'A dismal job market report Friday gave a resounding confirmation to fears that the United States recovery has markedly slowed, reflecting mounting evidence of a global slowdown.
'The report, which showed the smallest net job growth in a year and an unemployment rate moving in the wrong direction, was a political game-changer that bodes ill for President Obama as he faces re-election.
'It provided traction for his Republican rival, Mitt Romney, at a time when politicians have been deeply divided over the most effective way to strengthen the economy. And it put increased pressure on the Federal Reserve to take further action to stimulate growth.
'The United States economy gained a net 69,000 jobs in May, according to the Labor Department. The unemployment rate rose to 8.2 percent from 8.1 in April, largely because more people began looking for work. And there was more unexpected bad news: job gains that had been reported in March and April were revised downward'.
Eurozone Unemployment Rises to Record 11 %.
'The jobless rate in the 17-nation eurozone reached 11 percent in March and April, the highest since the start of the data in 1995, Eurostat, the European statistical agency, said in Luxembourg. The previous record had been 10.9 percent in February, Eurostat said, after it revised the March figure upward from the 10.9 percent initially estimated.
“We have an economy that’s freezing up, it’s clearly not creating jobs,” Peter Dixon, global equities economist at Commerzbank in London, said. “But right now policy makers’ main concern is to ensure that the peripheral countries’ governments and banks can stay afloat. Given that, the real economic data is taking a back seat.”
'But before long, he said, unemployment “is going to be a major problem for those countries,” as it rises to the top of the political agenda and further complicates the financial problems'.
China's economy slows further.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, fell 2.9 percentage points to 50.4 per cent in May, just above the 50 level that signifies expansion. The index was at 53.3 in April and 53.1 in March.
HSBC's index, which is adjusted for seasonal conditions and is more weighted toward export manufacturers, fell to 48.4 in May from 49.3 in April. The index has remained below 50 since October.
HSBC economist Qu Hongbin said the figures point to a "continuous slowdown of the real economy".
Global economic outlook darkens, 25/5.
'Overnight, the US reported that businesses were slowing their orders of computers, aircraft, machinery and other long-lasting goods. Measures of business sentiment in Europe slipped, and reports from purchasing managers at manufacturers around the globe turned down. Among them, China, the world's second-largest economy, registered its seventh-straight drop in an important manufacturing index.
'With the latest reports, a new economic threat is emerging: That activity is slowing in sync around the globe and not just in a few markets with their own isolated problems. Europe, struggling with the risk of a Greek pullout from the euro area and broader fiscal problems, is the epicentre of global economic concerns right now. But reports of economic trouble are turning up in China, India, South Africa, Brazil and elsewhere'.
These views accord with those of Henry and his contributors. Henry's blog today focussed on the Eurozone troubles, from which there is no happy exit.
International outlook, Mayday 2012
Internationally, the China boom is slowing, the American recovery may be fading and the Eurozone is in recession with the continued possibility of a disorderly breakup of the single currency union.
Chinese economic growth has slowed to a ‘mere’ 8 % annual rate. There is general belief that China’s growth is unlikely to dip further, but I am less certain than most about this matter. China’s inflation reached a recent peak of over 5 %, then fell and most recently has revived somewhat. China’s leaders may feel that cheaper commodities would be a suitable reward from a more subdued global economy and if that is the case the froth will come off Australia’s mining boom.
For some months the American recovery seemed to be stronger than generally expected, and corporate results have surprised on the upside. Yet the latest jobs figures suggest at least a stumble in the American recovery, and the US Fed has warned that recovery will be slow. The global benefit of this is that US interest rates should be lower for longer. US Fed Chief, Ben Bernanke has reiterated his position that US cash rates are likely to remain at approximately zero until late 2014. Zero cash rates in the USA is simply unsustainable.
The Eurozone crisis stumbles on. Germany is trying to force every other Eurozone country to embrace German work habits and industrial success, while simultaneously benefitting from a low Euro precisely because of the reluctance of the Club Med nations to come in from the beach and to begin working like joyless Germans. The Dutch government failed to implement a Germanic austerity plan and was forced to resign. France is busy electing a socialist president. Spain is struggling to meet its debt repayments and Spanish bond yields hit the recognised danger point of 6 %. Greece and other weaker nations have defaulted or soon will, entering into schemes of arrangement to pay only small proportions of their debts, like the land booming tycoons after the bubble burst in Marvellous Melbourne in the 1890s.
