Tuesday, 20 October 2009
Guess ... (The Answer)
Guess what it is? ... answer in 5 days ... and its implication.
I have had very interesting comments...let's dissect first the answers provided by "Island Crow" and "Eric".
"Island Crow" : Unemployment rates?
Well, the trend is similar however in the opposite direction.
If we look at "statistics finland" last unemployment release data, We can construct the following chart, of which I have taken the pleasure to extrapolate a possible trend:
We are currently in phase (1), unemployement is growing as the demand is faltering and the excess capacity removed. Phase (2) is a stabilization of the unemployment growth due to low interest rates and government spending especially in the construction sector (Roads, Metro, Opera and all the possible way to keep afloat the construction sector with the tax payer money and supporting companies such as Lemminkainen and YIT to name few). In addition, as rightly highlighted by "Island Crow", there will be a wave of retiree that will, in some cases, be replaced by potential unemployed. However, as shown in phase (3), when all the stimulus bullets will be shot and when the european growth will resume its downward trend the unemployment will resume higher as witnessed during the early 90's.
Now, it is worth to notice that female unemployment is lower than the male unemployment during the bad time which usually reflect the contraction of the construction and heavy industry.
Talking about female and contraction. There was another interesting comment:
Eric : "HousingFinland's sperm count..."
Well, the trend may be similar however statitically it does not reflect the male sperm count in general. After some "theoretical" and "practical" research, it is known that the sperm count will decline overtime however you only need to have 1 to 2 successfull sperm hit on the ovary egg to fulfil your family ambition. What has to be remembered is "Quality over quantity" ;->, the picture below show probable evolution on "the count" overtime (note the statistics start just after the 1929 crisis to the next mild one of the 1990...in line with housingFinland spirit...).
So the man fertility in general is pretty strong...statistically.
Now how about the initial picture?
The picture reflect the "MFI loans to households in the euro area", (Chart 5, "Monetary policy, credit flows" by Bini Smaghi), and it is contracting very substantially and in a robust manner, not even reflecting the fact that government have flooded the market with tax payer money and the ECB interest rates are at all time low.
So no sign whatsoever of a consumer back to frenzy spending. Household seem not interested in contracting credit for large purchase. Something opposite of what happened during 2003 which had led to asset inflation.
So this chart is very important to follow, should it stay under the zero level, which mean contraction, then the deflationnary trend will be triggered and anchored.