Archive for November, 2007

Healthcare Costs — Better Living Through Chemistry

Kurt Brouwer November 30th, 2007

This article addresses a new diagnostic tool that promises to make early detection of health problems vastly simpler, less intrusive and more reliable. I am discussing it because it is an example of the almost daily improvements we see in healthcare. Take this advance along with dozens and hundreds of others and we begin to see glimmerings of a far different health landscape [emphasis added below]:

A new blood test promises to spot cancer and Alzheimer’s long before you get sick (Popular Science Magazine, November 2007, Kalee Thompson)

‘By the time a doctor diagnoses you with cancer or a neurodegenerative disease, you may have been living with it for years-a troubling fact, given that early detection is the most important factor in successful treatment. Now, Power3 Medical Products, a biotech firm in Houston, Texas, has developed simple, low-cost blood tests for breast cancer, Alzheimer’s and Parkinson’s that will allow physicians to spot disease the moment it shows up in a patient’s body-years earlier than today’s most advanced technologies can catch it. “With our tests, you don’t have to wait around for 6 or 10 years [to spot the problem],” says CEO Steven Rash…

…The new breast-cancer test is much less invasive than a mammogram or biopsy. A doctor samples a patient’s blood and sends it to Power3′s lab, where scientists search for 22 irregular proteins that Power3 has identified as early signs of breast cancer. Initially the test will debut in 40 clinics that treat women at high risk for breast cancer, Rash says. Women under 40 years of age with high-risk genetic or family factors should benefit the most, he adds, because their denser breast tissue makes mammography significantly less effective. Scientists have been working to develop proteomic tests for the past three years, but they were derailed by inconsistent test results. Early data indicate that Power3 has overcome this challenge. In a blind trial of 60 blood samples provided by Mercy Women’s Center in Oklahoma City, the test scored a 97 percent rate of identifying cancer in samples from diagnosed patients and a 93 percent rate of correctly identifying healthy women as cancer-free. A second 100-patient trial will be completed by the end of the year. In comparison, mammograms miss up to 30 percent of breast cancers, and 75 percent of the biopsies performed after an irregular mammogram prove benign…

Continue Reading »

Economy Booms In Third Quarter

Kurt Brouwer November 29th, 2007

When we hear tales of the looming recession in the nightly news, it is hard to grasp that the actual performance of the economy is very impressive. In fact, the economy boomed in the third quarter. No exaggeration. It boomed, as this report from the U.S. Bureau of Economic Analysis (BEA) indicates:

‘..Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.9 percent in the third quarter of 2007, according to preliminary estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.

The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 3.9 percent…

…The increase in real GDP in the third quarter primarily reflected positive contributions from exports, personal consumption expenditures (PCE), private inventory investment, equipment and software, federal government spending, nonresidential structures, and state and local government spending that were partly offset by a negative contribution from residential fixed investment…’

I have to admit that the revision surprised me. The BEA recently estimated third quarter real (after inflation) GDP growth to be 3.9%, see Economy Booms Despite Credit Crunch. At the tail end of that post I wrote this (and boy was I wrong):

Continue Reading »

Federal Reserve Forecasts Future Growth

Kurt Brouwer November 27th, 2007

James Pethokoukis at U.S. News’ Capital Commerce Blog posted this on the Federal Reserve’s new system of forecasting future growth [emphasis added below]:

Bernanke Puts a Low Speed Limit on Growth (Capital Commerce Blog, November 20, 2020, James Pethokoukis)

The Federal Reserve released its first quarterly economic forecast today, projecting economic growth, unemployment, and inflation for the next three years.

‘Here are the Fed’s numbers—economic growth: 1.8 to 2.5 percent for 2008, 2.3 to 2.7 percent for 2009, and 2.5 to 2.6 percent for 2010; unemployment: 4.8 to 4.9 percent for 2008, 4.8 to 4.9 percent for 2009, and 4.7 to 4.9 percent for 2010; core inflation: 1.7 to 1.9 percent for 2008, 1.7 to 1.9 percent for 2009, and 1.6 to 1.9 percent for 2010.

My take: While that may be a great forecast for bond investors—unspectacular growth with low inflation—most Americans should be less than thrilled by it. Here is the key sentence from the report: “Economic activity was projected to expand at a pace broadly in line with participants’ estimates of the rate of expansion of the economy’s productive potential in 2009 and to continue at much the same pace in 2010.”

In other words, growth at 3 percent or more is inflationary. Yuck. Compare those numbers with the 1983-1990 Reagan boom when annual growth in gross domestic product averaged 4.1 percent. The Clinton boom, too, was right around 4 percent. If Bernanke and company are right, that’s all the more reason for America to adopt policies to make us more innovative and productive so the economy can grow faster than the low-ball Bernanke speed limit…’

Pethokoukis nails the point that we need to emphasize policies that will encourage future economic growth. We have benefited from solid financial growth for the past 25 years and it is imperative that we continue the policies that brought us that growth. We also have to avoid those who call for protectionism, higher tariffs and higher income taxes. Tariffs and income tax rates are falling around the globe and we have to remain competitive in both areas.

