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US GDP Growth: NOT What It Seems!

By   Shlomo Maital

I recently wrote a column titled: Why Can’t Economists Talk Straight?, in the Jerusalem Report. It was a book review of a book by a friend, an expert on behavioral economics. It explains why economists befuddle, use impenetrable jargon, and in general confuse and obfuscate.

     Here is a recent example.   US First Quarter GDP figures were headlined as: US economy growth surprises!   3.2% growth. Way above what was expected. It was predicted that a recession was on the way. But it’s not!   Yeeayyy!    This is what journalists wrote. I can understand that. They are not trained to read the economic X-Ray data. But economists?   Where ARE they?   Nowhere.

     The first quarter GDP news is BAD BAD BAD! Not good.   Here is why.

       A large part of that 3.2%   growth was “inventories”. Nearly a quarter. Without that, growth would have been 2.5%. Much worse ….. But what IS that inventory thing???

        Here is the straight talk.   GDP growth reflects what is PRODUCED   — not what is SOLD.   Some of GDP is sold. Some is NOT. So it is put into warehouses. This is then called ‘inventories’ or ‘inventory change’.  

       A whole lot of stuff was produced in the first quarter – but companies couldn’t sell it.   So cars, fridges, computers, motorcycles, appliances, etc. went into warehouses.  

       That is bad news. Because in the 2nd quarter, companies will sell off that inventory rather than produce new stuff. That will greatly reduce GDP growth rate.   In 2nd quarter, we will see numbers that begin to herald a recession. Trust me.   Set aside some money – we ARE heading for a slowdown.

      Now, is that bad news? Or good?     As we head toward elections in November 2020, a recession will help defeat Donald Trump.   People DO vote their pockets, to some degree. And the likely Democratic candidate Joe Biden is running a campaign to enlist support of working people.   Trump has not even begun to deliver on his promises to them. And they are beginning to get it. Moreover, Biden has pulled Trump’s chain, and got Trump to attack unions (dues-sucking!).  

       So bottom line:   NOT 3.2% growth, but 2.5% growth (subtracting inventories), to reflect what people actually BOUGHT. They are buying less. This is a slowdown signal.   I can find nowhere where this is widely and clearly reported. A great shame.

 

 

Make It Smaller, Cheaper, Better:

Democratizing Ultrasound  


By   Shlomo Maital

     Take a useful product. Make it smaller, cheaper. MUCH smaller and cheaper. In doing so you make it accessible to those in poorer countries.

     A lot of world-changing innovation works that way.   Take for instance Butterfly (New York Times, front page, April 18 2019).   “Hope in the palm of a hand”.   Butterfly Network is a Connecticut company that makes a hand-held ultrasound scanner called the Butterfly iQ.   It is about the size of an electric shaver. It is battery-powered, and is based not on piezoelectric crystals (used in nearly all ultrasound devices) but instead on microchips, far more durable. Butterly iQ won’t break if dropped. The target market: doctors and nurses who can afford a $2,000 device that “fits in a coat pocket and is as portable as a stethoscope”.

     The NYT article, by Donald McNeil Jr. and Esther Ruth Mbabazi, shows how this device has vast potential in Africa, Asia and Latin America, where conventional X-ray machines are miles and miles away and are often inaccessible. The article shows how Dr. Michael Cherniak counselled Rodgers Ssekawoko Muhumuza, a Ugandan clinical officer he was training, in using the device, to diagnose early-stage pneumonia in a six-year-old.   Rodgers prescribed antibiotics, and Dr. Cherniak approved.

       I was privileged to work with GE Ultrasound, in Haifa Israel, which began as an Israeli startup acquired by GE.   The entrepreneurs initially developed a PC-based ultrasound device, cheaper and smaller by far than the existing device.    They did this based on faith, that PC computing power would ultimately be sufficient – and it was. The key was image-processing software, that sharpened the ultrasound image a lot, developed by a genius software engineer.   Next, the development team converted the device to work on a laptop.   And now, in the US, Butterfly has slimmed it all down to the size of a mobile phone.

         Innovation is often not just about new inventions, but about making existing inventions accessible to those with low income, and low accessibility to urban medical care and devices. Almost by definition, things that are smaller are often also cheaper, and of course easier to transport.

     Kudos to Butterfly and founder   Jonathan Rothberg. He pursued the goal initially, because one of his daughters had kidney cysts that required regular ultrasound scans. One of his backers was the Bill and Melinda Gates Foundation.   “Two-thirds of the world gets no imaging at all,” Rothberg noted. “When you put something on a chip, the price goes down and you democratize it.”

