Category Archives: economics

Mars’ GDP Triples in Martian 3Q

Six Earth months, or rather, one Martian quarter has passed, which means it is time once again to estimate the red planet's gross domestic product!

Mars... I can't believe I'm back on Mars.

As the Martian economy completes the third quarter for which we've estimated its planetary GDP, we find it is humming along after having run into a rough patch during the previous Martian quarter. Starting from Earthdate 7 July 2022, robotic mining operations have proceeded without significant technical interruption and the Perseverence rover has resumed collecting rock core samples. This activity followed nearly four Earth months with no sample collection when the rover traveled from the Octavia E. Butler Landing/Ch’ał outcrop where it drilled its previous core sample to the sample-rich geology of the Delta Front within the Jezero Crater.

The rover drilled nine samples during the Martian third quarter, with the samples placed into inventory pending their planned export to Earth. With a total of seventeen samples, we now have the following revised GDP estimates for Mars' first and second Martian quarters and an initial estimate for the third Martian quarter:

Martian GDP Estimates (Constant 2021 U.S. Dollars)
Martian Quarter First Quarter Second Quarter Third Quarter
Approximate Earthdates 12 Jul 2021 - 31 Dec 2021 1 Jan 2022 - 21 Jun 2022 22 Jun 2022 - 11 Dec 2022
Estimated GDP $494,430
($110,780 - $878,080)
$296,658
($66,468 - $526,848)
$889,974
($199,404 - $1,580,544)
Revision Level Third Second Initial

We estimate Mars' GDP tripled its previous quarter's revised GDP total during the planet's third quarter, falling just shy of $900,000 in terms of constant 2021 U.S. dollars. At present, we're valuing the two regolith samples collected by the Perseverance rover the same as the seven rock core samples it collected during the Martian third quarter in the absence of better valuation data for it. We're also assigning a minimal value to the Martian atmospheric sample the rover collected and stored during the Martian first quarter (in August 2021), given the very low density of the Martian atmosphere and the low premium of $50/gram given to Martian meteorites on Earth determined to have trapped atmospheric content within them.

Looking ahead to Mars' future export economy, NASA and the European Space Agency reached an agreement to establish a sample transfer depot at the Three Forks location within Mars' Jezero Crater. The Perseverence Rover will cache its full inventory of rock and atmospheric samples at the Three Forks Depot before their future export.

Unfortunately, the government space agencies have pushed back their planned export operations, with deliveries to Earth now delayed from 2030 to 2033. They've also changed their plans for how the samples will be recovered before their transportation to Earth:

... the Mars Sample Return campaign will no longer include the Sample Fetch Rover or its associated second lander. The Sample Retrieval Lander will include two sample recovery helicopters, based on the design of the Ingenuity helicopter, which has performed 29 flights at Mars and survived over a year beyond its original planned lifetime. The helicopters will provide a secondary capability to retrieve samples cached on the surface of Mars.

The ESA Earth Return Orbiter and its NASA-provided Capture, Containment, and Return System remain vital elements of the program architecture.

With planned launch dates for the Earth Return Orbiter and Sample Retrieval Lander in fall 2027 and summer 2028, respectively, the samples are expected to arrive on Earth in 2033.

The following three-minute video describes the final stage for how the samples will be delivered to Earth during the final stage of their transport.

Previously on Political Calculations

Atmospheric CO₂ Suggests Global Economy Gained Steam in 2022-Q3

September 2022 saw the global economy gain apparent strength for the third consecutive month.

That assessment is indicated by the continuing rebound in the rate at which carbon dioxide is being added to the Earth's atmosphere during the third quarter of 2022. That new upward trend coincides with increased economic activity in China, by far the world's largest producer of carbon dioxide emissions, which has been lifting its government's latest economy-depressing zero-COVID lockdowns and has fired up coal-fueled power plants to promote its "energy security" to recover from a fossil fuel shortage.

It also coincides with improvement in the U.S. economy following the country's "technical" recession that saw its real GDP shrink during the first half of 2022. Though it has the world's largest economy, at less than 46% of China's output, the United States ranks as the world's second largest national producer of CO₂ emissions.

