It had never occurred to me before but now that I think of it carloads of garbage shipped by rail might be a pretty good indicator of GDP and as you can see from the graph above, courtesy of Business Insider, it is. Interestingly, sometimes, as in 1999, it’s a leading indicator, and sometimes, as in 2008, a trailing one but mostly carloads of garbage shipped by rail tracks GDP pretty closely. 82%, according to Bloomberg.
How can we explain the sharp, even historic, divergence that’s apparent today? One reason may be that we’re just not as trashy as we used to be. Or that less trash as a proportion of the whole is being transported by rail as state and local govenrments tighten their belts.
It’s possible that if enough of the growth is purely financial growth, concentrated in few enough hands, that the historic relationship could break down. Surely there’s some limit to how much garbage one person can produce. Although if folks up on Capitol Hill are any gauge that might not be the case.
It does seem to me that railways cars of waste is a lot easier to calculate on a timely basis than GDP. The BEA’s first estimate of 2nd quarter 2012 growth is due tomorrow. Expectations for that are growth of 1.2% on an annualized basis, down from 1.9% the previous quarter. It may be that we are in for some unwanted news.
Hard to believe we’ve become that much less trashy beginning with Q1 2010. (On the other hand, ~14 million people suddenly became unskilled layabouts in 2008, so who knows?) Easier to believe that deficit spending from the federal government PLUS various QE + TWIST programs from the Federal Reserve System have created electronic dollar GDP.
And that the spillover between the financial economy and the rest of the economy just isn’t that big.
I’m curious as to why they cited cars of waste. Tracking rail miles in general to GDP, and certainly as a measure of manufacturing has been done forever. As manufacturing people we certainly track it. Coal for energy, scrap, cars, chemicals, grains, resins etc etc all go by rail and as manufacturing goes.
In addition, given the relative efficiency of rail vs trucks we were trying to find investment opportunities in rail a few years ago but could just never make it happen.
I’m not sure they’ve decoupled, perhaps just out of phase. In any event, we’d better hope waste car miles isn’t a leading indicator or it’s Katy bar the door.
I’m not sure I was clear on the trucks vs rail comment.
Notice the historical gap between the two lines, then suddenly they are top of each other. This could be do to an increase in rail intensity to GDP. It would be interesting to see truck miles.
In any event, let’s hope miles isn’t leading. Else time to buy guns and move to Montana.
@Drew, rail miles would emphasize manufacturing, which tends to send industrial waste further to special landfills. Household waste is not typically transported by rail, except in places like New York City. Isn’t it just as much part of the overall economy if the financial sector slows down and produces less waste for an upstate landfill?
I’m sort of assuming that U. S. Steel produces more waste every year than Capital One does. They have roughly equivalent revenues.
I think it was Alan Greenspan who noted that the US achieved ‘peak net weight of GDP’ in the 1970s: The total tonnage of everything bought and sold in the US peaked that year and has been stable or declining since then.
Better use of materials, lighter materials, technology (computers weigh less, do more, etc.), and increasing services (including software) as a % of GDP help explain what Greenspan observed as well as, in the above chart, probably increased recycling (particularly of glass and metal, which weigh a lot and actually can be money makers to cities).
I’m sort of assuming that U. S. Steel produces more waste every year than Capital One does. They have roughly equivalent revenues.
I don’t know – I’ve received a couple of tons of mail from Capital One this year, and haven’t gotten anything from US Steel.
PD
The point I was making, perhaps clumsily, was a statistic sometimes called intensity. So for example, back when I was in the steel business you could look at GDP (manufacturing, construction , and even computer frames etc) and if it moved x, then steel purchases would be y. It of course assumes a somewhat steady composition of GDP.
So when you look at the gap between waste rail miles and GDP its a proxy for that concept, although I note that all the raw materials and finished products moved by rail are a broader, and perhaps more accurate, measure than waste.
I don’t want to put words in his mouth, but I think Dave was pointing out that when the two lines fell upon each other it could be due to a collapse in GDP overly weighted in collapsing financial services. That may be correct.
I was just pointing out that it was about 2008 (and I know this because we were fishing for investment opportunities) that necessity being the mother of invention, and energy concerns, that rail transport as a cheaper and more energy efficient transport modality became all the rage. Hence, rail miles might not have fallen as much relative to GDP, and the two lines fall right on top of each other. Its the opposite view: rail miles had support relative to financial services or overall GDP. I simply posit that looking at relative truck vs rail miles, and/or truck to GDP is probably the only way to get under the covers of this.
