PDX Dad

North Korea, Nukes, and the US Economy

2013-04-09T11:04:00.002-07:00

What's easier to cripple: the US military, or the US economy?

I'm sure everyone has heard about the latest round of tough guy rhetoric out of North Korea. And like many, I'm not too worried about nuclear capable missiles. Yes, they've moved two mid-range missiles to their coast for "testing" purposes, but they haven't proven the ability to actually hit anything. Remember, the Pacific Ocean is large. North Korea can certainly do serious damage to Seoul with its conventional artillery. There would certainly be some regional economic impact between South Korea, Japan, and maybe even China with stability questions.

No, I don't see anything so direct from North Korea that would allow the United States and South Korea to automatically retaliate.

Sailing the nuclear seas...

Instead, I see the possibility of Kim Jong-Un sending a nuclear device in an ocean container through China and to the United States, where 90% of all imports originate. Specifically, to Long Beach where over half of U.S. imports discharge. The volume per day is incredible (over 6 million containers in 2012; or 17,000 per day).

Long Beach operations are 24 hours a day. A few years ago, they were forced to implement a fee on any container handled during normal business hours, as an incentive to use the new night-time operations. Now, both the daytime and nighttime operations of the Port of Long Beach are at full capacity.

Any disruption at that port would cause the US economy to come grinding to a halt. US imports were basically backlogged for a year after the ILWU struck for a couple months in 2001. Docking and loading schedules are often down to the hour, and there's much, much more to economic logistics than just loading and unloading an ocean container. Warehousing, border protection, trucking, rail hubs, and various other necessary support functions can be found at our nation's ports.

All of these would be seriously affected with a small or dirty nuclear blast.

And how easy would it be to smuggle one in, and set a timer for detonation? Not very difficult. Shipping manifests can be altered, bribes are not unheard of in China, and out of a population of 1.8 billion people there are sure to be some anti-American reactionaries.

In the United States? Authorities took the "all cargo to be inspected" mandate off the table late 2012, and only about 4-5% of ocean cargo is inspected. Add the effects of the budget sequestration, and you'll see more border patrol cut at the ports and siphoned off to the southern border to protect against "illegals."

I'm sorry, but the threat of an "illegal" taking sub-minimum wage jobs away from unwilling Americans pales in comparison to our entire economy coming to a halt because we couldn't inspect enough ocean containers.Collapse this post

Gold Standard Fixed Exchange Rate Possible Balance of Payment Disaster

2013-01-18T13:46:00.000-07:00

The fixed exchange rate for gold is one of the attractive qualities that a new gold standard holds for those like Ron Paul and his followers. It's the simplicity that makes their argument. It's the same with a flat tax. If it's even for everyone, then it's equal and non-discriminatory.

But, just like the flat tax is highly regressive to poor citizens, using a fixed exchange rate is highly regressive for those countries that import more than they export.

Galina Hale has an excellent primer on balance of payments: what it is, how they get out of whack, and the effects of a trade imbalance. From the opening paragraphs:

A balance of payments crisis typically arises when a country can’t finance its foreign transactions. A country’s balance of payments can be separated into two main parts: the current account, which reflects the trade balance in goods and services; and the financial account, which reflects the balance on net international financial transactions. In turn, the financial account can be broken down into, one, the balance on international private capital flows; and, two, changes in official holdings of foreign reserve assets, such as gold, foreign currency, and foreign sovereign debt.

Three things are noteworthy about current account deficits. First, they occur when a country’s imports exceed its exports. Second, they indicate that a country’s consumption and investment exceed its production. In such a situation, a significant share of payments for purchases goes to foreigners, meaning that aggregate savings are below aggregate investment. Third, because a country running a current account deficit consumes more than it produces, it is forced to borrow. In effect, the country is promising to pay for extra consumption today by consuming less than it produces some time in the future.

So, instead of a "basket of goods" that is typically used to calculate changes in currency and allows for adjustable exchange rates, let's tie currency to a fixed asset such as gold and assign it a fixed exchange rate (say, USD35.00 per troy ounce). This would quickly cause a trade imbalance for any two countries that consume and produce at differing levels.

This is what caused Germany's hyperinflation of the 1920s. Germany was forced to pay restitution to their enemies at the end of WWI. Unfortunately, that restitution had to be in the form of gold. Once Germany's gold ran out, there was nothing for them to exchange. Prices shot up, the value of the Deutsche Mark dropped, and people were using wheelbarrels full of worthless paper money to buy a loaf of bread.

And gold standard-bearers are worried about hyperinflation caused by currency exchanges?

Galina Hale uses the current currency situation in the Euro-zone to highlight her point. The Euro is at a fixed exchange rate between Euro-zone countries:

The 1999 introduction of the euro set the stage for current account imbalances in some euro-area countries. A common currency reduced trade costs, thereby boosting overall trade volume. At the same time, labor costs rose in the periphery relative to core countries, especially Germany. As Figure 2 shows [below], this produced surpluses in Germany and widened current account deficits in Greece, Italy, Ireland, Portugal, and Spain (GIIPS), especially Spain.

Prior to 1999, Germany and other Western European countries poured their own currencies into GIIPS, which helped shore up their trade imbalances. Notice, though, after 1999, how the trade surplus of Germany tracks the trade deficit of GIIPS?

Switching to a fixed exchange rate gold standard, coupled with our current trade deficit and already weak US Dollar, would cause the same type of currency crisis and devaluation that we're seeing in the Mediterranean now.

Do Demographics Affect the Debt?

2013-01-18T10:43:00.002-07:00

Dr. Ed Yardeni discusses the changes in demographics with regards to marital status, and how that might help interpret our considerations of the national debt.

As you can see from the below chart, single Americans are catching up with their married counterparts. It's Dr. Yardeni's conjecture that the rise in single adults is driving our economic expectations. Basically, married couples have kids so are more concerned with long-term consequences of the debt; single adults are selfish and look to immediate gratification.

That's apparently why Barrack Obama was re-elected -- for all the free goodies (and no, I don't buy that line of reasoning).

I'm curious to your thoughts. Is the shifting demographic causing a change in social and economic expectations? Or, do you think changes in our social and economic expectations are shifting the demographics?

Euro versus United States Employment Changes

2013-01-18T09:56:00.000-07:00

Antonio Fatas takes exception with the Wall Street Journal and its constant Eurozone fear mongering (subscription link). There's a valid argument to be made against the Eurozone's austerity measures, and their lack of job opportunities for younger adults. However, a typical WSJ Euro article will talk about, per Fatas:

A bloated welfare state, high taxes, heavily-regulated labor markets have led to a disappointing economic performance. The predictions are generally dire and after reading the article it seems that the only remaining question is how long the European countries and the Euro project will survive.

