Replies to post #98756 on Biotech Values

[bladerunner1717]

Export-Import Bank has a more optimistic view of the economy






Fred Hochberg President, Export-Import Bank of the United States
Posted: July 14, 2010 08:53 AM



Why Robert Reich Is Wrong

In a July 9 post, former Labor Secretary Robert Reich warns of a coming trade war and casts a pessimistic light on President Obama's ability to meet the ambitious goals of the National Export Initiative.

Secretary Reich argues that the rising global middle class will not rise quickly enough to compensate for a slowdown in U.S. consumption wrought by the recession. This, he warns, could cause a protectionist backlash by nations unwilling to import more of our goods if we are buying less of theirs.

Reich's argument contradicts the message I've heard from leaders of the world's emerging economies who know that American innovation will help sustain their rapid infrastructure growth.

According to data released yesterday by the Department of Commerce, U.S. exports of goods and services increased by 17.7 percent during the first five months of 2010, compared to the same period last year. If this trend continues, the President will meet his goal of doubling exports in five years. The key: targeting export markets strategically.

At the Export-Import Bank, we're focused on countries that have weathered the global recession and want to grow in areas where U.S. companies have a comparative advantage.

Vietnam is building hundreds of miles of toll roads, and American companies make the world's best intelligent transportation systems. Indonesia and Brazil want to upgrade their rail systems, and we make the best welding equipment and locomotives. Economies in the Mideast, North Africa and Latin America need medical equipment, and we make the best medical devices and health care IT products

Commerce's May data illustrate the potential of an export strategy tailored to countries and sectors that suit our strengths. Over the last year, American exports have increased by 43 percent in Indonesia, 38 percent in Colombia, 37 percent in Brazil, 32 percent in Mexico and 23 percent in India.

In the current fiscal year, Ex-Im has authorized $17.4 billion in transactions to support American exporters. Our financing has supported an estimated 150,000 additional U.S. jobs over that span. This is already the second-largest year in our 76-year history--and it is only July.

While flat U.S. consumer demand creates a unique set of challenges, America's historic reliance on domestic markets puts us in a better position to boost our exports than most. Slightly more than 10 percent of our GDP is generated from exported goods and services. By contrast, exports represent nearly half of Germany's GDP, 30 percent of Great Britain's and 28 percent of China's.

Secretary Reich cites rising global unemployment as an impediment to U.S. export growth. Notably, though, employment has held steady in China, and the IMF predicts marginal gains by the end of 2011. Our trading relationship with Beijing is complicated, but growth opportunities for American exports exist and can be achieved through ongoing diplomacy and outreach.

With a focused strategy, America should be bullish about our export future.


Bladerunner


Dew,

Were you surprised to see that China's exports, as a percentage of GDP, is about the same as Britain's and only half that of Germany? It was a surprise to me.

[microcapfun]

Global Demographic Tailwind

>>The investing theme I call The Global Demographic Tailwind is alive and well regardless of what happens in the short run to any particular country’s economy.<< [Dew]

Watch 1.5 minutes of this video - from 6:30 to 8:00.

Pretty much the same theme. Great graphics too.

micro

[bladerunner1717]

Pooh on the pessimists



Setting Pessimists Straight
Brian S. Wesbury and Robert Stein, 08.17.10, 06:00 AM EDT
The recession has ended, growth has returned and signs point to an acceleration in growth.




Politics and economics don't mix well. When unemployment is high, no politician in their right mind would say “things are getting better”--even if they are. And when your party is out of power, no matter what the economy is doing, it's always good to point out some data, or forecast, or sector that is not doing well. As a result, there is no political constituency for economic optimism and this has created an awfully pessimistic environment.

Add to this political quagmire the largest pool of assets and asset managers ever to be deployed on the side of short-selling and what you get is at least a serious case of denial, or at most a willingness to ignore or obfuscate anything that might be positive about the economy.







Don't take this in the wrong way. The U.S. economy has its problems--we don't deny that. But, the recession has ended, growth has returned and signs point to an acceleration in the growth rate ahead.

For example, the pessimists are all talking about the fact that real GDP will be revised downwardly to an annualized growth rate of about 1% in the second quarter. What they don't tell you is that this low number was caused by a 35% surge in imports. That's right, consumers and businesses bought more from overseas (lots more), and since imports are a negative in the GDP accounts, it made the economy look worse. When we adjust for this, American households and businesses increased their spending at a 4% annual rate in the second quarter--over and above inflation. In the last 20 years this measure, which looks at just spending by domestic purchasers, increased at an average 2.8% annual rate. In other words, despite high unemployment and low consumer confidence, spending grew rapidly in the spring.

So, what about the future? First, consumers are in a better position to spend today than at the start of the year. The personal saving rate is now at 6.4%. Excluding spikes due to special temporary government transfers, this is the highest level since 1992. Meanwhile, due to longer hours and higher pay per hour, private sector earnings are rising. So far this year, real (inflation-adjusted) cash wages are up at a 3.4% annual rate.

Second, business balance sheets are chock full of cash, earning essentially zero return, that can and will be put to work enhancing productivity.


Although some analysts bemoan lingering excess capacity, they need to look more closely at the data. In the past year the real economy has grown 3%. During that time, the utilization of industrial capacity has climbed from 68% to 74%. That climb, in part, is due to falling capacity as the capital stock depreciates. One more year of 3% growth, and capacity use could be at 80%, which is higher than the average in the past 30 years.

Forward-looking companies can see this already and have already started investing, which is why investment in equipment and software is up at more than a 20% annual rate so far this year.

Third, home building remains at such unsustainably low levels that it can support both a rebound in construction and a continued rapid drawdown in excess inventories.




In the end, the underlying forces of economic growth have turned the corner. At the same time, the Fed is accommodative and unlikely to change its stance. These two factors alone will prove the pessimists wrong.

Finally, the political winds are howling toward a divided government. The odds of putting off a tax hike in 2011, and possibly reversing health care legislation cannot be ruled out. Add this to the mix, and the future could get a sharp boost to the upside that makes short-sellers very uncomfortable.



Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly columnfor Forbes. Wesbury is the author of It's Not As Bad As You Think: Why Capitalism Trumps Fear and the Economy Will Thrive.


Bladerunner