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The Trash Index: The Latest -- and Best? -- Economic Predictor - DailyFinance
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    The Trash Index: The Latest -- and Best? -- Economic Predictor

    By Bruce Watson
    Posted 8:45AM 08/24/12 Posted under: Economy
    Trash index
    Economics is known as the "dismal science" -- an often-grim analysis of numbers and trends that reveals the hidden workings of society. But when it comes to making predictions about the future, the dismal science occasionally veers dangerously close to superstition. From the hair index to the hemline index, the skyscraper index to the men's underwear index, the business pages are full of tools that analysts have used to understand where the economy has been and guess at where it's going.

    One of the most recent attempts is the "Trash Index," developed by economist Michael McDonough. His index explores the relationship between the gross domestic product and the number of train cars full of trash that are shipped to landfills. When the economy is booming, there are plenty of trains, but when it's in trouble, the flow stops.

    Accurate, but in Which Direction?

    Fundamentally, the trash index makes sense. After all, when a family buys a new couch, they often throw out the old one; ditto when developers construct new buildings. Much of this refuse makes its way to landfills. According to Bloomberg, the index is incredibly accurate -- between 2001 and 2010, there was an 82.4% correlation between flow of trash and the economy.
    The trouble is, while the peaks and valleys of the trash index echo the ups and downs of the economy, they don't always match up. Sometimes the trash index moves before the GDP, giving a hint about where the economy is headed. Sometimes it follows the GDP, showing where the economy has been. Right now, for example, the trash index is moving sharply south, suggesting that the U.S. may be headed into a steep recession. The question, of course, is whether GDP will follow.

    The Trash Index and Job Creation

    Regardless of its predictive ability, one of the trash index's most interesting aspects is the direct relationship that it suggests between consumption and the economy. While much has been made of "job creators," the economic titans who allegedly carry America's future on their shoulders, the trash index suggests that the real job creators might be the middle class. After all, when the middle class fills its homes with products and railcars with trash, they are effectively creating jobs. On the flip side, when they sock away their dollars, the trash trains slow down and the economy suffers.

    With the fiscal cliff looming, the question is whether the middle class will keep fueling the economy or start squirreling away money in preparation for tough times. For now, at least, the trash trains seem to suggest that a storm is on the way -- and the real job creators are keeping their money in their pockets.

    8 Strange Economic Indices



    Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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    Tagged: economic indicator, Economic Indicators, garbage, GDP, gross domestic product, landfills, trash index
    Bruce Watson

    Bruce Watson

    Features Writer

     Bruce Watson is a senior features writer for DailyFinance, focusing on the political and cultural effects of economic events. His publications include Military Lessons of the Persian Gulf War, A Chronology of the Cold War at Sea, and Primal Picnics.  You can reach him by e-mail at bruce.watson@teamaol.com or follow him on twitter at @bruce1971.

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    195 Comments

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    imalibnow2

    evan really is crazy.

    Yesterday at 9:58 PM Report abuse -2 rate up rate down Reply
    imalibnow2

    It doesn't take a rocket scientist to see that the economy is bad. Dems have been destroying it for decades. I'm a liberal and even I can see that.

    Yesterday at 9:57 PM Report abuse rate up rate down Reply
    teapartyiscrazy

    Resolved QuestionShow me another »
    Why did Bush give tax cuts to companies that outsourced?
    GOP is the party of outsourcing..

    Reagan took the first step by deleveraging workers against giant corporations (ie. Union Busting)
    Bush Sr signed NAFTA in 1992
    Bush Jr gave tax cuts to companies that outsourced.

    Bush ADMINISTRATION SUPPORTS NEW TAX BREAKS FOR COMPANIES MOVING OFFSHORE: After the WTO prohibited a U.S. provision "shielding companies' overseas sales from taxes," the Administration's allies wrote a bill to "make up for the lost tax break by creating others." One of the new tax breaks would have "allowed $70 million in tax breaks for off-shore construction contracts" – a specific incentive to move jobs offshore. [Source: SF Chronicle, 10/31/03; New York Sun, 10/29/03]

    Sickening. They are worse then the Nazis

    Yesterday at 4:45 PM Report abuse -1 rate up rate down Reply
    2 replies to teapartyiscrazy's comment
    imalibnow2

    That is just stupid, evan. Stupid is as stupid does. What are you doing?

    Yesterday at 9:57 PM Report abuse -3 rate up rate down Reply
    pischotta

    How sad for desparate liberals to keep blaming Bush, because Obama has no success record to run on.
    Unemployment 8.4%
    Foreclosure filings up 9%
    49 million Americans using foos stamps
    The national average for gasoline was $1.48 per gallon on 1-20-2009 it is presently $ 3.68 per gallon.
    Our AAA rating got down graded, costing American taxpayers even more to borrow .40 of each dollar spent.
    Our grandchildren and great grandchildren now have 55 thousand dollar debt over their head already.
    This administration hasn't any hope for future generations.
    Unions are the very reason for driving up the cost on manufactured goods, add the corporate income tax rates in the USA, and there's your reason for companies relocating to other nations for cheaper labor.
    You liberals are a sad bunch of characters.