One of the most debated structural problem in the United States is "job creation." With that topic comes a whole host of economic theory: lower taxes, increased government spending, outsourcing consequences, insourcing benefits, bailouts, etc.

And one of the more constant "truths" in American economic debate is that the US has survived the Great Recession with better job growth than the anemic Europeans.

But, is that really so? Fatas looks at the US and Euro's employment to population growth rates starting at 1999, which is when the EU formed. Here's the comparison graph:

Although the absolute numbers of employment participation favors the Americans (because of greater youth and female employment), the growth of participation favors the Europeans. Even during the Great Recession starting in 2008, the slopes (or, changes in rates) is better for the Europeans than the Americans.

Is there room for criticism of Europe's economic recovery? Absolutely. Does the Wall Street Journal need to pick better examples?

Absolutely.

Gold Investments and Behavioral Expectations

2013-01-18T08:13:00.002-07:00

Noah Smith has an interesting blog post up about gold, how it tracks relative to stocks, and some common behavioral responses from goldbugs.

Two major factors seemed to pick up the goldbugs' interests again: the unspeculated rise of gold prices relative to silver prices, and the vocal resurgence of "gold standard" rhetoric by American officials. One just needs to look at the historical constraints of the gold standard (or, Mercantilism, if you're old school). It stifled growth during the 16th-19th centuries, it was a direct cause of WWII, and it's simply an outdated mode of capital investment and global finance in the 21st century.

I'm a firm believer in diversified portfolios, which includes non-stock items like precious metals. However, I don't believe that gold is the end-all-be-all for commodity investing or for protection against dollar depreciation. Silver is tracking lower than gold, which has historically tracked in lock-step with its sister commodity.

As far as a monetary store, gold is all about tradition. Inherent value is much lower now compared with 50-100-500 years ago. And tradition is simply about behavior, and the slow evolution in changing that behavior.

Noah Smith sums it up with an update:

Zero Hedge is probably just "talking their book". They own a bunch of gold, so right up until the point they're ready to dump it, they'll say "Buy, buy, buy!" Then they dump it, then they start yelling "Sell, sell, sell!" If it works, it's the old pump-and-dump scam, which is illegal when you do it to a stock, but perfectly legal to do when it's a whole asset class, like gold. Of course, Zero Hedge probably doesn't have a lot of ability to move gold prices, but why not try? In the meantime, they make money selling ads for their website. There's really no downside for them.

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Noahpinion - Gold, gold, GOLD!!!
On November 11, 2011, Zero Hedge ran a post from a site called GoldCore. The title was: "Gold Over EUR 1,300 - On Way to ‘Infinity’ on Eurozone Contagion?" Here is what it said:

China & Japan Economic Conflict Continues

2013-01-15T11:22:00.000-07:00

Via Thomson Reuters: Ian Bremmer, Eurasia Group president, says China jumping over Japan as a global economic power stoked tensions between the nations, which now “hate each other.” Growing nationalism in each country and Japan’s position as a key U.S. ally make the situation one of the biggest global financial risks of 2013.

Luxury Goods in China to See Price Increases

2013-01-15T09:13:00.002-07:00

Luxury goods are seeing significant price increases in China. The reasoning given by Chanel China is a pretty straightforward one based on restrictions of trade. Generally, that's good, especially for the progressives who believe that overseas workers should be paid a living wage (although I'm a firm believer in more incremental wage increases to stave off inflationary pressures of a new "bourgeois class").

"The price adjustment this time is based on regular checks of our products," a Chanel China spokesman said. "It is also a result of rising labor costs, raw materials and operating costs combined with exchange rate fluctuations."

The biggest reason for the price increases, though, is simply because luxury goods manufacturers can. The demand is still high, the social norms and pressures are changing, and companies are looking for better markets.

The fact that China is also a market, and not just a production country, means some interesting logistical shifts in manufacturing and import/export over the next decade.

Luxury Goods Prices Rising in the (Chinese) Mainland

Shoppers who think the prices of luxury goods in the Chinese mainland market are already too high should prepare themselves for a shock.

Sellers of many luxury brands are jacking up the prices of...

Happy New Year 2013!

2013-01-02T09:44:00.000-07:00

First post of 2013... Happy New Year, everyone.

My wife insists that I try to stay positive; I can have quite the realistic outlook on life. So, here are my (hopefully) positive thoughts for the coming year.

If taxes on the 2% were to increase, I would expect to see more capital freed up for investment. Sure, there will be some who move their money or investments overseas. However, those will be on the margin. Obviously there will be higher rates of return in other places with higher rates, but I anticipate most freed up capital will remain in the US.

And on the heels of higher business investments, expect the unemployment rate to drop. Remember those 12 million jobs that Romney promised? Those were going to happen anyway. As I've mentioned before, look for more "insourcing" in the US, especially in the Southern states.

Hyperinflation is just hyperbole. Expect inflation to remain low, even with a renewed push for Quantitative Easing.

If anyone else has some positive predictions for 2013, I'd love to hear them (especially from my international Plussers).

On a personal front, I'm looking forward to the new year. I'm finally at a good company, my wife's photography is taking off, and the kids have some good opportunities ahead of them.

Now, if the positives can just outweigh the negatives this time around...

No Need for Newt - Gas Below $4 Per Gallon

2012-12-18T09:58:00.000-07:00

WSJ - All 50 states have gas below $4 per gallon.

I guess we didn't need Newt Gingrich afterall.

Look, it's all about the supply. Sure, individual stations can jack up the prices to whatever they want. That's mostly due to location, location, location.

But the seasonal stuff? That's because of the supply. Refineries stop producing gasoline at the end of spring, and begin production for heating oil for the Fall/Winter season.

Less supply = higher price.

Refineries are back to producing gasoline, because heating oil stocks are up. More supplies = lower prices.

Update: As of 12/25/2012, gas at my local Circle K is $2.85 per gallon for regular unleaded.

Is US Oil Consumption Declining?

2012-12-08T10:45:00.000-07:00

It's great that fuel efficiency in automobiles might continue to push oil consumption down. However, what we really need is to combat fuel efficiency of cargo haulers.