The overall global view is little changed, but the potential for fresh drama is clearly present. The Reserve Bank probably has no choice but to cut rates and therefore in doing so accept some criticism for having misread the economy. Such criticism is unfair, but even the flinty-eyed Glenn Stevens will feel he has to give some ground to his critics. But it would be wise to keep some powder dry in case the international situation deteriorates markedly.
Conversely, maintaining a firm grip on the economy provides some insurance against the possibility that a demoralised labor movement decides to grab what it can before the change of government that looks increasingly certain. Both the international uncertainties and the domestic risks suggest the need to cut by 25 basis points rather than 50 at this time.
The general outlook is for a long period of slow growth as nations, firms and households reduce leverage, cut debts, save more and consume less. Ideally as well as fighting fires, political and official leaders would be rethinking the ways in which growth became unsustainable in the past 30 years and how to encourage more sensible, less resource intensive growth in the future.
Sadly there is little signs that this is happening, and the prevailing ethos seems to be restoring the Club Med culture was quickly and as thoroughly as possible. Nations that maintain a firm monetary policy and restore a sound fiscal policy will do better in this time of relative austerity.
Slow global growth in prospect, strategy required to prosper, 26/4.
The world, including Australia, is in for a period of slow growth as we all work off the results of thirty years of profligate spending. It may also be a time of deflation, which will itself remind us all of the difficult economic times from 1913 until 1946.
Meanwhile, leading American (but Australian born) industrialist, Andrew Liveris, observes that Australia has no coherent economic strategy.
This reminds Henry of a judgment quoted by Martin Lynch in his book Mining in World History. Chile, then the USA, had copper booms in the nineteenth century.
Chilean copper came first, with a myriad of small mines exploiting high grade ore.
The USA came second, and developed four giant mines. After a fierce price war, Chile was effectively out of the game for the next century.
Martin Lynch quotes an expert who said: 'Chile had a mining policy of state revenue, the United States one of economic growth'.
Please take note, Wayne Swan and Julia Gillard. Those who ignore the lessons of history are condemned to repeat past mistakes.
By playing to our strengths and building on the current mining boom, rather than using it to bolster state revenue, Australia could become a truly dynamic economic powerhouse. Or we could remain mired in mediocrity, at least in manufacturing, education and tourism, the industries hampered by a high exchange rate. That is the choice facing us today, and for the rest of this decade.
‘A NEW York emerging markets expert says the commodity super cycle is all an illusion', reports Robin Brumby.
‘At the same time, Chile's Codelco has been forced to buy copper on the spot market because its mines cannot meet customer demand. And there's talk of a looming zinc shortage as some of the world's big mines near the end of their lives. And, again, there seems little doubt that the world is facing an uphill battle to feed itself in the future.
‘And so the resource contradictions persist. The latest ripple in this particular pool is from a book just published by Ruchir Sharma, head of emerging markets at Morgan Stanley. In Breakout Nations: In Pursuit of the Next Economic Miracles, Sharma argues the powerful idea that the inexorable rise of China and other emerging markets is driving up the price of everything from copper to textiles to soybeans.
‘He tags this idea "commodity.com" because it is strikingly familiar in some ways to the mania for technology stocks that gripped the world in the late 1990s. Only this commodity bubble has been worse’.
Ashton de Silva, from RMIT, whom I met today said his MBA students were reporting the view that China is stockpiling commodities so it can smash prices at some future time,
US approachesa economic cycle peak, 14/4.
Major overseas news includes slower growth in US jobs, a rise in US inflation (on one measure to a 3.7 % annual increase), a slight slowing in Chinese growth (and renewed rise of inflation) and fresh Eurozone forboding as Italian and Spanish bond rates broke sharply upwards.
The IMF's Christine Lagarde has warned that fiscal consolidation should not proceed too rapidly. (Click here for more information on Ms Lagarde, supposedly a lively lady.)
Read the latest Raff Report, predicting US cycle peak is near.
Asian tigers picking up, 13/4.
The good people at NAB report: 'Growth slowed considerably in the Asian Tiger economies late last year and remains relatively sluggish in 2012.
