Three Economic Shorts

I thought I’d written my last economic post. I get it, more or less; why belabor the point? But this morning I find that I’ve not yet lost the capacity to be startled.

1. From this article:

For the first time, the top export of the United States, the world’s biggest gas guzzler, is — wait for it — fuel. Measured in dollars, the nation is on pace this year to ship more gasoline, diesel, and jet fuel than any other single export, according to U.S. Census data going back to 1990. It will also be the first year in more than 60 that America has been a net exporter of these fuels…

There’s at least one domestic downside to America’s growing role as a fuel exporter. Experts say the trend helps explain why U.S. motorists are paying more for gasoline. The more fuel that’s sent overseas, the less of a supply cushion there is at home. Gasoline supplies are being exported to the highest bidder, says Tom Kloza, chief oil analyst at Oil Price Information Service. “It’s a world market,” he says. Refining companies won’t say how much they make by selling fuel overseas. But analysts say those sales are likely generating higher profits per gallon than they would have generated in the U.S. Otherwise, they wouldn’t occur.

While the fuel is a national resource of the United States, it’s of course not the nation that exports it or that jacks up domestic prices or that reaps massive profits on the global market.

2. From this article:

The United States will remain the top choice of most global commercial real estate investors in 2012, but the country has lost ground to Brazil which ranked No. 2 this year, according to a survey released Sunday. While the United States offers the most stable and secure option in commercial real estate, investors said improvement in rent and occupancy growth and the repeal of a 1980 foreign investment tax would have the strongest impact on their investment decisions, according to the 20th annual survey of Association of Foreign Investors in Real Estate (AFIRE) members…

As for U.S. commercial real estate, respondents said that this year they would most likely invest in apartment buildings, the fourth consecutive year multifamily topped the list. Of all the types of U.S. commercial real estate, the multifamily sector has not only recovered from the post-2007 real estate slump but rents and occupancy are even stronger than before.

The real estate investment opportunity poses a particularly striking contrast with…

3. This piece:

Since 2007, banks have foreclosed around eight million homes. It is estimated that another eight to ten million homes will be foreclosed before the financial crisis is over.  This approach to resolving one part of the financial crisis means many, many families are living without adequate and secure housing.  In addition, approximately 3.5 million people in the U.S. are homeless, many of them veterans.  It is worth noting that, at the same time, there are 18.5 million vacant homes in the country.


  1. illegal dances of new york city says:

    I think THIS is Krugman at his very best. Although he’s long good at describing how govt. and family mortgages aren’t comparable, he says it better this time, and also that point about the 89 cents. How many people have not bought the ‘new China debt myth’ hook, line and sinker?


  2. ktismatics says:

    Right: when the Fed lends dollars, either to the US government or to other banks here or abroad, it is required to pay the profits on interest back to the Treasury, so in a real sense the US citizenry owes the Fed debt to itself. This time, though, there is a big problem with the usual Keynesian strategy of spending our way out of recession by expanding the money supply, which commenter Jim and I discussed briefly here and which he wrote about at his blog. Increasing the money in circulation does stimulate domestic spending, keeping prices and profits up. But domestic spending has not been stimulating domestic business expansion or hiring, because the jobs and factories keep being exported to low-cost markets like China.


  3. ktismatics says:

    A more technical point on the 89 cents, one which I don’t understand fully but which I believe goes like this: The Fed and the Treasury have been complaining that China keeps the value of its currency artificially low relative to other currencies. That makes Chinese products cheaper on the world market, giving it a competitive advantage over the US economy. But one of the main ways China achieves this advantage is by buying US federal debt. They need to print more yuan to buy US Treasury bills, thus inflating their own money supply and lowering its value. The US Treasury pays back its debt in dollars, which the Chinese central bank stashes in reserve, taking it out of circulation and thereby increasing the value of the remaining dollars in circulation. So Krugman is right that China buying US debt doesn’t translate into China owning more and more of America. But it does serve to devalue the yuan, contributing heavily to the imbalance of trade and wages which result in the Chinese economy growing partly at the expense of the American economy.


  4. illegal dances of new york city says:

    I follow you well, but were you not also a bit surprised that the alarmism is being spread for some years now without being based but partly on fact–meaning that it’s definitely hyperbole about China (like the phrase ‘doesn’t translate into China owning more and more of America’), and that that really is what I’ve read most places (admittedly limited on this my reading, of course). But even so, it’s almost been like a mantra even in most op-eds. What you say in the last sentence actually resembles more of what we heard in the early 90s about Japan, with the trade imbalance always talked about, before they went into their ‘dark decade’ that Krugman always talks about a lot, their stagflation/deflation. It did not sound good for the U.S., but it did not have a somewhat sinister quality to it. The ‘Owed-China’ talk does, in that it’s fact blown up into a hypertrophied myth. Anyway, tell me if I’ve got any of this straight.


  5. ktismatics says:

    I agree entirely: there is a paranoiac alarmism about China that doesn’t jibe with reality. China is more likely to own large swathes of America if its banks start spending some of those squirreled-away dollars they’ve been hoarding. As noted in my prior economic post, American real estate is a “buy” on the world market these days. But even if the buyer of a Manhattan high-rise or Omaha meatpacking plant turns out to be some investment consortium from Switzerland, there’s no way of knowing how much of the money is being put up by Swiss investors, or Chinese, or Americans for that matter.

    Increasingly I’m thinking that some sort of trade protectionism is needed, but China buying up America is a much less pressing concern than American companies outsourcing jobs to Chinese workers. Of course the real danger isn’t posed by the Chinese workers but by the American companies buying cheap Chinese labor and selling products at high markups domestically. There’s certainly a motivation for conservative PACs and Tea Party financiers to promote a populist resentment of the faceless and mindless Chinese hordes taking us over. It’s always been a good distraction to shift the blame for hard times onto the blacks, or the Irish, or the Polish, or the Mexicans…


  6. These days financial system from all over the world is little down when compared to previous years. We cant say sure that market like real estate investments should be effective one in this down economy. Of course you are speaking about fuel, its price also likely to be increase within very short period.


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