Icepick
It’s good snark, but steel mills produce waste by the handy megaton,. Capital One (and all kinds of other tree killing enterprises – tee-he) may waste a lot of paper and glue, but it’s an uphill battle to match the process industries.
It’s good snark…
… but you will attempt to kill what little humor it had by explaining it anyway.
Yep. That’s roughly it.
Icepick
Sorry. Unlike 99.9% of the time when you have to horsewhip me to get serious, I’m in a serious mood today.
Unlike 99.9% of the time when you have to horsewhip me to get serious, I’m in a serious mood today.
Go back to work, Drew, and put it to use.
Icepick
Yes, sir.
I see looking closer at the Bloomberg piece, that iron and steel make up 42% of “waste and scrap” being hauled by rail. Also, ashes are 5% (coal ashes?), and non-ferrous metals 4%. That’s not really representative of the U.S. economy or our collective waste stream, which would contain far more household waste and construction and demolition wastes — I assume these go by truck.
I can’t help but wonder about the “scrap” component of waste. In my lexicon, “scrap” is the opposite of waste, its a product. Its a product that becomes more attractive if the price of the “new” alternative is too expensive or regulations preclude disposal. Paper, scrap metal, dirt . . . Things that go to Regional Reccling Centers, What are things we ship to China?
@Drew, I figured out what you were saying; it took me a while.
PD
Hard for me to imagine that coal ash does not dominate the term “ash.”. This is because of the prominence of coal in electricity production.
Now that’s an interesting point. No new coal fire power plants are being built. I was in AZ playing the TPC course and got paired with an Exxon guy who was in their gas business. He told me that ALL new plants are nat gas driven. No ash.
Nothing wrong with that given the prices of natgas. Except this: as I posted either here or at OTB awhile back. The 2015 bids by distributors are in for the producers. Because regulations are forcing out coal fired plants, pricing is going through the roof. All the coal plants are being decommissioned. So now the cost of a new plant, or at least the retrofit for gas, must be priced into the product.
These are killer price increases. This guy Obama is the worst thing in the world for the economy.
I was going to pick natural gas as a factor, but Drew just beat me to it. I am hoping it leads to fewer asthma problems in particular as I take care of lots of kids. China, if you read on their Olympics, is facing problems with their air quality which I think they will need to address sometime. OTOH, gotta miss the good old days with that dense smog rolling in.
Steve
It’s not just air quality. They have problems with water pollution and soil pollution as well. Something not mentioned enough: a lot of the arable land in China is in the same places as the worst air pollution. The level of particulates in the air is enough to reduce the amount of sunlight that filters through and is lowering yields.
You’d think they’d do something about it and, if the problems become so severe they threaten the ruling elite, they might.
I suspect the entirety of China’s arable land is contaminated with heavy metals. I know that a growing number of marine biologists believe Chinese coal burning is responsible for bio-accumulation of mercury, cadmium, lead etc. in marine mammal populations throughout the Pacific. Unfortunately their toxic wastes don’t respect their borders.
Water pollution and water quantity IIRC. One of many reasons I think people overestimate China as a competitor.
Steve
Ben:
IMO the consequences of China’s environmental neglect are too much ignored. As you mention, their air pollution is detectable from here but that’s not the half of it. There’s an ocean hot spot off the coast of China that’s been getting larger and hotter for the last decade and a half. If that doesn’t have some bearing on the peculiar El Niño-La Niña cycles we’ve been experiencing here and which, in all likelihood, are responsible for our current drought, I would be very much surprised.
There’s an ocean hot spot off the coast of China that’s been getting larger and hotter for the last decade and a half. If that doesn’t have some bearing on the peculiar El Niño-La Niña cycles we’ve been experiencing here and which, in all likelihood, are responsible for our current drought, I would be very much surprised.
This lines up with what I mentioned in the comments about “fixing” the CO2 concentration in the atmosphere. Environmental manipulation can be viewed as warfare by other means. The Russians might prefer some global warming. The Chinese might prefer to see the USA become unstable due to food shocks.* We might prefer everything to be the same way it was in 1950.
Also, that hotspot is just a consequence of the largest human migration in history, as is the pollution. (The human migration is a knock-on effect of a major policy shift in Chinese leadership a few decades ago. Anyone want to bet on whether or not that leadership foresaw pollution and hotspots as a consequence? I’m betting they didn’t consider it.) Kind of like WWII was just a side effect of the Great Depression. Sometimes the child grows up to be mightier than the father – and sometimes that happens really quickly.
* I don’t think the Chinese really want an unstable USA (or world) because of food shocks. But it can’t be ruled out.