Container vessels continue to chew through massive amounts of oil, with price shocks passed on as bunker fuel surcharges. Airlines with their specialized fuel also pass on fuel surcharges during spikes in prices. Over the road haulers tend to eat any gasoline spike, with many single-family firms going out of business during the 2000-2001 consolidation.

Better fuel efficiency and renewable energy married with energy-craving cargo transportation is not just a good idea for consumers and the environment, it's a good idea for our economic security.

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Econbrowser: Will U.S. oil consumption continue to decline?»

Fuel efficiency of vehicles sold in the United States has been increasing rapidly over the last five years, meaning that the typical new car gets substantially more miles per gallon than older vehicle...

Prediction Time: Turmoil in France

2012-12-05T10:32:00.000-07:00

My prediction is that we'll see rioting in France within six months.

There have been, what, 16 mass shootings in the US this year alone? Something like 33 mass shootings in the past 20 years? And now we're hearing stories across the US of planned mass shootings being stopped.

One common denominator is that a majority of the shooters have been young males, 18-25. They all seem to have different motivators: mental illness, lost jobs, economic stagnation, religious issues. But, they've been mostly young men.

Western Europe has horrible unemployment rates for young men (and women). They are not able to get new jobs or advance, because of various labor laws (of which I don't necessarily criticize). Many Western European countries have racial and immigration problems; in the case of France, Northern African immigrants are often stuck in banlieues ghettos with crumbling infrastructure. I remember the banlieues riots in 1995 and 2005.

Look at Spain and Greece right now.

In the U.S., those with these types of problems take their anger out individually. It's easy to do, what with easy access to firearms.

The reason you don't see these "lone wolves" very often in Europe is because of the stricter gun control laws. Instead, enough resentment and anger builds up between a few people, then a neighborhood, then a community, and things get organized. Riots happen.

But, that's the thing. In the U.S., a mass shooting from anger or resentment just happens, then we have to react to it. At least with something as widespread as economic downturns or rising racial inequality, trends can be seen before something catastrophic happens.

People need to pay attention, though.

World Series Champions: San Francisco Giants!

2012-10-28T21:51:00.000-07:00

Congratulations, San Francisco Giants!

What an amazing season, what a dramatic post-season, and what a brilliant World Series! I don't think a fan could ask for anything more.

How Taxes Work

2012-10-28T13:30:00.002-07:00

Interesting graph on how taxes historically worked. I'd like to write something longer and with more information, but with my sickness coupled with the kids being pills, some quick notes will be it.

The graph shows how taxes and employment have historically worked. If you study intermediate macroeconomics, then you'd have learned about Okun's Law, growth rate models, and the such. Taxes do not play any role in establishing the normal rate of unemployment, nor does reducing taxes induce investment... there's just no correlation. But that's really ephemeral theory for the lay-person.

In actuality, 30+ years of Republican-led tax cuts and Democratic-led progressive tax increases bear fruit to this graph. When taxes were high - prior to Reagan, and during the Clinton administrations - capital investments were up. The incentive to re-invest in order to minimize tax liability was real. So was increased charitable giving.

What changed with taxes...

Once taxes were slashed in the 1980s, we saw the explosion of conspicuous consumption and massive savings by the rich. There was no need to re-invest or increase charitable giving if it didn't lower tax liability. Sad to say, but self-interest seems to fuel altruism.

BUT... and this is a big but... can this model be sustained in the 21st century? If taxes were increased on the highest earners in order to spur re-investment, would that be the same outcome that's been tracked for a few decades?

Unfortunately, there's a strong case for there not being an incentive.

Capital moves effortlessly now. Nothing ties capital to one country or location. With the push of a button, all of your money can be transferred to foreign investments, bank accounts, etc. Sure, there are tax issues with moving money overseas, but they seem to be dwarfed by the possible returns on investment and the tax haven savings.

I remember the Asian Tiger Crash of 1998 very well (I was an exporter to most of those countries). It was all about the quick entry and exit of capital into various Asian economies. Once investors got spooked about lowering ROI and government interventions (as well as some major investment crashes on the US East Coast), capital flowed out of Asia like water through a burst dam. It's just too easy to move money around now.

If there is no incentive to invest when taxes low, and no incentive to keep money in the US if taxes are high, then how do we generate more revenue? How do we incentivize the "job creators"?

I'm curious to your thoughts.

Economic History: Differing Approaches to the Infant Industries Argument

2012-05-10T21:29:00.001-07:00

Infant industry protection is a form of economic protectionism used by less developed countries (as well as developed countries with failing industries) for the purpose of establishing an industry typically outside the scope of a nation’s resources. African nations using public resources to establish automotive industries would be one such example. Free market and mainstream economists view these industries as a waste of resources when adequate trade partners are readily available.

Slums of South Africa.
Img Url: futuretimeline.net

Directly post-WWII, before the discovery of the new relationship between inflation and employment in the 1970s, so-called Third World nations eschewed the market capitalism of the Western First World and the central planning hegemony of the Soviet Second World. These countries looked towards the profit motive and industrialization of the capitalists, but knew they could not compete globally against such technologically advanced nations. National security played an additional role for validating infant industry industrialization, as Latin American nations did not want to be dependent on outside military technology. Although Alexander Hamilton first developed the idea in 1790, the Third World nations (now politically referred to as Less Developed Countries) took full advantage of the argument.

Additionally, LDCs and international aid organizations demanded more aid during the 1960s through today. The developed countries – including the U.S. – denied outright aid to less developed countries. The World Bank, derived from the original Europe-centric International Bank for Reconstruction and Development (IBRD), analyzed that aid tended to be project-focused and not program-focused. Funds for the IBRD were sporadic, and minimal funds were available for each proposed project. The Organization of the Petroleum Exporting Countries (OPEC) proved a formidable economic force for LDCs during this time. OPEC, flush with new petro-dollars, could not spend its surpluses fast enough to counter inflation. OPEC funneled billions of dollars into LDCs for their infant industries development.

If an industry is protected until economies of scale are developed, the supply curve should move down. Eventually, with proper planning and balance of payment, the new supply curve (S’_LDC) moves to the point of demand equilibrium.

Unfortunately, infant industry protection did not work for the LDCs as was hoped. Infant industry protection only works if the industry can develop comparative advantage over developed industries. Poor countries lacked infrastructure, skilled labor, and stable monetary systems. Job protection costs significantly outweigh wage retention, and the scopes of import substitution are typically too broad. When politics, rather than economics, determine production output, efficiency suffers. The failures of Latin America, sub-Sahara Africa, and much of South Asia reinforced the neoclassical economist’s belief that infant industry protection through import substitution made everyone worse off.

