Showing posts with label US GDP. Show all posts
Showing posts with label US GDP. Show all posts

Friday 23 July 2010

Country GDP as US States

Fascinating stuff:  Carl Størmer points us to this amazing map of the United States. Each state's economic output is analogized to another country's GDP.
click for larger chart:State_nation_gdp_2
Notable omissions: U.K., Japan, Germany, China, 
Russia
, Italy.
I cannot vouch for the precision of this, but by eyeball, it looks about right.

http://bigpicture.typepad.com/comments/2007/01/countries_gdp_a.html

Saturday 5 December 2009

Is The U.S. Government Too Big To Fail?

Is The U.S. Government Too Big To Fail?

by Marv Dumon


When considering whether the U.S. government is too big to fail, it's helpful to look at historical precursors and ask yourself: Was the Roman Empire too big to fail? How about Genghis Khan and his Mongolian Empire, or Alexander the Great and the Macedonians? Can we find an everlasting civilization in the ancient Egyptians or the early Chinese? History not only teaches, but shows, that civilizations and species are only as fragile as one non-adaptive and careless generation.

Most people believe that incomprehensibly large systems are simply beyond demise, or are somehow invincible. Compared to other nation states and empires that once dotted the globe, America is a fairly young country, at a little over 200 years old. The U.S. boasts the world's biggest economy, which helps to fund and support its gargantuan bureaucracy. Massive amounts of liabilities on the government balance sheet, however, threaten significant cuts on important programs that are aimed at keeping the country strong.

Programs such as education, defense and homeland security, and technological research are reliant on adequate funding (along with effective implementation and execution) for the continuing long-term prosperity of the U.S. Significant fiscal pressures placed on the U.S. government may well reduce future funding of these critical programs - especially if belt tightening becomes the only option for fiscal responsibility. Lack of funding, along with lack of effectiveness of the funded programs, heightens the country's economic, geo-political and defense risks. (Learn more in our Credit Crisis Tutorial.)

Financial Metrics
The U.S. economy is the world's largest, with a gross domestic product (GDP) of approximately $14.5 trillion as of the end of 2008. This economy supports a massive governmental bureaucracy with a budget of $2.9 trillion for 2008. This budget represents annual expenditures spent on defense, homeland security, education, health services, infrastructure and other programs. The latter half of the 2000s saw severe economic pressures on ordinary citizens, the federal government, as well as state and local governments. (Mutual funds devoted to keeping roads, structures and communities safe can make you money, read Build Your Portfolio With Infrastructure Investments.)

A Decade of Missteps
As of the latter half of the decade ending 2010, the federal government and markets underwent the following:
The war on terror cost hundreds of billions of dollars in 2008, and was projected to rise in 2009. Since 2001, the total cost of the war has exceeded $2 trillion.

The years from 2000-2008 brought in the five biggest budget deficits in America's history. In 2008, the federal budget deficit exceeded $450 billion – an all-time high at the time. In 2009, the budget deficit is expected to exceed $700 billion. That deficit figure was highly unforeseeable (if not unimaginable) merely a decade earlier.

2008 saw the U.S. hit a 53-year high for national debt as a percentage of GDP. In the fourth quarter of 2008, the national debt clock in Times Square ran out of space, and had to eliminate the dollar sign in order to add another zero to the government's debt. As of October 2008, the national debt exceeded $10 trillion for the first time. Merely three months later, the national debt exceed $10.6 trillion, and at the time, some were expecting the national debt to increase by $1 trillion within the next year. (Learn more in The Treasury And The Federal Reserve.)

To facilitate the national debt, the federal government had to borrow more money, much of which came from foreign sources including the Middle East, Europe, China and others. Additional liabilities on the balance sheet means that the government has to set aside interest payments that could otherwise be spent on education, healthcare, infrastructure and military programs. Interest payments are essentially a zero sum expenditure with high opportunity costs. (Find out more about these debt obligations in Buy Treasuries Directly From The Fed and Where can I buy government bonds?)