    12 hours ago Report abuse rate up rate down Reply
    teapartyiscrazy

    Republicans today stopped a vote that would end the tax breaks for corporations who outsource jobs to other countries. With the economy and jobs being the number one concern for Americans, the Republican obstructionists in Congress continue to support Wall Street and say no to Main Street.


    For several years, we the Tax payer have been giving tax breaks to corporations for shipping American jobs to other countries. The Democrats had proposed a Bill that would end that tax break and give a tax credit to those who create jobs here in the USA, but the Republicans said, “no”.


    Yesterday, the Republicans in Washington prevented Congress from getting subpoena power to investigate BP’s oil spill. They obviously do not care that 11 people were killed on the oil rig or care about the oil spill itself. Rep. Joe Barton even apologized to BP earlier this year, and several Republicans have gone after President Obama for making BP pay for the spill and clean up with a $20 billion fund for those affected by the spill.


    Today the Republicans stand with outsourcing jobs to other countries. The Republican Party has voted against every jobs Bill since President Obama took office, and Tea Party Folk blame the democrats for the lack of jobs.


    Last week the Republicans took a stand on the Bush tax cuts saying that unless the tax cuts for the rich are extended, the tax cuts for the middle class and the poor will end.


    Republicans last year said that they planned on slowing the economic recovery for our country in order to campaign against a bad economy, well they have succeeded.

    The Republican “Party of No”, no jobs, no recovery, no health care, just say no.

    Yesterday at 4:44 PM Report abuse rate up rate down Reply
    b.gregory2

    I hope the garbage men can recover the Constitution from the trash after Obama leaves.

    Yesterday at 12:14 PM Report abuse +2 rate up rate down Reply
    1 reply to b.gregory2's comment
    b.gregory2

    Let's hope Barack doesn't steal any of the White House furniture on the way out too. He's so close to the Chinese, they are probably making exact copies of everything there. BO Gotta go !

    Yesterday at 2:36 PM Report abuse rate up rate down Reply
    2 replies to b.gregory2's comment
    teapartyiscrazy

    Bush borrowed more money from China than Obama did and Bush outsoured more jobs than Obama did. Bush even gave tax cuts to corporations who outsourced American jobs. Obama wants to end giving to cuts to corporations who outsource jobs but the republicans blocked it.

    Yesterday at 3:01 PM Report abuse rate up rate down
    imalibnow2

    I hope they count the silver.

    Yesterday at 9:57 PM Report abuse -1 rate up rate down
    teapartyiscrazy

    The economic collapse of 2008 was under Bush's watch his approval rating by the end of his term had reach a record low. No other president in our history had a lower approval rating than Bush. Even John Mccain said back in 2008, if we talk about the economy we will lose the presidenial elections. Thank you John Mccain for your honesty! Can somebody here on this board explain to me why George Bush isn't going to the RNC? Yeah,......I'm still waiting for Mitt Robme to boast about Bush's record.

    Yesterday at 9:28 AM Report abuse rate up rate down Reply
    4 replies to teapartyiscrazy's comment
    M

    This is OLD info, but it fits in with this topic.

    My home town decided to sponsor clean-ups of homes, apparently to prevent infestations by mice, etc.. Trash put at the street curbs was given free disposal twice a month, with no limitations. Not having anything better to do at the time, several kids my age rode our bicycles around the area, looking at the piles in front of nearly every house as attics, basements, and garages were cleaned. Some of the 'trash/treasures' included coffee percolators, older sewing machines, fans, radios, and the like, most actually worked; presumably replaced by drip coffee makers, and the latest models.

    In our young minds, questions began to form. One occurred to all of my group; if our neighbors were disposing of working items, what would we find in the more affluent neighborhoods? We got our answer after a lot of miles on our bicycles; in the boxes and bags at the curbs in front of the very nice houses, we found old newspapers and lawn clippings. Did they have no items for disposal? Apparently not...

    Another question formed; Were any of the working appliances being donated to charity? Clothing must have been since there was none at the curb.
    After that, our bicycle baskets were loaded with goods on their way to charities...