High performance Asian economies (HPAE) were the exception. Import substitution in Latin America and Africa proved one thing: the poor selling to the poor does not lead to economic growth. However, the protections put in place by the HPAEs allowed the domestic supply curve (S_LDC) to fall below the point of demand equilibrium.

The new domestic supply curve (S’_LDC) provides quantity for export, at lower prices that the ROW supply curve (S_ROW). HPAEs are able to export manufactured goods to capital-intensive countries, and positively affect their balance of payment. Japan began the process with automobiles and computers in the 1970s, China followed suite in the 1980s with exporting basic manufactured goods. South Korea, Indonesia, Singapore, and now Vietnam are all exporting their way out of poverty.

This is not to say that the “Asian Miracle” is solely dependant on export-oriented industrialization policies. The export-favoring geography of Southeast Asia is a strong determinant, as opposed to the many landlocked countries in sub-Sahara Africa. The high savings rate of many Southeast Asian nations are stark contrast to the lack of savings possibilities in Latin America; giving Asian nations more investment opportunities in high technology. Finally, enough failures in industrial development policy, specifically in South Korea and Indonesia merit questions on its effectiveness.

Maybe GDP Isn't Enough for the Global Economy

2012-04-27T22:12:00.000-07:00

News reports today have been slow buzzing about the modest 2.2% GDP growth rate for the first quarter of 2012. Analysts predicted a modest 2.5% GDP growth, but retailers looked to simply replenish used stock rather than ramp up increased production or investment. Stock markets paused, and political pundits gnashed teeth.

And then I read another story about how the economic recover, as slow as it's been, has primarily benefited American companies overseas. From an MSNBC report:

A Wall Street Journal analysis of 35 companies based in the United States that employ more than 50,000 people found that they collectively added 446,000 jobs between 2009 and 2011, around three quarters of which were overseas. During that period, 60 percent of their revenue growth came from overseas.

So we get a report about the first quarter Gross Domestic Product being lower than expectations, but then another report about the job growth by American companies overseas. This is where the disconnect comes in, and where I think the federal government (and World Bank) are dropping the ball on reporting.

At issues is the continued, singular, use of Gross Domestic Product (GDP) as an indicator of economic health and comparison across countries.

For those who do not follow business or economics closely, Gross Domestic Product is the production and revenue created within a specific country -- in this case, the United States. It's what's made within the borders of the country, regardless of nationality of the firm or consumer. So, for American reporting, our GDP is affected by Wal-Mart stores and Ford production plants in the United States. But, it is also affected by the revenues created by Deutsche Bank USA and the production revenues of Toyota plants in Mississippi. If a foreign company owns a production plant in the United States, hires foreign workers, and sends profits to their home country, that revenue is still counted towards American GDP.

However, any revenues generated by American companies operating overseas are not included on America's Gross Domestic Product. Coco-Cola plants in India, Nike sales offices in Indonesia, and Caterpillar's operations in England do not account for America's GDP.

Img Src: http://www.csr-asia.com

Instead, those numbers would be reported by a country's Gross National Product (GNP). This is the aggregate revenues generated by a country's citizens regardless of location. So, HP's operations in Germany would be counted in America's GNP, but not Toyota's production plant in Mississippi. AMD's operations in Taiwan would be reported on America's GNP, but not Deutsche Bank USA.

So how does our GNP compare to our GDP? Wouldn't that be a good indicator of how robust and healthy American business is compared for foreign business? Wouldn't that weed out the foreign influence towards our GDP and give us more accurate numbers on how well our policies were doing towards American business?

Yeah, we don't know our GNP.

That's because the U.S. Bureau of Economic Analysis (BEA) stopped using GNP around 1993, and switched to the more ubiquitous GDP used worldwide. We didn't have nearly the same level of multinational volume of trade and financial flow as we do now. GNP was often confused with GDP, and apparently it took too long to explain the differences (look at the verbiage of this post, for instance). We were more concerned about the resources being used within our own borders, not thinking that finance and jobs flow would become a global phenomenon in the next decade.

I think it's time to bring back a true measurement of GNP, considering the high percentage that multinational corporations play in our global economy. It's not going to be the end-all-be-all economic indicator. GDP certainly isn't, even when we account for purchase price parity.

The key for GNP would be as a means of comparison with GDP to help smooth out the foreign influence of our domestic economic policies.

Should We Really Fear China's Economy?

2012-04-27T14:34:00.001-07:00

China has been America's economic boogeyman for about a decade now. Before China's rise in international trade during the late 1990s, Americans feared Germany's reunification would create an economic powerhouse that would dominate Europe. Before Germany's reunification, Americans generally feared the Soviet Union. And before the Cold War, Americans feared Britain's economic might. It goes on and on, backwards in time; although I don't recall Americans ever fearing the French.

American's have always feared someone militarily and economically.

Part of that fear is generated due to massive real estate purchases, like with British and German holdings on the U.S. East Coast. Part of that fear is generated by job loss, such as with Japanese and now Chinese firms. Part of that is just straight political posturing and a need to increase the military-industrial complex, like with the Soviet Union.

Fear, rather than nuance, also makes better soundbites.

But, I've always been much more interested in learning about the Asian economies than fearing them. Their performance and recovery since the 1997 Asian Tiger Crisis (especially South Korea) has been spectacular. The Asian markets were much of my focus in international trade, and the High Performance Asian Economies are often a model for development economists.

So, I took some interest in today's Daily Chart from The Economist. Here, they show that South Korea is about to overtake Japan as far as their Gross Domestic Product. The chart below compares Japan, South Korea, Taiwan, Hong Kong, and Singapore. The unit of measure is each country's GDP per capita PPP, in constant international dollars. PPP, or purchasing power parity, refers to how much it would cost citizens of different countries to buy the same goods or services. Although Gross Domestic Product isn't the most accurate measurement of an individual citizen's worth, it really is the best economists have in comparing whole countries.

Wait. Something's missing...

China.

The Economist article prefacing the chart goes on to say:

It was the first Asian economy to industrialise, and the emerging Asian tigers—Hong Kong, Singapore, South Korea, Taiwan and later China—merely followed in its tracks. Now, however, Japan is steadily being overtaken. China’s economy is now bigger than Japan’s, but less noticed is the fact that Asia’s so-called newly industrialised economies are becoming richer than Japan.

So why wasn't China included on the chart? Surely, if China is such a powerhouse of an economy and constant threat to the world, it should be included. Maybe this is why...