U.S. taxpayers, with their periodic payroll checks, have been funding Social Security and Medicare in anticipation of benefits as they get older and retire. Congress had been spending hundreds of billions of dollars of trust fund money on various spending programs, as opposed to setting it aside for the taxpayers' retirement benefits. In 2008, Congress "borrowed" $674 billion in Social Security trust funds. Social Security and Medicare have been regarded as unfunded liabilities. That is because only a portion of the monies provided by taxpayers are actually set aside. They are also regarded as generational liabilities, which is when a current generation borrows money, and when they die, the bill is handed off to future generations – while the current generation benefits from the current spending. As the U.S. approaches the end of the 2000s, some economists and government accountants estimate that these unfunded liabilities would exceed $80 trillion. (For more, check out Introduction To Social Security.)

A U.S. and global economic recession not seen since World War II was placing financial stress on citizens, affecting the lower, middle, and upper classes. Wall Street's poorest performance since the Great Depression of the 1930s saw stock market wealth worth $6.9 trillion wiped out during 2008.

Over one million jobs were eliminated in the U.S. in 2008, which contributed to the unemployment rate approaching 8%. With U.S. per capita earnings of $48,000, one million layoffs translate to approximately $48 billion in eliminated payroll and earnings for working families. These statistics do not include under-employment figures in the country – it is estimated that one out of nine Americans are underemployed. As of 2007, approximately 12.5% of Americans lived below the poverty line. (From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone in Macroeconomic Analysis and Economic Indicators To Know.)

The housing collapse was expected to require government intervention and action on mortgages that require over $1 trillion. American homeowners saw over $1.9 trillion in home values wiped out in 2008. A frozen credit market forced the government to spend several hundred billion dollars through a stimulus package. Continued frozen credit facilities through 2009 made the economic downturn of 2008-2009 more protracted and more costly for the government.

Future Opportunities
The U.S. continues to be the most technologically advanced nation in the world, with the best research universities. New developments and advances can bring a wave of economic stimulus simultaneously ushering in a new age in commerce activity.

These areas could become the economic rallying cry to uplift the economy and refill government coffers:

•clean / alternative energy and fuel efficiency
•infrastructure building and repair
•nanotechnology
•robotics
•healthcare advances

Parting Thoughts
The ruins of ancient Rome, and numerous other civilizations centuries ago, serve as warning to national leaders against taking rash actions on behalf of their people or on behalf of future generations. Such gambles can spell disaster, and risk the very existence of the state. Fiscal irresponsibility may not bring about such a rapid decline as that of Napoleon's charge on Russia, or Germany's multi-front wars, but it can lead to a longer-term protracted decline similar to ancient Rome's nagging and continued multi-front wars and internal discord.

Fiscal decline is a slower process of reduction in flexibility, which forces leaders to make choices in proportional constriction. Affected citizens encounter reduction in economic wealth and quality of living. The philosophy of monetary and resource conservatism has endured over the millennia, from agricultural to hunter-gatherer societies, for a reason. There is a time when corrective measures in the form of resource conservatism, temperament and an urgency in common sense, are the clarion call of the times. (Learn about the series of events that triggered the Great Depression and other crashes in The Crash Of 1929 - Could It Happen Again? and our Market Crashes Tutorial.)

by Marv Dumon, (Contact Author | Biography)

Marv Dumon serves as a mergers and acquisitions advisor for a middle-market financial services firm specializing in industrial and energy companies. He maintains established relationships with more than 500 mid-market private equity firms. He also serves as a national business and finance columnist for Examiner.com. Dumon's background includes experience in consulting, finance and operations with several organizations including two S&P 500 companies. He received a Bachelor of Arts, a Bachelor of Business Administration and a Master of Accounting from the University of Texas at Austin.

http://www.investopedia.com/articles/economics/09/us-government-too-big-to-fail.asp

Saturday 1 August 2009

U.S. GDP released Friday was better than economists expected.




U.S. Economy Shrank Less Than Expected in Quarter

The government reading on U.S. gross domestic product released Friday was better than economists expected.

By CATHERINE RAMPELL and JACK HEALY
Published: July 31, 2009

The economy’s long, churning decline leveled off significantly from April through June, the government reported on Friday, supporting hopes that the economy would turn around in the second half of the year.

