Mish's Global Economic Trend Analysis |
- Debunking the Myth "Consumer Spending is 67% of GDP"
- Crowdfunding Review: Exploding Kittens; Bankrupt Zano; Will Crowdsourcing Ever Work?
- East Coast Blizzard - Some Love It: Legal Sledding on Capitol Hill First Time in 140 Years; Panda "Tian Tian" Loves Snow
- Rajoy Says Leftist Parties Causing "Terror in Europe" as Spanish Government About to Fall
| Debunking the Myth "Consumer Spending is 67% of GDP" Posted: 24 Jan 2016 10:55 PM PST Consumer Spending Myth It is widely believed that consumer spending accounts for approximately two-thirds of the economy. A few of us dispute that claim. Reader Gary writes "You had made the comment more than once that manufacturing is really a much larger part of GDP than is frequently quoted. I could not find how you got there, but ZeroHedge has a nice Pie Chart that shows what you have stated." It's Only a Manufacturing Recession The chart Gary referenced is from "But It's Only A Manufacturing Recession, What's The Big Deal" - Here's The Answer.  I am not sure of the origin of that chart, or its precise accuracy, but the essential idea rings true. GDP Illusion In Is the US Economy Close to a Bust, Pater Tenebrarum at the Acting Man Blog points out ... One thing that we cannot stress often enough is that the manufacturing sector is far more important to the economy than its contribution to GDP would suggest. Since GDP fails to count all business spending on intermediate goods, it simply ignores the bulk of the economy's production structure. However, this is precisely the part of the economy where the most activity actually takes place. The reality becomes clear when looking at gross output per industry: consumer spending at most amounts to 35-40% of economic activity. Manufacturing is in fact the largest sector of the economy in terms of output.In The GDP Illusion Tenebrarum writes ... Sure enough, in GDP accounting, consumption is the largest component. However, this is (luckily) far from the economic reality. Naturally, it is not possible to consume oneself to prosperity. The ability to consume more is the result of growing prosperity, not its cause. But this is the kind of deranged economic reasoning that is par for the course for today: let's put the cart before the horse!In addition to what Tenebrarum states, please note that government transfer payments including Medicaid, Medicare, disability payments, and SNAP (previously called food stamps), all contribute to GDP. Nothing is "produced" by those transfer payments. They are not even funded. As a result, national debt rises every year. And that debt adds to GDP. Real GDP is constantly overstated because it's obscured by a cloud that hides monetary inflation and ignores both debt and bubbles. Mike "Mish" Shedlock |
| Crowdfunding Review: Exploding Kittens; Bankrupt Zano; Will Crowdsourcing Ever Work? Posted: 24 Jan 2016 07:24 PM PST Crowdsourcing Hype Robots and artificial Intelligence will destroy 5.1 million jobs by 2020 says a study on the "Future of Jobs". Crowdsourcing was one of the big factors noted in the study. My comment last Friday was "I suspect crowdsourcing is one of those things with huge potential that never really flies because there is no money in it for anyone." More accurately, I should have said "no net money for anyone but the promoters". This weekend, readers emailed a series of article on a cwowdsourcing that I had not seen. Crowdsourced Zano Implodes Please consider the January 18 Media.Com article How Zano Raised Millions on Kickstarter and Left Most Backers with Nothing. The gist of the story is one of Zano, a drone-maker that sought to raise $190,000 to put a prototype into production. The company raised millions but the drones could not fly. Said one person involved: "I unpacked my Zano and tried to fly it indoors, as I guess most people did. It really didn't go very well at all, banging into the wall. So I took it down to a local park and tried to fly it there. After 10 or 15 seconds, it would just go off and do its own thing, zipping off sideways until it got out of range. Basically, it was just awful. The video was pretty poor quality too." The promotional videos displayed smooth, professional shots. "As [with] any commercial video, people are going to edit out the takes that aren't as good." The article notes "UK market analyst firm Juniper Research predicts that that investments made in technology via crowdfunding platforms will increase sevenfold from an estimated $1.1 billion last year to $8.2 billion by 2020. If we want a democratic, open, freely accessible alternative to banks and venture capitalists, then we will have to accept occasional failures like Zano along with runaway successes like Pebble, Oculus Rift, and Veronica Mars." Media.Com concludes with some sobering bullet points ...