Img Src: http://goo.gl/v3hmO

Ok, so maybe just a straight snapshot of China's GDP isn't quite clear enough. How about if we add China into the mix with the other countries that The Economist chose? These numbers were pulled from the World Bank Group and its World Economic Indicators section. (Note: Taiwan was absent from the World Bank database, I assume for political reasons, so I included the United States for additional comparison). Here are the countries GDP per capita PPP, in constant international dollars:

China is the blue line all the way down on the bottom of the chart.

That Chinese economy sure is scary, isn't it? Why not fear Singapore and Hong Kong, the two Asian economies with wealthier citizens, instead?

Foreign Direct Investment, Housing, and Investment Expectations

2012-04-18T21:36:00.003-07:00

China Daily reports that Foreign Direct Investment declined again for the fifth straight month, as of March. The total decrease, year-to-day from March is 6.1%. China's FDI inflow fluctuates between $140-$180 Billion annually.

Europe made up the biggest decrease in FDI spending to China, with a drop of 31% in the first quarter. Year-to-date investment is approximately USD5.6 Billion, or almost 3% of China's FDI. The United States, which invests approximately USD3.6 Billion, or almost 2.3% of China's FDI, actually saw their contribution increase by 10.1% in the first quarter. (Singapore tends to be China's largest FDI partner, at roughly 33% of funding)

A drop in FDI inflows to China is not that surprising, though.

Consider that Europe continues to be embroiled in their sovereign debt crisis, and the United States is slowly moving out of recession. Although, I was a little surprised at the volume of money flowing into China from Europe -- I really thought the contribution percentages would be reversed between Europe and the United States. European animosity towards Chinese manufacturers extends much further back than the recently vocal American anti-Sino sentiments.

Img Src: http://helenhwang.net

I imagine the low, single-digit contribution of American dollars to China's investment economy would be surprising to most Americans. We are bombarded with rhetoric of boatloads of cash being funneled overseas, when that's simply not the case.

"But, foreign countries don't invest in the United States!" is something I've heard before. And, that's simply not the case. The U.S. is the largest recipient of foreign direct investment; although the majority of our's comes from European countries.

What surprised me was the amount of FDI used for housing projects: 25%.

Why would a foreign firm want to invest in commercial property or housing or starts overseas? Anyone who has purchased or built a house probably can relate to the complexities of city, county, state, and federal regulations that go into properties. Plus, this type of investing is focused on the return to capital. Wouldn't manufacturing be a much safer bet than housing for recouping, or even profiting, from FDI? Consider, also, that China's housing bubble is already bursting, and it seem foreign investment in housing would be a potentially disastrous proposition.

Newly built villas in the Huaxi village of Jiangyin, Jiangsu province
Img Src: http://theglobeandmail.com

But then I looked up some numbers on India's FDI flows, and it appears housing takes up over 20%. France uses almost 14% of FDI on real estate. Vietnam, The Philippines, Thailand, and other ASEAN nations also seem to have high percentages of their FDI inflows go towards real estate and housing. Turkey, on the other hand, only used about 6% of FDI inflows on housing and commercial construction.

Should FDI be used for housing, construction, or commercial property development?

Consider, again, China's housing bubble bursting; Western European housing problems; American banks and their CDO problems; and all other manners in which construction can be large-scale economic drains. Also consider the possibility of sovereignty issues when dealing with foreign landed property (scams concerning Mexican beach housing comes to mind). Finally, consider the returns on investment in manufacturing, and the seeming slower turnaround for construction returns. Is FDI usage in construction really a wise choice in the long-run?

Greg Mankiw and Statistical Illusions

2012-04-17T13:43:00.003-07:00

Greg Mankiw, Professor of Economics at Harvard University, recently found himself in some mild controversy when over 70 students walked out of his Introduction to Economics class in solidarity with Occupy Wall Street. He is often viewed as a standard-bearer of neo-classical economics, and has recently endorsed Mitt Romney for the presidency. Last week he posted the following chart on his blog, entitled "Monitoring the So-Called Recovery":

That was it, as far as the blog post. He provided no explanation, no background information, and no additional analysis. What we are to assume from this chart is that President Obama has been ineffective in driving the economy recovery (hence, the "so-called recovery" of his title). I would admit this is a pretty damning graph... if that were the whole story.

So, what does the graph really represent?

It is not the employment rate, nor the actual employment numbers. It is not related to the unemployment figures we see in the news. This set of data is the Employment-to-Population Ratio. In other words, the percentage of citizens eligible to work who are actually working.

A citizen eligible to work is someone who is not institutionalized (jail, military, school, psychologically incapacitated) and not out of work due to disability. This is not the same thing as the Participation Rate, which is also based on the ratio of people who are actively looking for work. This participation rate, or lack thereof, is what makes the difference in our standard unemployment rate, and why it's only 8.2% instead of 40%.

It still looks like we haven't recovered though...

Like I said, this would be a damning chart indeed, but for one major problem: Mankiw is comparing our Employee-to-Population Ratio based on the highest participation ratio in the history of our modern economy. Sure, these numbers are correct; however, they do not show the entire situation. Mankiw's chart goes back to 2004; let's see what the chart looks like when we go all the way back to when these statistics were first started in 1948:

When republicans and neo-classical economists talk about the Golden Age of the American economy, they're referring to the post-WWII period of 1948-1969. According to the same source as Greg Mankiw (the Bureau of Labor Statistics, as presented by the St. Louis Federal Reserve), this Golden Age saw Employee-to-Population ratios fluctuate between 55% to 58%. Our current ratio since the end of the last recession is hovering around 58.5%, and has not dipped below the peak of the Golden Age. Remember, this was also the age of our highest amount of manufacturing, highest amount of exports, and our fastest economic growth until the dot.com boom.

Additionally, the spikes you see in the 1990's under the Clinton Administration were during times of "unprecedented" economic growth. Remember that phrase during the dot-com boom? Unprecedented growth. Unprecedented profits. Unprecedented employment numbers. We see the same spikes during the housing bubble of the second Bush Administration. Unprecedented.

Meaning, higher than normal.

I would love to hear/read Professor Mankiw's explanation on these numbers. My speculation is that we're seeing a return to a more normalized employment-population ratio. Think about what happened with the stock market during the dot.com boom. Stock prices soared due to no real economic reason other than speculation. The P/E ratios of high tech companies were out of whack, and the drastic reduction in stock prices (primarily in the tech sector) were viewed as a return to normalization. Possibly, as thousands of venture startups grew out of nothing in the 1990s, and new construction demand spiked almost overnight in the 2000s, employment demand increased to these unprecedented -- and in hindsight -- unsustainable levels.