The American economy shrank at an annual pace of 1 percent in the second quarter, after contracting at an annual pace of 6.4 percent earlier this year. Government spending, bolstered by the first payouts from a $787 billion stimulus package, propped up the economy and accounted for 20 percent of the country’s output.

But consumer spending, which makes up about 70 percent of the overall economy, has continued to fall as fearful Americans hold onto their paychecks and whittle down their spending. This has led to concerns about what will happen once stimulus funds peter out.

“The most severe part of the decline is behind us,” said Joshua Shapiro, chief United States economist at MFR. “But it’s hard to say how sustainable whatever bounce we might see will be. It depends largely on whether the consumer has the genuine ability to spend, or if it’s all just government cheese being handed out.”

The increasing reliance on the government to fuel the economy — and the decreasing contributions from consumers — could put the Obama administration and other Democrats in a difficult position. Many economists say that even if the economy has bottomed, the recovery over the coming months or possibly years many be painfully slow.

“We’re going from recession to recovery, but at least early on, it’s not going to feel like one,” said the chief economist at Moody’s Economy.com, Mark Zandi. “For economists, this is a seminal part in the business cycle, but for most Americans, it won’t mean much.”

Bright spots have been seen in stock markets, corporate profits, some housing markets and the pace of job losses. But generally the job market tends to follow the rest of the economy, as employers wait to hire more workers until their businesses strengthen. This means the threat of sustained, double-digit employment in coming months remains.

As long as employers keep slashing jobs, and consumers continue to hurt, pressure may mount on government officials to speed up the recovery.

“At some point it becomes Obama’s economy, not Bush’s economy anymore,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group in Washington. “He made a big mistake in overselling the first stimulus, and then in celebrating all the ‘green shoots.’ That just opens the door for people to say, ‘Where are my green shoots? I still don’t have a job.’ ”

Unemployment climbed to 9.5 percent in June, leaving a total of 15 million people out of work and looking for jobs. Consumers, wary of losing their jobs or already unemployed, cut their spending by 1.2 percent in the second quarter and saved more than 5 percent of their disposable income, a stark turnaround from their spendthrift behavior during the housing boom.

“Concerns about a possible ‘double-dip’ recession probably would focus mainly on the consumer,” said Nigel Gault, chief United States economist at IHS Global Insight. “If households continue to try to bump up their savings rate, any growth we get in the overall economy could certainly relapse.”

Friday’s report on gross domestic product — a broad gauge of the country’s output — painted a bleaker picture of the recession than earlier estimates had.

The Commerce Department said the economy tumbled downward by 6.4 percent this winter as the country reeled from the shocks of the financial crisis, and it said the economy grew only 0.4 percent in all of 2008, compared to earlier assessments of 1.1 percent growth.

Now, even with jobs still vanishing and wages flat, many forecasters expect the downturn to level off. Economists say that businesses from small manufacturers to big automakers are poised to rebuild their depleted inventories, which fell by an annualized $141 billion in the second quarter. That restocking could spur economic growth later this year.


The Commerce Department’s quarterly assessment offered a tour through a dreary year. The economy withered during each of the last four quarters, its longest contraction since the 1940s. Businesses cut their investments and laid off millions of workers. Imports and exports tumbled.

The country’s gross domestic product fell to $14.15 trillion in the second quarter, from $14.5 trillion in the second quarter of 2008.

In interviews, small-business owners across the country say the ground is slowly reforming under their feet, and that business no longer seems to be careening downward. Indeed, business investment in structures like new factories and office buildings fell at a rate of 8.9 percent in the second quarter after declining by more than 40 percent in the previous three months. And investment in equipment and software, which fell 36 percent this winter, dropped a more modest 9 percent in the second quarter.

But many employers who have laid off employees or scaled back say they are not about to increase their spending or start hiring.

In Nashville, Jerry Robertson laid off one of his 15 employees, cut his budget for advertising and trade shows and moved into a smaller office space to cut costs at his company, which helps trucking companies manage their operations. His business is down about 10 percent from last year, and clients are still falling off his books.

“We do see it not declining as fast as it was, but we don’t see any growth,” Mr. Robertson said. “We’re still going down.”

http://www.nytimes.com/2009/08/01/business/economy/01econ.html?_r=1&hp