More Economic Musings

A few people have asked me to explain more about the previous post. So, here is my thinking on this. The U.S. consumer (and government) have been running a current account deficit for a long time. However, as the the chart below shows, as a percentage of GDP (which is the important measure) the current account deficit has spiked. The current account is the overall inflows vs. outflows of wealth into our economy. The chart in the post below indicates that the U.S. has been sending significantly more money overseas. In the long run, this is bad.

However, don't get the idea that the world is more dependent on the U.S. debt-stifled consumer than ever before. I think that the world economy is relying on the U.S. economy less than ever. This is because there are vast new classes (in the hundreds of millions of people) that are just coming into the world economy. They will want to buy many things, and the U.S. will sell them.

Also, I wonder if there is an investment lag taking place, where the U.S. companies are spending vast sums to build out infrastructure (factories, etc.) that haven't yet started generating income back to the U.S. We'll see.

Even as the dollar drops in value, and even as U.S. economic growth moderates, corporations (especially ones with foreign exposure) are reporting record profits. Profits are at their highest levels ever in terms of percentage of GDP.

What's Going on Out There?

I saw these graphics over at a story from money.cnn.com. I think they give a very concise picture of the global economy. Note the relative growth of Japan, the U.S, China, and India vs. the European countries. Also, how much of global growth is fueled by U.S. debt.

How to Become a Billionaire

If you are looking for an interesting web site to read, check out kurzweilai.net. He's a futurist, and has a lot of interesting thoughts about what the future could bring.
One of his observations is that the rate of technological development is exponential. I think this is pretty self evident if you just think about how much new information is being added to the world's knowledge every day. But, an interesting result of an exponential growth in information is an even more exponential growth in the connections that can be made between this information.

A quick demonstration: 2 things can have 1 connection (a line), 3 things can have 3 connections (a triangle), 4 things can have 6 connections (a square with an "x" in the middle), etc.

He crystallizes this point by noting that the number of important connections not made is growing exponentially with time. This means that there are ever more brilliant ideas just lying about waiting from someone to think them.