Recession was inevitible and necessary too
US had tremendrous growth in the last few decades. It has established itself as one of the best performing economies of the World, and has won trust from most of the Global Investors (be it countries or individuals).
Above is the graph of US GDP Trend. The upward curve is awesome.
Let us also look at the Gross Domestic Income.
Wow. This is awesome again. The reason behind the growth is the increase in the available credit for the business and individuals. Let us see the trend here.
Available Credit is good for the economy, and it is the major reason behind the rise of the economic activity. But too much credit might not be a good idea either. Let us see the trend of Loan to GDP Ratio.
Now this is horrible. Loans has increased from 50% of GDP to 6 times of GDP from 1989 to 2008. Here is the overall change ratios on the two metrices — Loans and GDP.
Outstanding Revolving Credit and Non-Revolving Credit
There was increase in Loans, and there was increase in outstanding amount as well. Here is the trend of Revolving and Non-Revolving Balance.
Revolving Credit is closing to a Trillion Dollars, and it accounts for 8.2% of GDP. (graph below)
The Non-Revolving Credit Outstanding now stands at 1.65 Trillion Dollars, and accounts for 12.3% of GDP.
The overall outstanding stands at 20.5%of GDP, and is 2.6 Trillion Dollars. This outstanding amount is bigger than the economy of the United Kingdom.
Recession had to Happen
Now for this credit bubble and the outstanding explosion, recession had to happen. The bubble started before Bill Clinton took office and it extended till end of 2008. Barack Obama is unlucky to see this happen in his time. Hoping he finds some solution to it, and takes back economy to the growth mode.
United States becoming safer; crime rate declining
There are too many bad news about the United States Economy these days. East-west civilization clash took a bad turn after Iraq and Afghanistan attack; many US Soldiers lost life and many more Iraqis and Afgans lost their life. Strengthening of European Union and ASEAN gave serious and instant challenge to the US supremacy in the World; and rise of China and India giving sleepless nights to the long term planners of US Economy. The last and Worst is the huge Recession that started by mid 2008, and went to become the deepest economic fall since the Great Depression.
These things remaining apart, there is some good news too. United States is becoming more peaceful and safe place to live. Yes, it is becoming I am not joking here. I will prove it with the lines that follow.
Not many people might have realized it. With more active media, these days negative news finds us faster than before. We hear of more rape, more burglary and more killings now than the last decade. Thanks for the Media Revolution, now we know all what happens. Last decade it was happening more, but less reported.
(Gapgh source : www.f-cube.us ; Data Source : FBI)
Fig. Population Increasing at the steady rate touched 301mn in 2007
The above graph shows an increase in US population. Below are some of the facts about the number of various types of crimes that occured each year.
1. Aggravated Assault
2. Burglary
3. Forcible Rape
4. Property Crime
5. Theft
The important point to be noted in the above graphs is that the numbers are decreasing for all of these types of crimes. Don’t know whether people are becoming more tolerant or homeland security of the government is getting better; one thing is sure that America is becoming a better place to live.
I have seen lots of violence in my life in different parts of South Asia, some political and some social. There are many more economical. There are many wars and many accidents, but those come few times in a person’s life time. The smaller issues are always with us. And however low magnitudes they be of, they affect life more.
Looking at these statistics, I congratulate the successive governments of the United States from Bill Clinton to Barack Obama for making Americans life better and peaceful. They might have tensions about what Iran is doing in Tehran or how many Americans are killed in Iraq. But at the end of the day, they can sleep carefree at their homes.
China is happier than United States.
Is economic prosperity the every thing for us? Is the increase in GDP all we want in life? The New Economic Foundation had introduced a new parameter called Happy Planet Index in July 2006, to bring out the clearer picture of the economci conditions. Its a common wisdom that Money don’t bring happiness, neither does the vice-versa. Thus I find it quite ironic to be using these two parameters to justify which is better than the other.
What is GDP and HPI?
GDP defines the total productivity of the country, along with import, export and consumption. Whereas, HPI is a new parameter which defines the mental state of the general public of the country, in other words “How happy are you?”
Analysis
Data : GDP of 2008 and HPI of early 2009. Source:Wikipedia
From this graph, we see that Jamaica is the happiest and Zimbabwe is the least happy, though both of these have very LOW GDP. Now considering the peaks in GDP, we see that US which has the highest GDP is less happier than all the other countries below them.
Taking the TOP GDP countries:
Data : GDP of 2008 and HPI of early 2009. Source:Wikipedia
These are the TOP countries with the highest GDP, there average HPI is around 50, which seems normal. We can see that there are two countries below the margin, Russia and United States. The most happiest among the richest seems Brazil and China. India also finds itself a resonably above average HPI.
Data : GDP of 2008 and HPI of early 2009 and Population in 2009. Source:Wikipedia
Taking population into the consideration, we find a resounding similarities between India and China. Both the countries have a remarkably high Population. Both finds themselves in the TOP GDP countires and both have the HPI above average.
