Three Vital Economic Trends

Quote of the day:
“When you grow up in a dysfunctional household, you quickly tune in to what's going on under the surface. From age five or six, I was scanning, figuring out all the stuff not being discussed."
--Sue Grafton

Quote of the day no. 2:
“We’re losing eight children and teenagers a day to gun violence. As far as young people are concerned, we lose the equivalent of the massacre at Virginia Tech every four days.”
--Marian Wright Edelman

Morning Music:
We began with Debussy’s Images and Dances for Harp and Orchestra in a wonderful Phillips LP from the 1970s with the Concertgebouw Orchestra of Amsterdam. Then we listened to a Bach Cantata (no. 69) on a fine old Erato recording. Feeling adventurous, I put on Mahler’s Third by the London Symphony--the Nonesuch recording that Gramophone magazine still adores. Mahler was too much for the morning, so I took it off and went back 600 years to Dufay. Then the Mendelssohn Octet (another Erato) and then the Sinead O’Connor Irish CD from 2002.

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We are regaled two or three times each month with news stories about surveys of home prices. We are hugely interested in these reports.

At the same time, there are three more-significant economic trends that we don’t seem to be much interested in.

The dollar is at a 25-year low, measured against the British pound, the euro and most international currencies. If you have traveled outside the U.S. recently, you’re very aware of this.

The dollar being so low gives other nations even more incentive to invest in dollars and dollar-denominated assets. A "San Diego Union Tribune" financial columnist cleverly pointed out recently that the biggest U.S. export to China is dollars. China has accumulated $1.2 trillion in foreign-exchange reserves, and that figure is going up by the hour. Interesting tidbit: in order to buy dollars, the Chinese are simply printing more of their own currency, the yuan.

Second economic trend: long-term interest rates are lower than short-term rates. It’s been this way for several months. The consequence is obvious: it is more advantageous to borrow long-term than short. And, for savings, it is more advantageous to invest short-term than long.

Third, the Dow Industrial Average is hitting all-time highs. This is a result of the first two trends, and also because corporate earnings seem to be getting stronger.