Is Professor Greg Mankiw being disingenuous with his historical look at employee-population ratio based on political objectives? That's hard to say, especially since he provides no real information or explanation to his graph. What's not hard to say is that a little more historical perspective certainly shifts the meanings of his post.

Barter System Gains Popularity in Volos, Greece

2012-04-16T22:18:00.001-07:00

Greece has been hit hard by the financial crisis. The despair to is to the point where an elderly, retired pharmacist chose to take his own life in front of the parliament, sparking comparisons to the self-immolation of a young graduate which initiated the Arab Spring. Unemployment remains over 21%. Greece's parliament just voted on a second round of austerity measures.

Economic necessity is the mother of social invention.

Volos, a town in Greece, is experimenting with a new barter system. Rather than the typical direct exchange of goods, a secondary monetary equivalent is used. Goods and services are converted to TEM, which are also a 1-to-1 conversion of Euro worth. So, say a vendor wants to sell €50 worth of widgets. The vendor receives a receipt stating the value of his or her goods in TEM, then is able to purchase an equivalent worth of goods from other vendors. Here's a video from the BBC article:

Like I said, this is different than normal barter. With normal barter, someone trades a good directly for another good: a bag of wool for a bag of wheat (that's the textbook economic history example). The biggest disadvantage of this type of straight bartering is finding someone who actually wants what you're trying to trade, and that you want want what they're trading. When economies and productions were simple -- just grains, cloths, pottery, and animals -- this type of trade wasn't that difficult.

How do you trade bales of wool for an iPad, though?

Who would trade wool for an iPad? Maybe one person, out of a population of 300 million, but how do you find them easily? That's where money traditionally comes into play. Money allows you to sell your labor in whatever you do for a fixed amount of money, and that money can be used to buy the labor from someone or some company. But then, Greece has run into a money problem, hasn't it? And a pricing problem.

Future payments for this child's polio vaccines?
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Although I don't have all the details on the system, it seems like a simplified version of a Bill of Exchange. The buyer converts their bartered products to an appropriate amount of TEM, they receive a receipt, and the vendors trade on that receipt (I imagine there's some sort of endorsement as well).

That's why I think this type of barter -- setting up a secondary currency, called TEM -- is a pretty smart move by the citizens of Volos, Greece. Even the mayor of the city supports it, and sees it as a complement to the Euro. I mean, they're not going to be able to use TEM for large purchases or for investments; that's where the Euro will remain. However, if a Greek is able to minimize the amount of Euros he or she pays out for necessary goods such as food, clothes, and certain services, then that's more Euros available for paying bills and housing.

And, it's certainly not the same as Sue Lowden's "chickens for healthcare."

Alternative Energy for Transportation is a National Security Issue for America

2012-04-15T21:29:00.003-07:00

The interstate highway system of the United States was not developed because of commerce, or to allow easy access to different locations for American citizens. Sure, the highway program coincided with the massive increase in our car culture, and provided a means for the feasible developments of suburbs.

National security was the driving force (No pun intended. Well, yeah it was) for the development of our national highways and interstate system. President Eisenhower initiated the interstate program in 1956, because of his experience as Allied Commander in Europe during WWII; and Germany's use of the Autobahn to move troops and equipment.

The ability to move people and equipment quickly across the United States is a national security issue.

The concern for national defense is not just limited to military troops and equipment, but also private citizen movement and commercial goods. Specifically, commercial trucking takes great advantage of this system of interstate highways, and we consumers take great advantage of the benefits that trucking and short/local haulage provides. When trucking is delayed for whatever reason, shortages of consumables and non-durable goods quickly occur.

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Professor Alan McKinnon, Director of the Logistics Research Centre at Heriot-Watt University in Edinburgh, describes the effects of commercial transportation shortages determined from his recent research:

The conclusions of the UK study were far-reaching and profound. After only five days, the country would see retail stocks of most grocery products exhausted, almost all manufacturing closed down, all elective surgery in hospitals suspended, half the national car fleet without fuel, mail and parcel deliveries terminated and retail banking seriously disrupted by the collapse of the ‘cash logistics’ system. As the analysis made no allowance for panic buying, the reality would in all probability be far worse.

Over 70% of oil/petroleum use in the United States is for transportation purposes. Half of that is used for commercial trucking. The remaining transportation use of oil/petroleum is in motor cars (45%) and commercial airlines (5%). Oil and petroleum account for a third of U.S. energy consumption; however, it can have a significant impact on trucking with regards to prices, distances offered, and company viability.

Continued use of oil may cause severe economic disruption due to its pricing.

The U.S. saw significant changes in trucking and freight handling prices during the oil price spikes of the early 2000’s. Fuel surcharges spiked (the additional charges companies include specifically for changes in oil prices), which meant consumers had to pay even more for consumer goods. And remember, oil is not included on inflation measures; this point was often debated during these price spike times.

Some of the larger companies cut back on trucking services to more remote places, because the volumes needed to justify the longer hauls just wasn’t there. We’re seeing a replay of those distance issues with the possible curtailing of U.S. Postal Service routes into deeply rural areas. And then there were the massive layoffs as trucking company after trucking company either folded or were merged with larger competitors (less visible were the number of independent truckers who simply ended their businesses).

Professor McKinnon’s research also shows these pricing perils:

[I]ts profit margins are very tight. This leaves carriers’ finances vulnerable to cost increases, particularly of fuel, whose price is highly susceptible to global events, and which typically accounts for around a third of total haulage costs.

Additionally, the threat of disruption isn’t just towards American trucking and consumers. Also from Professor McKinnon's research:

In September 2000, steep increases in fuel prices provoked some UK hauliers and farmers into blockading oil refineries and blocking roads, causing a national crisis within three or four days. Since then strikes have seriously disrupted trucking operations in France, Spain and Portugal (June 2008), Australia (July 2008), India (January 2009), Greece (September 2010) and Shanghai (April 2011).

The search for alternative fuels is often seen as part of the “liberal agenda” to usurp capitalism and profit. As it stands now, pricing points for alternative fuels still underwhelm investors, and the efficiency per unit of output is still lower than fossil fuels. This is why government subsidies and research assistance is still needed. However, as we’re already having to procure oil from less efficient sources, the price of oil and petroleum will continue to rise to meet that marginally decreasing efficiency and return on investment.

