Class in the US...

The first of five major conclusions from a fascinating study by the respected Pew Foundation...

1Middle-income Americans are no longer the nation’s economic majority. In early 2015, there were 120.8 million adults in middle-income households, matched in number by the 121.3 million adults who were in lower- and upper-income households combined.

This is the culmination of a long slide in which the share of adults in middle-income households has fallen from 61% in 1971 to 50% in 2015.

http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/

Mexico's oil trade surplus: going, going, gone...

Mexico’s oil trade surplus has vanished. It maxed out at US$19.4 billion in 2006, falling into single digits in 2013 for the first time in eleven years. The decline became a rout last year when the oil surplus plunged to just US$1.1 billion. In the first nine months of this year, the surplus turned into a US$7.0 billion deficit. It’s the first deficit in central bank's oil trade balance series that begins in 1993.

Where's the risk in the international financial system?

Per former Fed Chairman Ben Bernanke (quoted in the October 28 New York Times), the risk to financial stability today comes from emerging markets. In a talk at the London School of Economics, Bernanke highlighted emerging markets and how they react to higher interest rates in the US as a "risk area". The magnitude and nature of that risk is hard to know, he cautioned.

What an independent member of Pemex's Board of Directors has to say...

Here's the conclusion, roughly translated from the Spanish:

"The blame for the risk Pemex face today are decades of corruption and bad administration, from the inefficiencies of a monopoly and the wasteful spending of the oil bonanza by federal, state and local governments. The Energy Reform gives us the opportunity to tackle the drop in oil prices. It will require an enormous effort by everyone. It's an effort that can't be postponed."

Carlos Elizondo's article is well worth the read. Here's the link:
http://www.excelsior.com.mx/opinion/carlos-elizondo-mayer-serra/2015/09/03/1043729

Surprised the peso has been devaluing?

After looking at the numbers on portfolio investment in Mexican money market instruments in the first six months of this year, you won't be. Foreign investment in money market instruments came to a barely discernible US$0.9 billion, down from US$10.8 billion in the first six months of 2014. Portfolio investment in money market instruments in each of the first two quarters of this year was the lowest it’s been in any quarter since 2009.

Any bets on what the numbers will look like for the third quarter?

A slow motion devaluation...

The following graph charts the average monthly exchange rate as well as the minimum and maximum rates in each month since January 2007. The picture speaks for itself...

What will it take to boost Mexico's growth rate?

Mexico's central bank, Banco de Mexico (Banxico) had something to say about that it in its most recent Quarterly Report on Inflation, released yesterday. Banxico's reduction in this year's projected growth to 1.7% - 2.5% (down from 2.0% - 3.0% three months ago) captured the headlines. But it's the final paragraph of its two page summary of the report that is what's really important. Roughly translated, Banxico's Governors warn:

"... Mexico must undertake additional efforts to strengthen its institutions and the rule of law since, for example, the lack of public security has negative effects on confidence, inhibits the efficient allocation of resources in the economy and complicates economic growth. To the extent that Mexico moves in this direction, it will be possible to detonate the economy's potential growth rate in a context of low inflation and financial stability." (underlining mine)