From: John Conover <john@email.johncon.com>
Subject: forwarded message from John Conover
Date: Thu, 20 Feb 1997 13:27:53 -0800
If you do a simple regression analysis on China's GDP, and compare it
to a regression of the US GDP, you will find that China will surpass
the US as the World's largest economic power by 2012. (Fractal
analysis gives 2005.) If Mexico can keep up its GDP growth, (and the
US maintains its 2+ percent growth,) then Mexico will surpass the US
by 2033. (Fractal analysis gives 2022, or so.)
Something to think about when discussing any issue that impacts
productivity.
John
BTW, there is a lot of discussion between monetary policy economists
as to why the industrialized countries are doing so poorly, (ie., US,
Canada, UK, Germany, France, Japan, etc.,) while the "emerging
economies" are doing so well, (specifically, the Asian "Tigers.")
Concensus is, (and it is arguable,) that the industrialized economies
do monetary policy that prioritizes stability, (ie., low volatility in
the GDP, in an attempt to stabilize the economy at low employment
levels,) while the emerging nations prioritize monetary policy for
growth, ie., domestic economic expansion. It is enigmatic, since the
two policies are mutually exclusive, and striking a compromise between
the two is a prescription for mediocrity, ie., you will do neither,
growth or stability, well. (Recently, there have been some
applications of fractal analysis-similar to the concepts of programmed
trading-to the issue, which would tend to indicate that there is an
optimal operating point that minimizes volatility, while, at the same
time, maximizing growth. If it turns out that this is the case, then
it would also imply that positive feedback at the national economic
level could potentially exist, and we would have to scrap the larger
part of economic/monetary theory. Specifically, that monetary policy
can be effective, which many economists have maintained for years.)
BTW, if you had invested in the Bolsa prior to the fiasco with the
Peso in 1994, you are getting pretty close to making all your money
back. If you sold out in late November of 1994, (when the Shannon
probability of the Bolsa was dropping to near 0.5-like you should
have,) and re-invested in mid 1995, (when it was increasing to near
0.5-like you should have,) then you have made a lot of money. As a
tutorial point, note that the average growth of equity values on the
Bolsa, (what you look at in a graph of a stock's pro forma,) did not
change much, on average, over this time interval. What did change was
the volatility, (as measured by the root mean square of the day-to-day
fluctuations in equity values,) which increased dramatically over the
same time interval. And since the Shannon probability is linearly
related to the to the average divided by the root mean square of the
day-to-day fluctuations, it decreased. Today's Shannon probability is
the likelihood that an equity's value will increase tomorrow. So,
bottom line, the graph watchers have payed a lot of money to the folks
who do quantitative analysis, ie., financial engineering.
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Message-ID: <"XqtZO1.0.N97.AKA3p"@netcom6>
From: John Conover <conover@netcom.netcom.com>
To: John Conover <john@email.johncon.com>
Subject: Mexico's economy roars back from recession in 1996
Date: Wed, 19 Feb 1997 15:32:52 PST
MEXICO CITY, Feb 19 (Reuter) - Mexico on Wednesday
announced a surpisingly strong 5.1 percent growth rate in 1996,
suggesting the economy roared back from the crushing recession
that followed its 1994-1995 peso crisis.
The good news sent Mexico's stock market skyrocketing, but
it was met with little euphoria among ordinary citizens, who
are still trapped in a quagmire of high debts and low wages.
The government had originally forecast a conservative
growth rate of 3.0 percent in gross domestic product (GDP) in
the year, and applauded the better-than-expected results.
``The economy showed much more steam than anyone expected,
and that is good news,'' Finance Ministry spokesman Alejandro
Valenzuela told Reuters Financial Television.
Strong growth in the industrial sector, expecially in
manufacturing, helped pull the economy out of its slump.
By the end of the year, much of the growth came in the
services sector, particularly in retail spending.
``The recovery has certainly been much faster than anyone
would have thought a year ago. Now the challenge is to keep the
rate at 5 percent or higher,'' Alonso Cervera of Mexican
brokerage house Interacciones said.
After the peso crashed in late 1994, Mexico went into a
deep recession. The economy shrank 6.2 percent in 1995,
throwing thousands of Mexicans out of work and closing many
businesses.
The government responded with a strict fiscal and monetary
policy that helped stabilise the peso and restore calm to
financial markets, even if it left the country saddled with
high interest rates.
Fourth-quarter data showed the economy posted a sizzling
7.6 percent growth rate, the sixth straight quarter of growth
and the strongest single three-month increase since 1981.
Imports rose 24 percent in 1996 over the year before, and
over 820,000 new jobs were created in the formal sector of the
economy, the government said.
Although the economy bounced back last year, in large part
on the back of bullish exports, many consumers are still
feeling the pain.
Analysts say Mexico is in the early stages of a recovery in
private consumption, but that this important sector is
gradually recovering and could be the motor of growth in 1997.
``They were very good numbers, and higher than expected for
the fourth quarter. GDP ended the year on a very strong note,''
Nomura Research economist James Nash said.
The government is estimating growth of about 4.0 percent in
1997, and economists agreed the rapid pace of expansion this
year will be much more moderate.
``We will see much more modest sustainable growth in 1997,''
said HSBC James Capel economist Gray Newman.
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John Conover, john@email.johncon.com, http://www.johncon.com/