.
My best bet as a 40+ yo is to effect reform in this area via travelocity.com.
Troy,
I don't have a problem with "income inequality". I just have a problem with the actual flows from poor to wealthy since these are asymmetric and unsustainable without making government an enabler of them (and that's what we've been doing).
That's pretty much my take on it too. There will always be income inequality. It is the growth that troubles me and the mechanism that has allowed it.
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