With President Obama touring Asia, Asian leaders have a bit to say about the global recession.  Some comments from an APEC meeting in Singapore, led off by World Bank president Zoellick as reported in the Wall Street Journal:

Several expressed concern that the global stimulus, especially the flood of liquidity pumped out by central banks, could create asset bubbles. “What central banks did in the face of the crisis is just open the tap of liquidity,” the World Bank’s Mr. Zoellick said. The increased liquidity could lead to inflation, such as in commodities. Asset bubbles “could undermine confidence in 2010,” he said.

Hong Kong Chief Executive Donald Tsang said he was he was “scared” that the U.S. may be following the example of Japan — tackling its recession with overly loose policies that could, in turn, inflate asset bubbles.

Singapore Prime Minister Lee Hsien Loong said he wasn’t sure the recent surge in financial markets was sustainable. “In Asia, we have seen stock markets go up, we have seen property markets go up,” Mr. Lee said. “We have to live with it for now and manage the difficulties, but if it becomes a significant and broad, widespread bubble … this will become a serious problem.”

Meaning: we could be — indeed we seem to be — already climbing back up an “asset bubble.”  Where does this take us?  Right to the brink of another crash.  Time for exceedingly prudent state budget making since there is little we can do.

So far, energy costs have not been central either to the analysis of our current Great Recession or of the recovery now struggling to announce itself.

This article in London’s Guardian pushes the cost of oil back to center stage.  The news: the US government during the Bush administration (should we call it the Cheney-Bush administration?) apparently lobbied the International Energy Agency to underplay peak oil.  Result: IEA estimates show unlikely growth in oil production.  Note how much the forecast production relies on sources not yet known.

We’re not going to have to wait long.  As energy demand grows with economic recovery oil prices will climb, maybe into the stratosphere.

One more reason to expect an “L” of a recovery, one more reason for very cautious government budgets.

Update: study that chart for a minute.  Imagine what happens to us if the ‘not yets’ are not found.  We’re in for hard times soon.

Gloomy picture in the UK.  Expecting the 3rd quarter data to show a bit of growth signaling the technical end of the recession, the turnaround wasn’t there as noted by the Telegraph’s economics editor. This despite ‘quantitative easing’ (massive gov’t. spending) paralleling our huge stimulus efforts.  Here’s his chart.

London Times editors note that our economists are having a hard time forecasting — one more worry.

And click to continue to see a British comparison of this recession/depression with others since the 30s. Read the rest of this entry »

headed down?

Not necessarily says Washington Post columnist Robert Samuelson — see this sobering column.

His main points:

1. our youngest generations seem to be headed for a worse economic future, partly because
2. health care reform generally transfers resources from the healthier younger to the sicker older.

Samuelson sees signs of overall downward mobility — hitting our young generations hardest and lasting for a generation:

Downward mobility is possible. Expanding health spending would raise taxes (to pay for government insurance), lower take-home pay (to pay for employer-provided insurance) or increase out-of-pocket medical costs. Other drains also loom: higher energy prices to combat global warming; higher taxes to pay for underfunded state and local government pensions and repair aging infrastructure; higher federal taxes to cover deficits and payments to retirees (much of which reflect health spending). The pressures will undermine private living standards and other public services (schools, police, defense).

The young’s future has been heavily mortgaged. Taken together, all these demands might neutralize gains in per capita incomes, especially if the economy’s performance, burdened by higher taxes or budget deficits, deteriorated. One study by Steven Nyce and Sylvester Schieber of Watson Wyatt Worldwide, a consulting firm, examined just health spending. The continuation of present trends would result in “falling wages at the bottom of the earnings spectrum and very slow wage growth on up the earnings distribution. These dismal wage outcomes would persist over at least the next couple of decades.”

See the item below for more on the jobs-health connection.

In our interconnected world everything is connected to everything — that goes double for health care.

So a win in health care reform — more people covered, costs going down — is tied tightly to economic recovery.  That means a jobs recovery.

And that means we’re in trouble.  See this analysis by the Christian Science Monitor — “What will it take to bring back 7 million jobs?”

Here’s a back-of-the-envelope calculation: If jobs could grow at a mid-1990s pace of 3 million a year, it would take about five years. If jobs grow at a mid-2000s pace of 2 million a year, it would take a lot longer.

In the past, steep job losses have often been followed by strong rebounds in jobs. What’s different today is a historic erosion of household wealth: households amassed record levels of debt in the past decade, and then saw the value of homes and stock portfolios tank.

Against this backdrop, economists say the number of jobs needed is more than the government can afford to engineer.

A constant drive to create jobs will be part of the “new normal.”  How can health care reform help — and vice versa?