The latest update to Political Calculations' chart illustrating the rate at which CO₂ is accumulating in the Earth's air shows the results of the rebounds taking place in the world's two largest economies.

Trailing Twelve Month Average of Year-Over-Year Change in Parts per Million of Atmospheric Carbon Dioxide, January 2000 - September 2022

The big question now is how long might that uptrend last? Signs the global economy is slowing as central banks impose rate hikes in a "synchronized" effort to restrain inflation suggest the pace of CO₂ accumulation in the Earth's atmosphere may soon start falling again. That's because producing that outcome is expected to throw much of the world's economy into recession, where a global economy that's shrinking will emit less carbon dioxide. That die would seem to have already been cast, especially with the Chinese government committing to continue and expand its economically destructive "zero-COVID" lockdowns and a developing recession expected in the U.S.

Update 14 October 2022

Two late breaking stories regarding the state of China's economy confirm Political Calculations' analysis. Here are the headlines:

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Text File]. Updated 5 October 2022. Accessed 5 October 2022.

Rate of Atmospheric CO₂ Accumulation Points to Rebound for Global Economy

August 2022 saw a rebound in the rate at which carbon dioxide is being added to the Earth's atmosphere. That change directly follows July 2022's rebounds for the U.S. and China following months of sluggish economic activity in both countries during the first half of 2022.

That's the latest development for the global economy as measured by atmospheric carbon dioxide concentration data recorded at the remote Mauna Loa Observatory. The rebound can seen in the latest update to Political Calculations' chart revealing the rate at which CO₂ accumulates in the Earth's air.

Trailing Twelve Month Average of Year-Over-Year Change in Parts per Million of Atmospheric Carbon Dioxide, January 2000 - August 2022

China is, by far and away, the world's biggest producer of carbon dioxide emissions, a status it has undisputably held since 2006. In 2020, China's CO₂ emissions were nearly 2.3 times larger than those of the second-ranked United States, accounting for almost 31% of the world's carbon dioxide emissions. The two countries together accounted for 44.2% of the world's CO₂ emissions, which is directly linked to the output of their national economies.

That China's economy was struggling during the first half of 2022 was confirmed by the Helsinki-based Centre for Research on Energy and Clean Air, which measured a decline in China's CO₂ output:

China’s carbon emissions fell almost 8 per cent in the April-to-June quarter compared with the same period last year, the sharpest decline in the past decade, according to climate research service Carbon Brief.

The fall in emissions reflects a dramatic slowing in Chinese economic growth caused by large-scale coronavirus lockdowns and a crisis in the heavily indebted property sector. It was the fourth consecutive quarter in which emissions have fallen in China, the world’s biggest emitter.

Lauri Myllyvirta, an analyst at the Helsinki-based Centre for Research on Energy and Clean Air, which compiled the data for Carbon Brief, said there had been a drop of 44 per cent in the number of construction projects started and a 33 per cent fall in those completed during the second quarter.

Lauri Myllyvirta's analysis for China is available here, which indicates "emissions from power generation have rebounded in July and August". Given the several week lag for atmospheric carbon dioxide concentration data to reflect changes in economic activity, we anticipate the next month's data will continue showing upward movement in the pace at which carbon dioxide accumulates in the air.

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Text File]. Updated 5 September 2022. Accessed 5 September 2022.

Why Hasn’t the Price of Gold Fallen More with the Fed’s Rate Hikes?