    Yesterday at 6:28 AM Report abuse +2 rate up rate down Reply
    BABIN

    Well…if we have at least 51% Americans who bought a house before 15 years and until this day he pay off that house I mean for real pay off with monthly payments NOT resell for anyone who use again credit to bought that house…
    If we have at least 51% Americans who use C.C. monthly and paying off in full balance every month…
    If we have at least 51% American who pay off own car in 2 year time…NOT in 5 or 6 years time…
    If we have at least 51% American (one person NOT family) who work yearly for salary around $40.000 AFTER all deductions taxes and so on…(I think that amount of the money one person need in here to live ‘’normal’’ life…)
    Well…we don’t have any of that…why…?....because 3% to 4% rich guys take over our ‘’perfect’’ system in own hands and we still just looking what is going on and vote for the same again and again and again…how in God sake that small % guys can rule above all rest of us…?...is look to me likes Communist system with only different name…AMEN……

    Yesterday at 4:20 AM Report abuse rate up rate down Reply
    1 reply to BABIN's comment
    Get real.

    You had everything right until your last sentence. Communism is the EXACT OPPOSITE of the problems you are bemoaning. You should add to your list the pathetic American educational system that brainwashes you into equating "Communism" with anything bad. The problem is CORPORATISM, which is the driving force of fascism - and that's almost 180° away ideologically from Communism, in which every resource is owned by the public and shared equitably. There is no unemployment or shortages of any basic need in Communism. There are no homeless people in Communism. Who suffers the most? The top 1%, who's wealth is wrenched from them by force and distributed among the population. Is THAT what you see happening in America today? Because I see the exact opposite - the poor losing more and more money and rights every day.

    Yesterday at 4:43 AM Report abuse rate up rate down Reply
    1 reply to Get real.'s comment
    goodhealth4you

    You have got to be kidding! Have you ever known anyone who lived under communistic rule? I have! They had NO rights whatsoever and they were watched constantly. They had to be careful where they went, what they said, what they had - and they could not even take pictures! Someone was always following them & watching them. If they came into your home (which was the norm to check up on you) and you had one little thing that everyone else didn't - you got in trouble & they took it away. Any kind of worship was done underground. No one was happy because everyone was like a robot - doing the same thing, not able to better themselves. That's why communism fails! People need to be able to try & better themselves if they want to. There are those lazy people that don't care about that, but most of us want to better ourselves to become the best version of ourselves! And yes - if I work real hard to improve my family's standard of living, you bet I want to keep it & not have it given away to people who don't work any harder than they have to. It's their right to do so, and my right to do as I do, too! And don't you think Big Brother who watches over all the others - those in government positions - have more than everyone else? They're the rich ones! You're not going to get away from greed. At least in this country people have the right to better themselves IF THEY WANT TO! And no one is starving. If they are, it's also their choice, because there are soup kitchens & food pantries at almost every church in this beautiful country of ours! Then there are LINK cards, government subsidized buildings & many other kinds of help for people if they want it. If you want to live under a communistic rule - find another country to live in! Stop trying to change the best country in the world!

    Yesterday at 6:07 AM Report abuse -2 rate up rate down
    lhte

    I've been in the family trucking business all my life. Trucking is one of the earliest, (if not the best) indicator of which way the economy is trending. It has cycles based on the time of year and comparisons year-to-year are easily tracked. We've been in a downward trend since 2008, but 2012 has been the worst year in many years, even without factoring in the (roughly) 24,000 trucking companies that have gone out of business since 2008.

    Oddly enough, oil prices are trending opposite of the demand. Worldwide inventory of oil is far above the average, yet prices continue to trend upward while demand continues to drop. The only reasonable conclusion is speculators are driving the price up simply because there aren't any lucrative alternatives for profit out there since all other economic indicators are pointing to an imminent crash.

    The media has largely ignored the looming depression. Would it be different if a Republican occupied the White House? I surmise they intend to maintain the facade of a false "recovery" to lend all possible aid to the campaign of the current resident of the White House. This election is crucial in that it will determine the depth and length of the coming depression, and the perception of how and when America will (or will not) recover from it.

    We are in serious financial trouble, folks. It's time for somebody to admit that "the Emperor Has No Clothes" and take the necessary steps to turn this great ship of America around before we are run aground with no hope of restoration.

    Quit ignoring the "DEAD END" signs and put on the brakes! There IS a cliff at the end of this road we are on!

    Yesterday at 3:19 AM Report abuse +6 rate up rate down Reply
    2 replies to lhte's comment
    dovch1

    Interesting comment and analysis. Thank you for sharing.

    Yesterday at 4:03 AM Report abuse +2 rate up rate down Reply
    M

    Would it not be true that offshoring manufacturing industries and jobs has also removed the need for trucking raw materials, parts, and energy sources used by manufacturing?

    I do not have figures or references, but that certainly HAS to be part of the decline in trucking needs. Trucking of finished goods is obviously still in progress, only now it starts at the ocean ports instead of the now-empty factories...

    Yesterday at 6:44 AM Report abuse rate up rate down Reply
    lindah3159

    Maybe more of us have discovered how to re-cycle. My family uses Freecycle.com and Craigslist to re-home larger items. Any surplus of food we simply give away to food banks or friends and neighbors.

    Yesterday at 2:39 AM Report abuse -1 rate up rate down Reply