He also points to what is, I believe, an error in the Fed’s thinking. That is, GDP growth above 3% would be inflationary. I don’t think that is true and I hope they amend that policy because economic growth of 3% is eminently achievable without high inflation in my opinion.

Ed Yardeni — Economic Comparison of Thanksgiving 2002 vs. 2007

Kurt Brouwer November 26th, 2007

Continuing in our positive mode following the Thanksgiving break, we bring you economist Ed Yardeni’s comparison of our economy on this Thanksgiving Day versus that of the year 2002. Five short years have made quite a difference and Mr. Yardeni is grateful for eight serious improvements and one tongue-in-cheek mystery point:

Nine Things For Which To Be Thankful (Real Time Economics Blog, November 26, 2020)

‘Forecaster Ed Yardeni’s list…with a kick in the shins for Alan Greenspan.

(1) The S&P 500 is up 53% since Thanksgiving 2002. The current bull market has been the third best since 1960.
(2) The 10-year Treasury yield was near 5.5% in early 2002. It is down to 4.0% this morning.
(3) The core CPI inflation rate in the US has been remarkably steady around 2%, and down from 2.6% to 1.8% on average among the 30 members of the OECD, despite the soaring price of crude oil, which is up from $27 a barrel to $99 a barrel since Thanksgiving 2002, based on West Texas Intermediate price.
(4) Notwithstanding all the nonsense about outsourcing, the unemployment rate was down to 4.7% in October vs. 5.7% five years ago as payroll employment rose 8.1 million to a record high of 138.4 million.
(5) Real disposable personal income was at a record high in September, up 16.0% since September 2002. Real per capita income is also at a record high and up 2.1% per year, on average, over the past five years.
(6) Real GDP is up 15.3% over the past five years.
(7) In the US, since the end of 2002, household net worth is up nearly 50% to a record $57.9 trillion.
(8) World exports have doubled since November 2002. The OECD world industrial production index is up 30% since then. Today, roughly three billion people around the world are aspiring and perspiring to improve their standards of living…’

I’ll leave you guessing as to number nine. You’ll have to go to Real Time Economics to figure it out. The point is not really related to economics though, but rather it’s a mild snarky comment about former Fed chief Alan Greenspan, who has been all over the media of late.

In all fairness, the comparisons Yardeni cites are not surprising given that the economy in late 2002 had begun a recovery from a short recession and the worst stock market since World War II, not to mention the economic devastation of the terror attacks of 9-11. Nonetheless, this list does a good job of putting in perspective current rates of unemployment, interest and inflation.

However, the most amazing statistic in my opinion is number seven, household net worth. For more on this, see $57.9 Trillion — American Net Worth.


Good News on the Declining Dollar, Savings & More

Kurt Brouwer November 24th, 2007

The declining dollar has generated lots of anxiety even though this type of decline is nothing new. It has also drawn much speculation as to its origin, when in fact that should be quite obvious (see How Far Has the Dollar Fallen? And Why? and The Unloved Dollar) because our currency falls when short-term interest rates fall. With all the ink that has been spilled and all the pixels deployed in online media, this is one of the few articles that clearly spells out what is going on. The columnist, Gerard Baker of the Times Online, also succinctly ties in our much-decried savings rate and the phenomenal increase in U.S. household net worth. It’s quite a piece [emphasis added]:

The dollar’s in decline. Great news! (Times Online, November 24, 2020, Gerard Baker)

‘…Much has been written about the eschatological symbolism of the dollar’s fall and the financial problems that have accompanied it. The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown. And all this is supposed to reflect in turn a seismic shift in the balance of global economic power away from the US and towards Mighty Europe and Emerging Asia.

Let me take a moment in this season of cheer to raise a few objections. The first and most obvious point is that there are many reasons why currencies move against each other, often in quite dramatic fashion. Seismic, epochal, geopolitical shifts are not usually the best explanation.

Rather, more prosaic facts such as differentials in countries’ short-term interest rates, the rebalancing of temporary financial and economic imbalances and sudden changes in demand for and prices of commodities such as oil produced by particular countries — all of these help explain the dollar’s recent decline.

US interest rates are on a downward trend, while European rates are steady and might even rise. The US still has a vast trade deficit, which is being reduced by a continuing fall in the value of the dollar…

…For the historically short-sighted, let’s remember we have been here before. Between 1985 and 1995, the dollar declined by 43 per cent against the world’s big currencies — somewhat more than it has in the past six years. That period was also marked by dire proclamations of the end of US economic power. But it turned out that in those years the foundations were laid for the strongest period of US economic growth in the past 35 years…

Many people view the six-year decline of the dollar with fear and anxiety and that’s unfortunate. The dollar has fluctuated in a similar fashion in the recent past with no harm done. In fact, there are some tangible positive aspects of the falling dollar — then and now — most notable of which is the sharp reduction in the U.S. trade deficit.

Continue Reading »

Next »