U.S. returns to 2014 economic global growth leader
Back on top.
For most of the past decade, the well-being of the global economy, especially in the wake of the Great Recession, has been expected due to the presence of the BRICS nations of Brazil, Russia, India, China and lately South Africa.
But as we anticipate economic aspirations for 2014, the BRICS alternative is losing steam while the U.S. again could become the center of potential promise. What could add to America’s more prominent role next year is the unexpectedly growing economic dynamic of its flanking NAFTA partners in Canada and Mexico. Both now generate trillion-dollar-plus business entities. Simultaneously, the previously dependent-upon BRICS nations are undergoing the following slowdowns:
Brazil: The “land of tomorrow” that seemed to have arrived will do little better than an unimpressive 2% growth (its 2013 expectation). A big chunk of this is due to a reduction of agricultural and oil exports to China and the rest of Southeast Asia. Despite the expectation of the Rio de Janeiro 2016 Olympics, Brazil’s increasing labor union problems are undermining the nation’s previous optimism instigated by former President “Lula” da Silva.
Russia: Doing little better than a 2.5% economic growth increase, Russia is heavily dependent on natural gas and oil shipments to central and western Europe, areas barely hanging above the break-even level. Other than fossil fuels, Russia’s economy generates little internal or external upward growth.
India: This Asian sub-continent, second only to China in global economic growth with a 1.1-billion-strong population, is destined to fall to a 5% level this year and possibly in 2014. It has the highest inflation rate in the developing world (10%) and a double-digit deterioration of its rupee currency. Strong in technology, it has lost its world leadership status in that category in recent times. There is little chance to return to a 7% to 8% increase it had gained under the long-term leadership of Prime Minister Manmohan Singh.
China: On which the global economy has pivoted for years, China will settle in at 7% this year and in 2014 under present circumstances. Although far above other BRICS members as well as the developed nations, Beijing’s projected growth will prove enough to make 2014 more than a “better than survivalist” global economic forward motion.
Now, it’s all up to the U.S. and its NAFTA partners. With an unprecedented growth in the world’s overpowering fossil fuel reserves under its belt, this has a better than even chance to become the “growth engine” that could make 2014 a 3% or more recovery year in the U.S.
But it will necessitate the reversal of America’s “untimely excesses” of climatic and strangulating financial regulations sure to throttle the opportunities in energy resource development only the U.S. today possesses.
Ethanol blend already obsolete?
When Ethanol was introduced as a gasoline blend during President George W. Bush’s second term, the rationale was the previously used MTBE (methyl tertiary-butyl ether) was cancer-inducing and not helpful to mileage effectiveness.
Since that little-known additive had no lobbying support from the phalanx of influence peddlers ready to descend upon Congress, the ethanol mandate was introduced eight years ago utilizing taxpayer dollars provided by a substantial subsidy for every gallon of gasoline. This corn-based mandate now has been upped to 10% of every gallon used and is protected from cheaper sugar-based Brazilian imports with an additional 50-cent import tariff.
Since much of America’s corn production derives from farmlands owned by such agri-businesses as Archer Daniel Midlands, Conagra, etc., the utilization of corn has greatly hyped that food product’s revenues as well as elevated its prices. The food shortages that were caused by the ethanol impact in the poverty-stricken segment of the world were brushed aside by a Congress sold on the benefits of greater energy productivity at a time of reduced U.S. oil production and refining, while greater amounts of oil were being imported primarily from the OPEC monopoly.
Although oil/natural gas and such derivatives as jet fuel, diesel, heating oil and derivatives from the “fracking” resolution are on the way to making ethanol obsolete, an even greater mandate (as a percentage of each gallon of gas) is getting ready to kick in at the first of the year. Not a word as to the obsolescence of ethanol (especially under these changing circumstances) is heard from the hallowed halls of Congress and certainly not from the billion-dollar lobbies that dominate many of the economic issues Congress deals with.
While it might be superfluous at this point to comment about ethanol’s greater flammability factor and the overproduction that has rendered that supplement’s overproduction cost-ineffective, it would be heartening to hear the House or Senate sub-committees on energy reopen hearings on America’s judicious use of energy resources in light of the most recent fracking successes.
It may be one of the great flaws of America’s 435 congresspersons and 100 senators that they have little conception to what makes America’s world-leading super-economy tick and how to best let the private sector’s entrepreneurial thought leaders state their case in this rapidly changing arena of energy development.
This would be true as well in other areas of expertise that entrepreneurial spokesmen can state much more effectively. They would do a far better job than those paid professionals who testify for those sectors in which they have never participated.
U.S. exports set record
With the U.S. June trade deficit shrinking to a multi-year low of $34.2 billion (a $10 billion decrease from May and lowest since October 2009), U.S. exports stole the show by posting the highest level of goods and services ever generated by this nation in a single month. Even shipments to the depressed European markets hit a positive tone.
