October 27, 2011, 12:53 pm
Let’s begin with the costs. In 2010, the United States spent $2.6 trillion on health care, over $8,000 per American. This is such an enormous amount of money, it’s difficult to grasp.
Consider this: If we stacked single dollar bills on top of one another, $2.6 trillion would reach more than 170,000 miles — nearly three-quarters of the way to the moon. Or, compare our spending to that of other countries. France has the fifth largest economy in the world, with a gross domestic product of nearly $2.6 trillion. The United States spends on health care alone what the 65 million people in France spend on everything: education, defense, the environment, scientific research, vacations, food, housing, cars, clothes and health care. In other words, our health care spending is the fifth largest economy in the world.
Or compare it to the second largest economy in the world, China. China’s G.D.P. is $5.9 trillion (compared to America’s $14.6 trillion). So the United States, with a population a quarter of the size of China’s, spends just on health care slightly less than half of what China spends on everything.
It is not just how much the United States spends on health care that is important, it is also how fast that amount is growing. For more than 30 years, health care costs have been growing 2 percent faster than the general economy
October 28, 2011
The Federal Reserve has done more to discredit capitalism than Karl Marx himself could have done. Yet it has never really represented a true capitalist system (especially in the decades after 1965) since it places no distinction on how it moves money throughout the system. Instead, the modern central banking system blindly creates money from nothing and then spends valuable time and effort trying to force it to circulate in any and all ways, just as long as it circulates. A “clean” capitalist system, rather, does make the conscious distinction of money from productive enterprise, valuing productive capabilities as the true standard of wealth. All the rest is just paper.
October 24, 2011 Penny Wise and Euro Foolish
John P. Hussman, Ph.D.
Among the effects of the recent and now renewed credit strains in the global economy is that investors have lost touch with relative magnitudes. For example, a billion dollars effectively represents about $3.20 for every adult and child in the U.S., while a trillion dollars represents about $3,200 dollars per person. From our standpoint, among the most important research coordination that government provides comes from the National Institutes of Health (NIH), which funds basic medical research in cancer, diabetes, multiple sclerosis, Alzheimer’s, autism, and other conditions, and where the total annual budget is about $31 billion annually (roughly $100 per American). Add in just over $7 billion in research through the National Science Foundation, and about $120 per citizen a year is spent by the government on essential medical and non-military scientific research through these agencies.
The most depressing display of math-illiteracy by investors last week was the excitement over a report suggesting that France and Germany had agreed to a 2 trillion euro bailout package for Europe, which triggered a “risk-on” tone for the rest of the week, even after the report was retracted as inaccurate. It was almost beyond belief that investors took that report seriously, but people have become so tolerant of unbelievably large figures that virtually any bailout number can now be tossed out without triggering the least bit of scrutiny. Notably, 2 trillion euros is more than the GDP of France, and is half the GDP of Germany and France combined. Moreover, Europe has just gone through a tooth-pulling process just to approve 440 billion euros for the European Financial Stability Fund (EFSF) from all EU members combined.
By Pankaj Ghemawat Oct 19, 2011 7:00 PM CT
In fact, data indicate that most people consistently overestimate current levels of cross-border integration and similarly underestimate the impact that distances and differences still have in keeping countries apart. Immigration, for example, is a contentious issue on multiple continents. Yet only 3 percent of the world’s people actually live outside the country in which they were born, and only 2 percent of university students study outside their homelands.
What about the much-vaunted flow of information throughout our hyperconnected world? Only 2 percent of telephone calls are international, and less than 18 percent of Internet traffic crosses national borders. Based on a popularity survey of online news sites in 30 countries, most users get all but a tiny portion — roughly 5 percent — of their news from domestic sources. According to the Pew Research Center, only 20 percent of U.S. news coverage across all types of media focuses on international issues, and almost half of that concerns the U.S.’s own foreign affairs.
Exports provide the most visible face of globalization, yet even they comprise a smaller proportion of the economy than many believe, accounting — without double counting products that cross a border multiple times — for about 20 percent of world gross domestic product.