'However, some partial indicators suggest that conditions have improved modestly more recently, bolstered by improvements in the US economy, and an apparent v-shape recovery in Thailand from last years floods. However, demand for exports from advanced economies is likely to remain soft, at least in the near term, and will continue to be a headwind for domestic activity. Indonesia has been a big exception to the slowdown – its economy is much less export driven and it has maintained very solid growth. Overall, however, our 2012/13 Asian growth forecasts are largely unchanged.
'Persistent inflationary risks present a difficult situation for policy makers, facing the potential for stagflation in an uncertain global environment. Inflationary pressures have generally eased across the region, although to varying degrees, but risks from elevated commodity prices (particularly oil) may limit the potential for policy easing if needed'.
Like many others, Australia's RBA acknowledges 'downside risks' in the unresolved Eurozone crisis. What if the risks are a certainty and that light in the tunnel is a major crisis rumbling straight toward us all?
Henry's favourite journalist, the Telegraph's Ambrose Evans-Pritchard, has been to Germany and comes back with refreshed view on the Eurozone crisis.
'The only way to break up EMU without a disaster is for the Teutonic bloc to withdraw, leaving a Latin euro with the existing institutions of monetary union in tact and euro contracts upheld.
'The new Teutonic 'Thaler’ would revalue. Exchange controls and central bank intervention could prevent this going too far at first, perhaps by 25pc or so to avoid a drastic shock to northern banks and exporters. If the Swiss can hold the franc at CHF 1.20 against the euro against the whole world, the Bundesbank can certainly hold the down Thaler for as long as needed.
'Some Teutonic banks would be left underwater by their devalued Club Med debts. They would have to be recapitalised. Tough luck.
'I stick to my view that such a plan can be executed technically, and would restore prosperity to Europe far more quickly than often supposed. I do not see the need for the convoluted plans put forward by some of the Wolfson contestants.
'Will it happen? Of course not. Politics prohibit such a painless liberation. There is no figure in Germany able or willing to lead such a move. The intellectual ground has not been prepared.
'Europe will instead hurtle towards its great, final, and obliterating crisis, cursed by sheer lack of imagination. The Project will be defended by its fanatics in the bunkers until the social, political, and diplomatic landscape has been reduced to rubble… and one day historians will ask why they did such a foolish thing'.
US jobs growth disappoints, 7/4.
'Although signs had pointed to a strengthening economy earlier this year, the jobs report on Friday came with a message: don’t get ahead of yourself.
'The country’s employers added a disappointing 120,000 jobs in March, about half the gains posted in each of the preceding three months. The unemployment rate, which comes from a separate survey of households rather than employers, slipped to 8.2 percent from 8.3 percent, as a lower portion of the population were looking for work'.
'Wen focused his remarks on the need for more political openness in China — a process he said should occur gradually, but must not be reversed.
“Without successful political reform, it is impossible for us to fully implement economic reform, and the gains we’ve made in these areas may be lost,” Wen said. “Even with a single breath left, I am ready to dedicate myself fully to the cause of China’s reform.”
'Wen began by admitting “many regrets” and mistakes of his own during nine years as premier. Addressing hundreds of Chinese and foreign journalists, he said he felt “truly sorry” for some the economic ills in China that were left unsolved on his watch — even as China’s economy grew to be the second-largest in the world'.
Four US banks fail stress test, 14/3.
'THE Federal Reserve has cleared the way for many of the largest banks in the US to raise dividends and buy back shares as it released the results of its latest round of stress tests.
'Of those four, Citigroup, SunTrust and Ally would see a key capital ratio fall below 5 per cent if they continued with all of their capital plans through the end of next year, the Fed said following the Comprehensive Capital Analysis and Review, which looked at how the largest US banks would ware in a harsh, but hypothetical, economic downturn'.
'U.S. Extends Its Run of Strong Job Growth Another Month', 13/3
'In yet another sign of a strengthening recovery, the United States added 227,000 net jobs in February, the third consecutive month of gains over 200,000. The unemployment rate was unchanged from 8.3 percent in January, the Labor Department reported Friday, as nearly a half-million people who had been staying on the sidelines rejoined the search for work.
'The improving job growth numbers could bolster President Obama’s effort to make the case to voters that his economic policies are working.
“Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression,” said Alan B. Krueger, the chairman of the White House’s Council of Economic Advisers'.
A 'soft landing' in China would hit commodity prices, GDP, employment and Federal and State budgets.