The setting of this record is all the more remarkable in that it was accomplished without the benefit of increases in aircraft or automotive shipments, which tend to distort peaks and valleys due to their disproportionate impact as a whole.
In viewing the favorable export sector as a component of America’s global gross domestic product leadership, it now has reached the 12% level, exceeding the revenues generated by other commercial/industrial sectors of America’s overall economic gross domestic product results. This puts the U.S. well above runner-up China by more than a 2-to-1 ratio. In putting this country’s ongoing export success in overall economic context, there are two major factors that are highly significant, but hardly given consideration in the ongoing national media dialogue.
The U.S. historically has shown little interest in exports throughout its 230-year history due to its preoccupation with phenomenal internal growth in land, population and domestic markets.
As a major shift into low-cost manufactured and natural resource goods occurred in the 1970s and 1980s (accelerated by the overseas shift of American factories), it had been assumed the ever-mounting U.S. trade deficit (reaching a monthly average of $75 billion in the pre-Great Recession days) was becoming a permanent component of America’s growth economy. Even then the severe drop-off to half the monthly trade deficit total was considered a temporary expedient of the deep recession from which the U.S. and most of the rest of the world was suffering. Ironically, June’s low U.S. trade deficit results mirrored those during the depth of the Great Recession.
What also should be emphasized is this favorable turn in America’s overall international trade balance was only marginally affected by energy imports from the OPEC oil monopoly, with a $500 million monthly decrease from the previous month. It’s all but certain America’s current “fracking” success will practically wipe out this deficit within the foreseeable future.
When comparing June 2013 vs. 2012, what stands out is the strengthening of America’s capital goods shipments such as construction and farm machinery. Technological innovations such as robotics, aircraft, automotive and other transportation services, as well as U.S.-owned intellectual property achievements have added to the export total.
Although some observers may view these positive results as a temporary aberration, the current oil derivatives (gasoline, heating oil, diesel, jet fuel) already being exported to Mexico and Central American nations will be joined by the upcoming exports of natural gas and potentially West Texas Intermediate crude as both liquid natural gas and an eventual U.S. crude oil surplus hit their stride.
Even as Environmental Protection Agency restraints may slow these highly favorable economic developments, there’s a good chance the U.S. can foresee a positive trade balance before the end of the current decade.
California’s energy potential
During the mid-20th century glitter days of America’s climb to the peak of world economic leadership, California, the nation’s most populous and productive state, pridefully earned the slogan: “As goes the Golden State so goes the nation.”
This was no idle description as California gained its claim through a combination of global leadership in entertainment (Hollywood), technology (Silicon Valley) and a bountiful, broad-based agricultural sector that was the pride of the country’s massive farming potential.
With Southeast Asia having become the global driver of economic development, the major port cities of California (San Francisco, Los Angeles, San Diego) have proven ample in exporting as well as importing the expansive world trade generating in the teeming Pacific economic area.
Even its ideal climatic conditions, barring occasional earthquakes and fires, made it a major draw for retirement, tourism and convention business.
However, the econo-political downdraft of the past two decades projected a severe negative impact on the golden image so magnificently projected in previous years. Due to an overzealous California Air Resources Board and its supportive environmental zealots, the state’s economic fortunes have reversed and inspired downgrading of oil production, cutting off water from within central California farmlands and leveling confiscatory state taxes that have either driven businesses out or severely undermined their growth.
However, a new alliance in both the California Assembly and Senate with the seeming tacit approval of Democrat Governor Jerry Brown is pushing back against the state’s anti-business combine. A proffered
moratorium to curb fracking in the Monterey Shale, the nation’s potentially largest shale, was defeated by an alliance of Republican legislators together with Democrats representing the rich central states’ farm areas.
Of even greater importance is the “marriage of convenience,” bringing together industrial labor union leaders and their rank-and-file with the pro-business Republicans to upend the “negativism” that has threatened California’s (and thereby the country’s) economic future.
A University of Southern California study that indicates tens of thousands of additional jobs as well as $50 billion of additional revenues by 2020 if the Monterey Shale is developed, lends credence to the belief in California’s future.
Even more, there appears to be a widespread awakening among the millions comprising the American labor pool. They have come to believe that Obamacare and ever-stricter Dodd-Frank financial regulations could prove permanently injurious to millions of future American jobs, especially in the arena of energy development. This alliance could lead to a major shot in the arm that provides America’s harassed and ailing full-time jobs with resultant benefit packages, thus replacing the threat of those positions becoming part-time.
This likely will precipitate a 2013 fiscal year-end confrontation and a showdown on Obamacare that is due to go into effect by the beginning of calendar year 2014. The relative nearness of the midterm elections also will cast an ever-darker shadow as the Nov. 4 election date approaches and ushers in more pro-business representatives.