Alternative fuels for trucking must be considered to ensure national security.

One certain outcome from the eventual rise in oil prices will be conflict. The United States is the largest consumer of oil, although we are not the only consumers. China is fast catching up, as is India. All western economies rely on oil for their industrialization; and developing countries (such as in Africa) are already ramping up their oil consumption as they increase industrialization. At some point someone will use military force to secure oil supplies.

This was part of Japan’s rationale for starting the Pacific War with America in 1941. Iraq invaded Kuwait in 1990 over claims of Kuwait stealing oil from Iraqi fields through slant drilling. Those against the second Bush administration claim oil rights as a driving force for the Second Gulf War.

More needs to be done to develop a line of alternative fuels that can be used on heavy trucks and haulage equipment. Electric bullet trains are a great start, but those only move product and people from one hub to another. Trucks are still needed to move smaller quantities of product from these hubs to distribution centers, stores, and individual consumers. The same holds true for ocean and air freight: trucks will always be needed to move smaller and more manageable quantities.

Anything that affects the price of haulage will also affect the availability of those goods. That, in turn affects the stability of the economy, which also concerns national security. If proponents want to make more headway with officials and industries still stuck on the “liberal agenda” view of alternative fuels, then they should develop this national security strategy.

India and Pakistan: Conflict Resolution and International Trade

2012-04-13T22:07:00.002-07:00

India and Pakistan continue to make quiet inroads to peace and, hopefully, a budding partnership.

Positive change in this relationship is one of the reasons why I support international trade so much. It’s not necessarily the cheap manufactured goods from Asia, although I do appreciate those. It’s not necessarily the logistics challenges in cross-country trade, although I do appreciate those as well. To a lesser extent, it’s not even the economic development of poor nations, although I greatly appreciate it when that happens.

For me, my biggest thrill comes from cross-cultural benefits. It’s the learning of different religions, the different foods and clothes, the different cultures and languages. It’s getting to know people greatly different from myself, yet realizing so much is the same. We all wish our children to have better lives; we all wish to pass down our collective knowledge; and for the most part we all wish to live in prosperous peace.

That, I believe, is what international trade does well.

Img Src: The Economist

Of course, some will argue the opposite: that trade homogenizes cultures; that the bad influences of one culture will inundate the other; that one’s social order will be usurped. However, even with sixty years of trade with America, the Japanese are still distinctly Japanese. Although there is McDonalds in France, no one can dispute French cuisine’s dominance. And, as far as I know, there hasn’t been any Sharia Law enacted in the United States or Europe.

This is why I hold out hope for Pakistan and India. Their leaders are meeting quietly and their respective powers may be minimal. However, it starts somewhere, and it’s often not forgotten when they do come together. The ties have been limited to a few attended cricket matches, and a couple dinners between leaders throughout the year; however, some signs of calm are there. Kashmir has been relatively quiet for over a year. India and Pakistan are concerned with the same terror suspects. And there’s the possibility of joint distrust with Americans (ok, that one isn’t necessarily positive from my perspective, but still, it’s something, right?).

Then there’s the possibility of linking the economies of India and Pakistan.

Recent opinions from The Economist mirror some of my own thoughts:

Pakistan’s dire economy (and a wobble in India’s) could prod efforts to lift wretchedly low bilateral trade. Called the “China option”, the idea is to emulate India’s workmanlike relations with its bigger neighbour, in which better economic relations (Indian trade with China is now worth $75 billion a year) increasingly trump unresolved political and border disputes. Pushing India-Pakistan trade up from $3 billion now to $15 billion in a few years’ time, once barriers are dismantled, would help. After that, Pakistan wants flows of tourists, traders and cricket players. India seeks a land route to Central Asia.

Don’t discount the power of international trade when it comes to conflict. We’ve already seen the evidence between these two countries before. Back in the late 1990s, Pakistan and India both conducted nuclear tests by detonating nuclear bombs. This led to a massive buildup between the two nations on their respective borders. The situation became severely contentious, and the risk of war grew exponentially. By 2001, both countries were conducting military drills and provocative maneuvers (with some reports of cross-border movements), and the threat of nuclear retaliation was bandied about more than once.

In rode the multinational corporations calvary.

India had just started their massive ramp-up of service industries catering to Western societies. Call centers, medical diagnostics, and light manufacturing all flooded into India at a record pace. Billions of American dollars (and European monies) were invested in India’s infrastructure and electronic frontier. The last thing these capitalists wanted was a nuclear war between these two. It would wipe out all that investment. At a glance, it certainly seems like a cynical way of addressing world crises, but hey, it worked. Enough multinational corporations put pressure on the Indian government, and they backed down their war rhetoric. Pakistan soon followed.

Sure, Kashmir was about to erupt in sectarian violence. Pakistan had to deal with its role in President George W. Bush’s “War on Terror.” India continued to be attacked by Islamic militants (as well as home-grown Hindu nationalists). These conflicts continued to last a decade.

But all-out war? We can partially thank international trade for averting it between two very bitter rivals. Hopefully, international trade can continue to bridge those gaps.

Statistical Ambiguity on Labor Market Growth

2012-04-13T14:18:00.001-07:00

The Economist has an article up detailing the economic changes of the top 50 metropolitan areas in the United States. The purpose of the article is to show how the effects of the housing bubble and manufacturing loss heavily contributed, and continues to contribute to slow job growth. Those metropolitan areas that were not the epicenters of housing bubbles, such as New York, were shown as the largest gainers of employment. However, those most affected by housing and durable goods manufacturing, such as Detroit, Las Vegas, and Los Angeles, were significant losers over the entire recession and recovery period to date.

However, as one commenter described, there are no units of measure on these statistics, which makes for poor comparison. Someone eventually figured out that the job gains/losses were in thousands of people. So, New York’s employment grew 118,000 from February 2011-February 2012; Houston’s employment grew 93,000 from the same period; Las Vegas showed statistically zero growth from the same period.

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Well, 118,000 people with new jobs is great, but...

The problem these figures show is that you can’t compare different population sizes. There’s no equalizing factor to provide proper comparisons. A city of 1,000,000 people may have increased employment by 100 people, but another city of only 1,000 people may have increased employment by “only” 99 people. According to the Economist article, the first city would be a higher gainer. A better measure would be percentage increases or decreases based on current population.