When Democracy Breaks: Understanding Brakes-It (Brexit)
By   Shlomo Maital

    Are you puzzled by the Brexit fiasco? As are the Brits themselves – and the rest of the world?

   I spent a year in Manchester, UK, studying economics, many years ago, and came to like and understand the British people. Here is my ‘take’ on Brexit.

   British democracy is built around its Parliament. There are 650 members of Parliament, elected by parliamentary district. There are two main parties: Labor and Conservatives. Liberals were strong for a while, then disappeared – now there is DUP (Northern Ireland) and SNP Scottish Nationalists. So there has been fragmentation, as there is in nearly all democracies, and above all, splits WITHIN the two major parties, Labor and Conservatives.

     I love watching question session in the British Parliament. “The right honorable member from Dipsy-Doopsy has clearly failed to understand the essential elements of this issue”.   Polite debate, sometimes raucous, but real intelligent debate, unlike in many Parliaments, and strongly contrasting with, say, Israel’s Knesset.

     But here is the problem. British democracy is adversarial.   Labor vs. Conservative. Them against us.   Usually this works. People vote, and choose between them decisively.

     Until now.  The governing Conservatives had a bare majority, with the help of DUP — and then basically lost DUP support. So they lack a majority.

     The Brexit referendum was very close, 51% for. The slogan of the “for” was: Take Back Control. That made stopping migrants the key issue. People wanted to stop the flow of migrants across the English Channel. But what about the other stuff that came with leaving the EU?   Northern Ireland-Ireland border? Trade/ auto plants? Investment? Foreign workers? Foreign residents? British living in Spain?

     PM David Cameron, at the time, OK’d the referendum because he was sure it would be defeated. He opposed Brexit. He lost. And the chaos began.  Because Cameron had no plan for leaving the EU.  None.  People voted for leaving, without knowing how it would be done.

     What is needed now is compromise, collaboration. WITHIN the Conservative Party, the two wings – hard Brexit and soft Brexit – have to join together and agree. WITHIN the Labor Party, the two wings, ‘stay’ and ‘leave soft’ , have to agree.

     Finally, at the 12th hour, PM Theresa May has offered to sit down seriously with opposition leader Jeremy Corbyn. To bargain.   But in an adversarial system, them against us, and at a time when both of the major parties are internally divided, the chances of an agreement are slim.  The two leaders deeply despise each other. What are the odds they can agree on anything, even the time of day?

     We’ve had a dozen votes or more in Parliament – and not a SINGLE one has generated a majority for anything! Except, perhaps, not leaving without some kind of agreement.

     So the odds now are Britain will crash out of the EU in early May, or before, without any real orderly agreement. It will be less chaotic than many warn, but very very harmful to Britain’s economy and future. Because there is no Parliamentary majority for Anything. 

    And most of all, Britain’s image as a paragon of democracy, a good place to invest, and London above all as the world’s financial capital, all have suffered irreparable damage.

   Democracy is great. Until it breaks. British democracy broke, because an adversarial system seemed unable to adapt to become a collaborative one – let’s get together and solve this. Even when the cost is infinite – collaboration seems well beyond the current Parliament.

   Brexit? Or Breaks-It?   Very sad. And just watch the dictators – Putin, Trump and others – rub their hands in glee as the EU comes apart.

Six Questions: Toward a Mindful Life

By   Shlomo Maital

I found this wise advice at a website called mindfulentrepreneur:

How to re-examine the story of your life – and rewrite it(?)

  • What is it that you’re truly good at?
  • What do you know or do at least a bit better than the others around?
  • What type of issues do people approach you with?
  • In what areas are you usually able to provide meaningful help?
  • What are you known for?
  • What activities give you pleasure even if you’re not rewarded for them in any way?  

 

 

The website goes on: “Try to identify that one special ability you have and cherish it. Use it whenever you can, despite not being seen. And don’t forget to remind yourself that the boomerang of positive energy you’re sending out to the universe will one day, sooner or later, come back to you, with multiplied force.

And it ends:

   “You’re the sole author of the story of your life. Make it an inspiring one to read.

In teaching creativity, I’ve challenged a great many young people to search deep inside themselves and find their true passions — and then pursue them.  For some it has worked.  And it gives me a lot of satisfaction.  I plan to keep doing it.  

    If by a huge cosmic error I reach the gates of heaven and am challenged there, I plan to say,  I tried to help people write their own life stories, rather than let other people write them on their behalf.   It just might work. 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
April 2019
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