Monday, July 2, 2012

The Real "New Normal"

Another big screaming headline today claims that factory orders are at a three year low. This proves the failure of Obama economics, and demonstrates the damage done by his socialist healthcare mandate. The small problem is that this isn’t based on actual numbers, but just on a survey of purchasing managers. The Institute for Supply Management (ISM) takes these surveys and then creates an index that is supposed to serve as a leading indicator. The ISM index is notorious for being what is euphemistically referred to as “volatile”, in plain language it’s panicky and completely unreliable. That doesn’t stop the right from presenting this information as having been chiseled into stone tablets by a vengeful god.

In reality, US durable goods orders rebounded in May after two months of decline. These are actual numbers, not survey results from people who want Romney to be President. With Europe pulling back from its suicide pact based on austerity you can expect factory orders to start picking up again. A big chunk of what we do export consists of parts for European manufacturers.

However, our biggest manufactured export continues to be refined petroleum, 30% of what comes out of US refineries is exported. But Obama isn’t allowing enough drilling, and that’s why gasoline is now $6/gal for the July 4th holiday, just like Mitt Romney predicted.  Remember the giant animated gas pump he used for a back ground at events, it showed the price skyrocketing as he belittled Obama’s conservation policies.

Housing sales activity is now 1.5 percent above the 2001 baseline index that is considered healthy activity. A commitment from the Federal Reserve to further push down mortgage interest rates, that are already at record lows, should further boost home sales. This will help prop up depressed prices in hard hit markets. Fewer Americans underwater on their home mortgages will boost consumer confidence. Rebate checks are starting to come from health insurance companies based on the 85% rule of Obamacare. Insurance companies no longer get to rip you off and keep their ill-gotten gains.

Here’s a new vocabulary word, “derecho” (de ret o), from the Spanish word for straight. It’s not a new phenomena, the name was coined by an Iowa State University professor in 1888 to describe a significant weather event in 1877. These straight line wind events used to occur in the US about every four years on average. The typical event in the past had 60 to 80 mph winds and would travel a 100 to 150 miles.

Today these events occur multiple times per year and have gotten much larger and more powerful. Tens of miles wide or more, with constant winds in excess of 100 mph and gusts up to 200 mph are being observed. The recent event to hit the DC area was actually 700 miles long. While the winds are comparable to those of a major tornado, they don’t have quite the same destructive effect, and are more comparable to a hurricane. But, they can also spawn a series of EF-5 tornadoes as well, depending on how the warm and cold fronts interact.

The Derecho is basically driven by heat, a cold front overriding a warm front creates an imbalance as the warm air must rise and the cold air must sink. They’re common in middle east desert regions. Those impressive walls of dust you see portrayed in desert action movies are created by this phenomenon.

In the US they are super-charged by massive amounts of moisture in the atmosphere that allow these systems to become extremely powerful as moisture stores incredible quantities of heat. As you might guess they are becoming more common as the globe warms. The water content of the atmosphere has increased by 5%, and this amounts to billions of tons of potential energy that gets released under right conditions. Previously rare events are becoming the new normal. Government weather forecasting is one of the things the Republicans want to cut drastically. Ignorance is the real “new normal”.


DemandSider said...

Thanks for the economics lesson about ISM data. I bought that data like probably 90% of Americans, hook, line, and sinker. However, if oil gets much cheaper, sabers may be seriously rattled at the usual suspects. Somewhat tangentially to that, discussions of the petrodollar are conspicuously absent from the corporate media(including PBS),for example. Doesn't the petrodollar system hide debt? Our debt to GDP isn't crushing (our current account balance is the worlds worst, however), but The Axis of Evil shunned the petrodollar. Coincidence?

If you have time for this, thanks, if not, that's fine. Keep up the great work!

prairie2 said...

The one most important thing to know about debt is that it's just paper. It can be run through the shredder at anytime. The rich don't hesitate to that when they owe money to us.