Finally, consider capital, which is presumed to respect no boundaries. Foreign direct investment makes up only 9 percent of all fixed investment globally. Roughly 15 percent to 20 percent of venture capital is deployed outside the investing fund’s home country, and equity investors have only 20 percent of their stock holdings abroad.
No matter how you slice the numbers, the bulk of the flow of goods and services is domestic, not international, and will remain so for the foreseeable future. Even the international flows that do take place are constrained geographically. Not only are international migration, telephone calls, trade and direct investment small in comparison with domestic counterparts, but more than 50 percent of international flows in these categories are contained within distinct continental regions.
In fact, if you double the distance between countries, trade between them falls by half. Similarly, otherwise identical countries trade 42 percent more if they share a common language, 47 percent more if they are part of a common trading block, 114 percent more if they share a common currency and 188 percent more if one colonized the other at some point in history.
Public sector workers were significantly more likely than their private-sector counterparts to get hurt or sick on the job last year, according to a new report.
By James Pethokoukis
October 18, 2011, 12:55 pm
I win drinks in bars sometimes by betting on the answers to two questions. First, what nation in the world “lost” the most jobs between 1990 and 2005? Second, what nation in the world leads in the value of manufacturing products?
The answers are the U.S. and China, but not in that order. China lost by far the most manufacturing jobs between 1990 and 2005, and the U.S. still leads the next largest manufacturing economy by a full 25 percent.
Economy October 14, 2011, 9:48 PM EDT
To paraphrase Mark Twain, the demise of U.S. manufacturing has been greatly exaggerated. The country remains a global manufacturing powerhouse, accounting for one-fifth of the world’s manufacturing output in real terms. U.S. manufacturers exported $1.3 trillion in goods in 2010–a sum about equal to the size of Australia’s economy. If current trends through August hold, 2011 will be an even better year.
The problem is that all this activity doesn’t create as many jobs as it used to. Far from it: American manufacturers have been producing much more with many fewer workers. U.S. manufacturing output has grown by 2.5 times since 1970, even as employment shrank by 30 percent…..
The lure of cheap labor persuaded many U.S. companies to move production offshore. Now managers have to take into consideration rising labor costs in many key emerging markets. For instance, average annual wage gains in Brazil from 2003 to 2008 were 21 percent, according to Simchi-Levi. The comparable figures for Malaysia and Mexico were 8 percent and 5 percent, respectively Most important, China’s wage rates have been growing at a 15 percent to 20 percent yearly clip. In 2010, China’s average productivity-adjusted production wage rate in U.S. dollars was $7 an hour, 31 percent of the U.S. average manufacturing wage, according to Boston Consulting Group. That’s up from $3.80 an hour, or 23 percent of U.S. manufacturing wages, in 2000. BCG expects the wage gap to narrow to 43 percent by 2015. The bottom line: “All of a sudden, the costs in the U.S. don’t look as high,” says Harold L. Sirkin, senior partner at BCG.
What’s melting these copper prices?
Contracting growth outlooks around the globe — and in particular the growing concerns over a potential hard landing for China — appear the most easily identifiable conductors of the metal’s sudden weakness. But that’s far from the whole story. In addition, persistent debt distress in European markets has fomented a noteworthy advance for the U.S. dollar index. In fact, as my colleague Sean Williams points out, the dollar has outperformed even silver year-to-date on the strength of its recent rally.
Given that powerful one-two punch, copper is obviously not crashing by itself. Rather, the full suite of industrial raw materials — including steelmaking components iron ore and metallurgical coal — have suffered in tandem. So after a decade of extraordinary price gains for copper and other key commodities, is this the end of the line for the broader commodities bull market? According to this Fool, certainly not! As was the case in 2008, when a far deeper correction blasted the sector and buried related equities miles below any rational notion of fair value, I maintain this latest event will likewise produce merely a volatile chapter within the long-term secular bull market for commodities … rather than a lasting reversal of the trend. That’s not to say the current correction could not carve deeper still, since expectations for industrial demand around the world clearly remain fluid.