Patrick Hagen, CEO of Seattle Children’s Hospital writes in the Washington Post that they’ve actually cut costs and increased quality by attacking “waste.”  Hagen defines waste rather broadly:

…only 5 percent of what we do actually provides value. The other 95 percent? Waste. While this figure may seem absurdly high, waste includes everything in health care that does not directly address a patient’s health. Some waste is necessary: registering patients, keeping records, moving a patient. However, most is unnecessary: errors, waiting time, unneeded complexity and avoidable complications.

Hagen says this “transformational approach is a blueprint for fixing the nation’s healthcare system. He found part of his answer at Toyota, on car-production assembly lines:

Here at Seattle Children’s Hospital, we were burdened by a costly, inefficient health-care model, and we had to look outside the health-care sector to find a way to provide patients better access, better care and better service at lower cost. We found it, of all places, in the automotive industry; the hospital adapted the principles of the Toyota Production System into a program called Continuous Performance Improvement (CPI). Improving overall quality is the goal — reducing waste is the means.

From the beginning, variation in care processes was the greatest source of waste. By standardizing and error-proofing, the quality of care was improved while costs were lowered.

The estimable Robert Fisk reports in the London Independent that a group of nations — the Arab oil-exporting states joined by China, France, Russia, Brazil and others — have been secretly talking about replacing the dollar with a basket of currencies for global oil trading.  OMG to the max for the US.

Fisk notes the ramifications of this self-protective move away from the volatility and declining value of the dollar not only are a blow to the already-reeling US economy but possibly portend increased US-China conflict.

The independent editorializes “the end of the dollar spells the rise of a new order.”

But the significance of this development goes much further. Since the end of the Second World War the dollar has been the bedrock of world trade. The pre-eminence of the American currency flowed naturally from the economic dominance of the US. Virtually everyone traded with America so it made sense to use their currency.

But the US is not the dominant power that it once was. The financial crisis has left it hobbled with significant government and household debts and sharply reduced prospects for growth. Developing nations such as China, Brazil and India, on the other hand, have weathered the economic storm significantly better. So while this latest proposal is born of financial calculation, it is also a reflection of a new economic world order.

Mark this day on your calendar.  If these folks succeed we’re in for another huge blow to our economy — a fundamental reset.  One more reason to get our financial house in order — most especially including health care reform — faster than asap.

Update: Here is the Washington Post following with a useful survey of the pressures on the dollar. This underscores how precarious is our situation.

Steven Pearstein of the Washington Post writes one of the good economics columns. In this one, “a new bubble of the Fed’s creation” he offers some insights and cautions that make a lot of sense to me.   Highlights:

• Yes, the financial crisis has passed and the economy is growing again, but there’s a good chance that growth will be temporary …  a sustained recovery in 2010 isn’t looking very likely.
• To its credit, the Obama administration has never lost its focus on the goal of creating the conditions for sustained growth.
• Less encouraging is what’s happening on Wall Street. It turns out that all those bold and necessary steps by the Federal Reserve to prevent the financial system from collapsing wound up creating so much liquidity that it has now spawned another financial bubble.
• But the lesson I prefer to focus on is the one from this decade, which is that central bankers ignore financial bubbles at their peril. … As Alan Greenspan discovered, it is also a mistake for central bankers to assume that they can quickly sop up excess liquidity whenever they decide the moment is right.

Translation: a) the 2010 growth we’ve been counting on may not be there, b) the risks of the next bubble crash are already growing.  And c) banks and central bankers still don’t have this right.

Polls showed Obama’s approval ratings dropping during angry August — and sinking with him health care reform.

If the polls are to be believed that mood has shifted.  As the chart shows from this new New York Times/CBS poll, the dominant theme now is uncertainty:  people don’t feel like they know enough.

And I’ve lost the link, but I saw another major poll the other day showing that 3/4ths of people are tracking the health care issue closely or very closely.  That is an extraordinary degree of public focus on one issue.

That mirrors what I’m finding here in the district.  Almost everyone is engaged, few — including me — feel like they know everything they need to know as this historic quest unfolds day by day.

Where does this leave the politicians who are involved in the scrap?  Politico opines that there are so many polls reporting different results from different questions that the pols are uncertain where the public leans.

My recommendation for our national reps: note the high voter uncertainty and focus more on feeding good information to the public than trying to stampede them one way or the other.

For those of you wishing to hear from some experts, here is an excellent, 20 minute discussion online among three experienced researchers in health care economics. Note this is moderated by the now-famous Dr. Atul Gawande, Harvard surgeon and New Yorker author.

Click here.  Note that the discussion is sub-divided into 7 topical parts if you wish to skip around.

Definitely worth your time.