On 16 March 2022, after a nearly a year of letting building inflation in the U.S. go unaddressed, the U.S. Federal Reserve finally decided to do something about it. The Fed announced it would begin hiking interest rates, raising them above the near-zero level it had been maintaining. Coincidentally, a week later, we featured a snapshot of the inverse relationship between the price of gold and the inflation-adjusted yield of the 10-Year Constant Maturity Treasury Bond from 2 January 2007 through 17 March 2022. Here's the chart we featured:

Gold Spot Price vs Inflation-Indexed Market Yield of 10-Year Constant Maturity U.S. Treasury, 2 January 2007 - 17 March 2022

It would be reasonable to expect that as the Fed has continued to hike interest rates, the inflation-adjusted yield of a 10-year U.S. Treasury would rise as well. And sure enough, that is what has happened in the five months since. It would also be reasonable for the price of gold to retrace its path along the curve shown in this chart, falling as real interest rates rise. We can confirm that's happened too. But as we're about to reveal in the next chart, by nowhere near as much as the relationship established in the previous 15 years implies:

Gold Spot Price vs Inflation-Indexed Market Yield of 10-Year Constant Maturity U.S. Treasury, 2 January 2007 - 19 August 2022

The red line added to the chart tracks the daily spot price of gold with respect to the real yield of the 10-Year Constatn Maturity U.S. Treasury from 16 March 2022 through 19 August 2022. During this period, the price of gold has averaged being $439 higher than the level indicated by the black-dashed curve modelling the inverse relationship between these variables.

That outcome suggests the Fed's current strategy for combatting inflation may be failing to achieve the full effect Fed officials are counting upon. That's also despite their policies' seeming success in boosting the value of the U.S. dollar, which should also contribute to reducing the price of gold:

The dollar is soaring against the world's major currencies, heading for its biggest calendar year rise in almost 40 years and third biggest since President Richard Nixon took the dollar off the gold standard over half a century ago.

Will the Fed be worried? Not one bit.

Quite the opposite. All else equal, the dollar's strength will help cool price pressures by reducing import costs, and tighten financial conditions, both desired goals for Jerome Powell and colleagues as they try to bring 40-year high inflation back towards their 2% target.

15 August 2022 marked the 51st anniversary of Nixon's closure of the gold window, when an ounce of gold cost $43. If the price of gold had grown at an average of 2% per year and compounded monthly, that ounce would cost $119.25 today. On 15 August 2022, the price of an ounce of gold was $1,778.57.

Speaking of the rise in the value of the U.S. dollar:

The dollar is hovering around a 20-year peak against a basket of major currencies. It is up 13.5% so far this year - on course for its biggest calendar year rise since 1984, and third largest since the dollar's convertibility to gold ended in 1971.

There's that gold-based reference point again! Why does Reuters columnist Jamie McGeever keep going back to it unless it's somehow meaningful for measuring the Fed's performance? Let's assume it is, which raises some questions.

If the Fed was succeeding in reducing inflation it believes is transitory, shouldn't that calendar year rise in the relative value of the U.S. dollar be much higher? Shouldn't the price of gold have fallen much more than it has? Or has the inflation the Federal Reserve's and President Biden's policies wrought permanently ratcheted up its value?

Or is it all just a matter of time before the value of the U.S. dollar spikes upward even higher and the price of gold collapses? How long does the Federal Reserve think that might take?

Global Economy Continues Cooling in July 2022

According to atmospheric carbon dioxide concentration data collected at the remote Mauna Loa Observatory, Earth's economy continued to cool in July 2022.

That outcome can be seen in the latest update to Political Calculations' chart tracking the pace at which CO₂ accumulates in the Earth's air.

Trailing Twelve Month Average of Year-Over-Year Change in Parts per Million of Atmospheric Carbon Dioxide, January 2000 - July 2022

A falling rate of carbon dioxide accumulation in the atmosphere corresponds to falling levels of economic output. It also occurs as China's economy strengthened following the lifting of its government's zero-COVID lockdowns in several regions and as the U.S. economy likely continued shrinking or stagnating in real terms. The falling rate of CO₂ accumulation points to the established negative trend in the U.S. economy more than offsetting China's economic rebound.

All in all, it's pretty amazing what you can see about the global economy from the side of a remote volcano!

Mauna Loa Observatory at Sunset - Source: NOAA - https://www.esrl.noaa.gov/gmd/obop/mlo/pictures/sunsetmaunaloa1.jpg

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Text File]. Updated 5 August 2022. Accessed 5 August 2022.