Data : GDP of 2008 and HPI of early 2009 and Population in 2009. Source:Wikipedia
Not fogetting the Bottom GDP countires, here is a quick look at their conditions. The average HPI of the Bottom Countries is around Group having a LOW HPI. Even Zimababwe which had the Low GDP and Lowest HPI seems to have its GDP higher than that of Bhutan and Rwanda. Countries like Nepal has its average HPI, whereas Jamaica has the highest HPI.
In both the LOW and BOTTOM group we have found that there are extreme differences between the GDP and HPI and that they seem to have less correlation. Let us add one more detail to it, the population contribution of these countries.
The TOP Group accounts for about 55.32 % of Total Population and the BOTTOM Group accounts for about 2.54% of Total Population. Below are there distribution graph:
Data : Distribution of Population for TOP Countires:Wikipedia (Corrected)
Data : Distribution of Population for BOTTOM Countires:Wikipedia
Consumer’s need for forecasting.
Recently, I have been busy collecting proper economic variables to forecast. After going to many forecasting portals and our own top search results. I have collected few economic indicators which people want to see fore-casted. Here they are ordered according to the TOP search:
1. Unemployment
4. Oil Price
5. Gold Price
8. Industrial Production Index
10. Consumer Credit
11. Personal Income
13. Real GDP Growth
14. Banking Reserves
15. Total Credit
At these times of recession, the top search list seems very likely. It shows the sentiment of people. At the top is Unemployment then its inflation. Both the result shows the correlating factors between the spending habit and the earning capabilities of consumer.
Gold and Oil, the two major raw materials that are related to the prosperity of the industrial growth of the country and related to the people’s financial situation. Impending Global Environment threat is always causing the fluctuation in Oil’s price. The increasing consciousness towards the green energy and renewable energy is an obvious threat to the Oil Industries. Then, coming down to the list we have consumer credit, Housing Starts and other related search regards of loan and Bank’s Credit.
This list of 15 items almost seems to summaries what people are interested in and how they want to see how the thigns are going to be down the line in future. F-Cube team is working to bring these required details to public in a way so that they can benifit from it.
If there is any suggestion, let us know.
F-Cube gets more friendly with Social Media
With the team comprising of Web 2.0 enthusiasts, F-Cube was designed to be social media friendly from the very start. Few months back when F-Cube was first launched, one of the features that were loved by the users was the ease with which it could be used in Social Media sites. All the reports and data presented could be shared very conveniently over various platforms.
I normally get my quota of news and daily updates from Twitter. I don’t just listen on Twitter and do post my favorite links and updates that I think would interest my network. Needless to say, it’s painful at times to copy those links from the location and post it on Twitter. So when the new feature of sharing the articles from F-Cube was introduced two days back; I was delighted to no bounds.
Try this feature and let us know your thoughts. We would love to hear your comments and act on them.
Biofuel : Is it the fuel of future?
Corn on plate or on your tank? This is how an article on biofuel was started in one of the articles relating to the crisis between the fuel and the food industries. So what is it that make the biofuel such a hot topic? Why is it being argued time and again in any G8 summit or World Economics Forum? How is the topic related to the stability of food economy?
The obvious reason for the disagreement is with the question of our morality and judgement over should food is grown to feed the people or to feed the vehicles. The effect of the increasing biofuel research and plants have led to the inflation of the food prices and is leading to the hungry world. Just to understand the fact, let me quote :
The new fuels don’t use the edible parts of corn and wheat and avoid land-use changes that raise greenhouse-gas emissions. Conventional biofuels accounted for as much as 15 percent of food-price inflation from 2007 to 2008, the U.S. Congressional Budget Office said April 8. Converting land to cultivate food crops for fuel can cause carbon-dioxide output 420 times greater than the annual savings, U.S. scientists said in Nature in 2008. - Bloomberg
So the point is, the increasing use of food for biofuel causes shortage of food in the market, leading to the price hikes and to inflation. On the othe side, humanitarian issues like- “feeding the people of poor countries” is criticised. But the logic holds true due to the mismanagement in the production of biofuel. As biofuel is a new industries, not much has gone into increasing the efficiency of the technology and the supply-chain optimization. So how strong is the issue?
The above shows the search result of the term biofuel in the google. About 35000 monthly search on the keyword, does show the interest it has among the people. Inorder to see the demographic distribution of the keyword serach, lets see this.
The highest search is seen from the Ethopia then Tanzania and Indonesia. The right hand side map of the world map overaly shows that the places hit by the topic is more in the African and Asian Nation. In order to investigate by ther is so much of interest in the Ethopia, I think the news below will make it clear.
