Tuesday, February 21, 2017

TRUMP TO CHANGE ECONOMIC CALCULATIONS

Well this has been a master stroke by Donald for the US economy which will give clarity about how the new era of De-globalization will take birth and exploitation of globalization plays its game in eroding wealth of an economy. He has asked to look over and change the traditional ways of calculating Trade Deficits and unemployment measures. Now let’s delve into the same and figure out the outlook of the Global economy and US markets in the long term.

Currently in US, re-exports, or exports of goods originally imported from another country, from the exports side of the equation are still being counted as the good as an import. Put it in simple example For instance, if a widget was imported from India, that would count toward the deficit as an import. If that widget is then sold from the US to a retailer in the UK, it would not count as an export in the ledger, making the deficit increase.  Now Donald wants separate data for the same. He wants only exports of goods that are produced on US soil count as real exports. The new method would exclude re-exports when calculating exports in the trade balance statistics Re-export means a re-export is a good that is unchanged before being transferred to a third country, while a broader definition of re-exports would include goods that undergo some material change, such as value-added service or finally assembly.

Now if this data is being taken out then it will create problem for many countries since its will give a clear picture of the US manufacturing goods in its own land. US might a be a looser in the international trade.

Many economists have argued that the calculation will not consider subtract the imports that go into the re-export from the import side of the trade balance. Well this is being done deliberately to show the world how US economy is being exploited and how trade gimmicks are played. Over the last 15 years China have replaced Made in America with Made in China.

Another major thing which US economy is looking ahead is the process of calculating Unemployment on which the world and me have written million words to describe fault of employment creation and loopholes in unemployment data.


The official unemployment rate is the U-3 measure calculated by the Bureau of Labor Statistics. This measure includes people that are unemployed and have looked for work in the last six months. Now the new method, BLS’ U-5 unemployment measure where it includes discouraged and marginally attached workers which are Americans that are unemployed and not in the labor force but ready and willing to work.

Another figure, called U-6, includes those people and the underemployed — people who technically have jobs but are not getting full-time hours or wages. All these 3 segments are calculated but only U-3 is being considered for decision making.  Now change of decision making data will make Fed to stop rate hikes in the long term.

Now from the above its clear the trade war will be more number driven game followed with employment generation. Many countries are going to find no answer even to the WTO community and other international trade bodies. US numbers might even get cooked to uplift the commitments of Donald in the long term. A war with numbers often goes wrong when bias is backed the same.

Another figure, called U-6, includes those people and the underemployed — people who technically have jobs but are not getting full-time hours or wages. All these 3 segments are calculated but only U-3 is being considered for decision making.  Now change of decision making data will make Fed to stop rate hikes in the long term.


Now from the above its clear the trade war will be more number driven game followed with employment generation. Many countries are going to find no answer even to the WTO community and other international trade bodies. US numbers might even get cooked to uplift the commitments of Donald in the long term. A war with numbers often goes wrong when bias is backed the same.

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