For example, the period of February 2011 through February 2012 shows New York as the highest gaining metropolitan area and Sacramento as the highest losing metropolitan area. However, New York saw an unusual increase in population growth, whereas California saw a stagnant population growth roughly during this same period. These differences in metrics are not taken into account in the statistical calculations, nor the analysis explanation. A different baseline, such as percent change per 1,000 people, might allow better comparisons of different sized metropolitan areas, with different growth rates, over different periods of time.

Taking current population into account is also key.

Now, don’t get me wrong, my own hypothesis is that the context of these numbers is generally correct, but they need more nuanced explanations that don’t just cover housing or durable goods. For example, the Sacramento figures are prefaced with the idea of California’s massive budget shortfalls. The Sun Belt areas of Arizona and Texas have the highest growth, but they also had extensive housing bubble growth at the start of the recession. Detriot was already a depressed economy before the housing bubble, and the extreme collapse in housing prices coupled with the loss of durable goods manufacturing was a triple-whammy that’s not fully captured by the statistics. Las Vegas was seeing a decline in gambling revenues before the start of the housing bubble, and the prurient policies being pushed nationally might exacerbate the recovery.

The Economist article should be redone with better statistical analysis, with metrics that smooth out the differences in population sizes and growth rates.

Since When is Quitting a Good Thing? When it Comes to the Overall Economic Recovery.

2012-04-12T15:27:00.001-07:00

Last week I posted why I thought the March job numbers were not as bad off as the media would have us believe. This involved the huge number of part-time jobs that were cut in relation to previous months, and March's percentage contribution to the year-to-date.

This week, I found another interesting tidbit from the Bureau of Labor Statistics' March numbers through The Oregon Economics Blog.

This blog post focused on the number of "quits" in relation to the number of "layoffs."

In their blog post, "Yeay for the Quitters!" we see that the number of "quits" has statistically exceeded the number of "layoffs" for an extended period of time during the economic recovery. Again, this is a significant bit of datum which points to the possible robustness of the economy, at least through the eyes of consumer and worker expectations.

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During a recession or long-term economic downturn, consumers hold onto their money. Financial institutions are viewed suspiciously, stocks (a relatively liquid form of money) drop, and people begin to lose jobs. As they hold onto their money, less is purchased and consumed in the economy. This, in turn, leads to more job loss, which, in turn, leads to more consumer thrift.

It's a downward spiral that can be quick to occur, and hard to get out.

As consumer confidence falls, and people begin to be laid off in mass numbers (2007-2009 come to mind), employees hold on to their jobs. Even if they have horrible working conditions. Even if they're working 70-80 hours a week. Even if the position is only part-time without benefits. Employee confidence drops as quickly as consumer confidence.

Who wants to quit a crappy job that pays something, and risk not finding a new job for months or years?

That's why the Bureau of Labor Statistics' numbers comparing job quits to job layoffs are so promising. People are more confident they can find a new job sooner rather than later, and are willing to leave bad jobs for better ones. And since so much of our economy is driven by expectations (inflation expectations, employment expectations, wage expectations, etc), this employment confidence will have a ripple effect in the whole economy.

As people get better jobs with better pay and better benefits (an assumption, I know), they are able to afford more consumables and become less thrifty. Consumer confidence will grow, which means demand for products and services will grow. This increased demand should drive companies to invest more in employment (again, an assumption, because we automate so much in the U.S.), which means more jobs. More jobs equal more consumption, and the cycle repeats just the opposite of the recessionary downward spiral.

But, what about the actual jobs? Won't they just be part-time jobs?

Ah, but see, part-time jobs are tanking. Remember, March 2012 saw 400,000 part-time jobs lost at the same time full-time employment grew and employment confidence increased. This again points to a more robust recovery that's not quite given the due it deserves.

CNBC Anchor Maria Bartiromo Conflates GOP Talking Points Over Budget Proposals

2012-04-12T11:22:00.002-07:00

Normally, I enjoy watching +Maria Bartiromo, however, I have to agree with+Talking Points Memo that her interview with President Obama’s top economic adviser Gene Sperling was poor journalism and seemed like a political hit job. It was pretty much a rehash of false Republican talking points and tried to paint Democrats as pushing away from Obama's budget proposal:

Bartiromo initially elaborated on a false premise, and her subsequent line of questioning treated a GOP political stunt as if it was standard operating procedure on Capitol Hill.

“How tough has it been operating without a budget?” Bartiromo asked. “This administration has not had a budget in 3,000 days. Why is it that the president puts forth the budget and not even one Democrat bought into it? Was it so reckless in terms of spending that your party actually couldn’t even buy into it?”

The White House proposes a "budget", but it is a list of suggestions. Congress actually hammers out the budget in legislative terms which is what gets voted on. This creation of the actual legislative budget comes from the House of Representatives, which is controlled by the Tea Party Republicans. The budgets for the past 3 years have been Republican budgets, that the Democratic party obviously does not agree with. Technically, Senate Democrats are not passing the Republican Budgets, but it has nothing to do with President Obama's budget proposals.

Separately, for the last two years Republicans in Congress have for political reasons converted the White House budget into legislative language and put it to a vote. Democrats have opposed it unanimously for both political and substantive reasons, but not, as Bartiromo said, because it was “reckless.”

The line of reasoning from +Maria Bartiromo seems to lack basic American Civics 101, as well as putting false reasoning onto the Democratic Party. Or, maybe she was truly being disingenuous, which would be a shame from someone so adroit on international finance.

CNBC Anchor Whiffs On Obama Budget In White House Interview »

President Obama’s top economic adviser Gene Sperling got heated in a Tuesday interview on CNBC, when anchor Maria Bartiromo pressed him on the federal budget. The exchange was so explosive that CNBC re-aired the interview on Wednesday — in celebration of holding officials to account and setting the record straight for the public.

Is Global Warming Effecting the Jet Stream?

2012-04-09T23:05:00.000-07:00

Is Global Warming changing the jet stream?

The recent weird weather in the US, during March, was due to the jet stream bending north from West Texas up to the Canadian border. Cold air from the north was trapped in the western US (Portland had 3 days of snow in March, which is more than usual). The rest of the nation saw unseasonably warm temperatures, because warmer air from the south was able to travel farther north.

The blog, A Weather Moment, gives a really good breakdown of that effect.
I was curious if there'd been any research done on the possible effects of global warming on the jet stream. The only speculations I could find were from 2008, with the idea that global warming is causing the jet stream to move closer to the poles year to year. But, again, this was from 2008, and I won't state to their veracity.
What do you all think?

Anyone know of some good modeling or information on this question?