The Ethiopian Ministry of Mines and Energy has announced that government’s allocation of 24 million hectares of land for jatropha farms that will be used by bio-fuel producers does not have negative impact on the country’s food security and will provoke no land crisis. -AfricaNews
So what is the solutin towards taking the new technology and its drawback? Obiviously the new technology like this is not going to be abondoned by the scientific community over any moral issues, cause we have never seen such things happening, be it the HUMAN Cloning or the Nuclear energy.
Lets look at this interesting video:
Now, inorder to conclude such topic of high importance, I donot think any closing sentence would actually bring the issue to the end. Thus I would consider the topic to be open to the discussin floor. I hope you to add more on the topic.
More reading:
GDP and your business. Understanding Recession
Yes. The BIG word GDP which stand for Gross Domestic Product. Well much talked much discussed topic of this year, obviouly “The Recession”. But if you still going through tough time understanding the meaning of it and the influence it has brought to your business or your government policy, here you go.
This post will present the historical analysis on the economic parameters. Here is the basic equation for GDP:
GDP = consumption(C) + gross investment(I) + government spending(S) + (exports − imports)(E)
Your business is basically going to be affected by the first two parameters as they are related to the consumer’s behavior - consumption and gross investment.
Lets look at the graph below:
Data Source: F-Cube
The graph shows the percentage share of the indicators (C,I,S,E) on the Gross Domestic Product.
During the period of 1941 and the 1946, the data shows that the rise in the GDP is mostly accounted for the involvement of the Government, whereas private investment just sinks down.
The personal consumption expenditure accounts for the maximum share on the GDP, that is why Consumer Confidence is such an important parameter in the development of the country. This also affects your normal day to day business. During the peak rise in the GDP, both the private investment and consumption has lower share, representing low consumer confidence. Even though the GDP is very high, this is a purposeful act from Government to pull the economy up. That is why we see so many countries’ government putting money into the market to increase the people’s confidence.
Hence, all the policies made today should certainly be reflecting in the confidence of consumer. The above graph shows how the consumption and the investment starts to rise after the peak in GDP and how government then starts to reduce its involvement in the investment.
The point is, government is only a factor which will influence people’s behaviour. Ultimately its investment from public and the invovlvement of public which is going to bring the economy up.
Don’t wait for government to act, cause they are waiting for you to act.
Role of Prime Rate in Economy
Interest rates affect
each and every individual in some way or another. Leave aside the knowledge of prevailing rates; most of us do not even know the definition of some of the lending rates. They do not just affect our spending and investment but are also few of the key economic indicators of a nation.
‘Prime Rate’ is one such indicator. It is the interest rate levied by banks to their most credit worthy customers. Every bank decides its own Prime rate as found appropriate. Those who aren’t so creditworthy in the eyes of lenders get charged a little over the prime rate.
The Prime Rate is 300 basis points plus the federal funds target rate. If the fed funds target rate is 0.25%, then the U.S. Prime Rate will be 3.25%.The Prime Rate is consistent because banks want to offer businesses and consumers loan products that are both profitable and competitive.
The graph below shows the Prime rate for the past fifty years
All kind of loan rates are dependent on the Prime Rate. A study on the behavior pattern of Gross Private Domestic Investment on Residential and Non Residential yield the following result
Data Source: F-Cube
What do people want from Government?
In the 21st century, what are people expecting from the government? How should the government respond to the new innovations taking place in the space of Social Network? Here are few :
- Access to Free Information and Data.
- Ability to share those data and information.
- Comment and discuss on the issues on social network with people around the world.
- Participate on the economic development of their country.
- Make their own views on the development and be heard.
Sharing and reciprocating to the shared contents, has never been so easier then today. Everybody wants to be the part of the bigger things happening and people are making sure that they get themselves involved into it. Starting from the content generations, to carrying out online discussion forums, people are very active in the development process.
At these times, people need more data to understand the world better and make better judgment. No longer are we slave of the Brand Media for forcing their views to the public. Today, if you disagree with anything, then within a minute you can carry out different actions on the issue and change it. Many countries seem to like it and implement in their development process. Whereas many fear the loss of power, so they seem to be discouraging such online social movement.
People are realizing that they have every right to the data being collected by the government. Only can such actions, such as freeing the data will allow people to be more aware of their own part on the development process.
F-Cube is one of the ways we are trying to bridge that gap between the raw data and the valuable information that people wants. Please suggest us on the development of our initiative. If you want to be the part of the discussing please connect with us in Facebook and Twitter and join into the discussion.
How much do Americans save?
The Credit crunch that US witnessed recently got the whole world talking about the US economy. The world took note when all news channels flashed that American spent more than they earned.
Much to our relief, the situation seems to be improving now and the personal savings in America which has gone as down as 16.45 billions of dollars in 2005 has gone up to 96.6 billions of dollars in 2008.
The chart below show the trend of the personal savings in US from 1929 to 2008:
The personal saving as a percentage of disposable income saw an all time low in the year 2005 since the Great Depression. The saving habits of the Americans have been on a decline since 1982 when 11.2% of their disposable income went into their personal savings.
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