Related Articles October 30: Crowdfunding for Internet Stock Sales Approved by SEC November 2015: When Crowdfunding Projects Go Wrong January 21: Kickstarter Digs Deep Into Case of Doomed Drone Biggest Crowdsourcing Efforts Bloomberg reports on the Biggest Crowdfunding Campaigns of 2015, cleverly commenting "no the Greek Bailout did not make the list".  Exploding Kittens and Russian Roulette I confess. I never heard of "Exploding Kittens" or anything else the crowds are funding. "Exploding Kittens is a highly strategic kitty-powered version of Russian Roulette. Players take turns drawing cards until someone draws an exploding kitten and loses the game. The deck is made up of cards that let you avoid exploding by peeking at cards before you draw, forcing your opponent to draw multiple cards, or shuffling the deck," wrote the creators in the official webpage. "So if you're into card games or laser beams or weaponized enchiladas, please help us make this game a reality. We think you'll love it as much as we do," they added. Expect More Beanie Babies Maybe the crowds can identify popular games in advance, maybe not. But when it comes to serious applications, any expectation that crowdsourcing will be a disruptive force seems silly. The crowds also brought us Beanie Babies and Pet Rocks. Expect more of the same. I commented on truly disruptive processes in Fourth Industrial Revolution: Robots, Artificial Intelligence Will Destroy 5.1 Million Jobs by 2020. Mike "Mish" Shedlock |
| Posted: 24 Jan 2016 12:56 PM PST Not everyone hates the unusual blizzard that dumped 2 feet or more of snow in Washington D.C. and other locations on the East coast. Giant Panda Stars at National Zoo Please consider Giant Panda Stars at National Zoo in Reaction to Blizzard. "A frolicsome giant panda called Tian Tian appeared to be capturing the bulk of the online attention as videos and other images emerged of animals at the National Zoo in Washington, D.C., as they encountered Saturday's accumulating snowfall." Legal Sledding on Capital Hill DC Residents Flock to Capitol Hill for First Legal Sledding in 140 Years. Just in time for the blizzard that dumped more than 2 feet of snow across the mid-Atlantic, kids and adults took their sleds to Capitol Hill, legally, for the first time in more than 140 years.Best Thing From Congress in Years Is sledding on Capitol hill the best thing Congress has done in years? I struggle to come up with anything better. Mike "Mish" Shedlock |
| Rajoy Says Leftist Parties Causing "Terror in Europe" as Spanish Government About to Fall Posted: 24 Jan 2016 12:10 PM PST Following a December election that has left Spanish politics deeply fragmented, People's Party (PP) leader, Prime Minister Mariano Rajoy's has been unable to secure the majority coalition he needs to rule. Unless someone has a majority, it is the role of the king, otherwise a largely ceremonial role, to see if anyone can build a coalition. First chance goes to the party receiving the most votes. Here's a sequence of events with brief translations and a couple of comments from reader Bran who lives in Spain. The clips are from last Friday through today. Links are in Spanish.
Breaking the Logjam The Financial Times reports Podemos Proposes Leftwing Coalition to Break Spain Logjam. The anti-austerity Podemos party on Friday made an audacious move towards breaking Spain's post-election political logjam, proposing a three-way coalition government with the Socialists and the United Left party.Problems Facing Leftist Coalition
Spanish Government About to Fall The most likely possibilities are a new election (if no one can achieve a majority), or an unstable coalition of leftist parties. Barring an unlikely last minute miracle, the government of Mariano Rajoy is over. New elections are in the cards immediately, or a bit down the road after an unstable coalition of some sort falls apart. Either way, Rajoy is burnt toast. Mike "Mish" Shedlock |
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