This has been a theme of this column and of other leading journalists for some time now. We have been joined by The Australian'sDavid Uren.
Ambrose Evans-Pritchard said way back in January: 'I strongly suspect that the trade and power data reveal the true state of China’s economy'. Read on here.
Mr Uren reports today on Chinese steel production - down from a record 2 million tonnes per day last June to 1.7 million tonnes now.
'CHINA'S soft landing could have a bruising impact on Australia, bringing a much sharper fall in bulk commodity prices than anyone is expecting.
'The Reserve Bank had predicted that improved world growth would put a floor under coal and iron ore prices and last month wrote back some of the fall in the terms of trade that it had anticipated during the depths of global gloom in November'. More here.
China's slowdown, nuisence or hard landing?, 1/3.
First there is the current weakness, the consequences of the recession in the North Atlantic nations following the global financial crisis.
As reported yesterday, one expert group sees a 10 % chance of a hard landing in China, and a 25 % chance of a soft landing.
A hard landing would do immense damage here, with falling GDP, double digit unemployment and a massive shake-out in house prices.
Even a soft landing would create a local recession.
As the Rudd-Gillard-Swan governments have already spent the legacy of Howard and Costello, and incurred large budget deficits and rebuilt government debt there is far less room for fiscal stimulus.
And, in any case, Mr Swan has already promised a return to a (tiny) surplus in 2012/13, with no caveats this writer could spot, and reiterated after news of slowing activity in China.
Now the longer term Chinese future is suddenly clouded also.
This comes courtesy of the World Bank and the Beijing's Development Research Centre, as told by Ambrose Evans-Pritchard.
'THE US labor market grew at its most robust pace since last spring in January, a sign that the economy's momentum carried into the new year.
'Nonfarm payrolls rose by 243,000 last month, the Labor Department said today, marking the biggest gain since last April. The jobless rate fell by two-tenths of a point to 8.3 per cent, the lowest it's been since February 2009.
'Both figures contradicted expectations of a slowdown in job growth to start the year. Economists surveyed by Dow Jones Newswires had forecast a gain of 125,000 in payrolls and for the jobless rate to remain at 8.5 per cent.
'The report also indicated that job growth was stronger in previous months than initially reported, with the economy gaining 60,000 jobs beyond the government's preliminary figures for November and December'.
Too little, too late for Greece?, 31/1.
'European leaders were poised ['trembling on the brink'] Monday to agree to tougher new measures to enforce budget discipline in the euro zone, but still showed few signs of producing a comprehensive solution for the sovereign debt crisis or a credible plan to revive fragile economies across Europe’s weakened Mediterranean tier.
'The meeting of European Union heads of state and government here in Brussels was aimed at finalizing the text of a so-called fiscal compact for the 17 E.U. nations relying on the euro and issuing a declaration calling for a new push to kick-start growth and combat joblessness across the Continent.
'But a number of politicians and analysts said the pledge by the E.U. leaders to create new jobs was mostly empty, and others complained that the proposed rules to keep deficits under control were unbalanced because they contained little to actually help nations with high borrowing costs'.
Comments have been made about the inherent conflict between the 'austerity' needed to resolve the debt crisis and the stimulus (believed by some to be necessary) to boost jobs.
What is happening in China?, 26/1.
Ambrose Evans-Pritchard says the slowdown is serious, more serious than the local press has suggested.
'I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.
'The Shanghai Container Freight Index fell 1.4pc to a record low of 919.44 in November, after sliding relentlessly for several months. It has picked up slightly since.
'The Baltic Dry Index [an old favourite of Henry] measuring freight rates for ores, grains, and bulk goods, has fallen 44pc over the last year. Kasper Moller from Maersk in Beijing said weak Chinese demand for iron ore was the key culprit.
Courtesy TickQuest and
'Cautionary warning. The BDI index also reflects the shipping glut, so it is not a pure indicator.
'However, rail, road, river and air freight volume for the whole of China fell to 31780m tons in November (latest data), from 32340m tons in October. Not a big fall, but still negative. (National Bureau of Statistics of China.)
'Chinese electricity use was flat in over the Autumn, with a sharp fall in the (year-on-year) growth rates from 8.9pc in September, to 8pc in October, and 7.7pc in December.
'Residential investment has been contracting on a monthly basis, and of course property prices are now falling in all but two of China’s 70 largest cities.
'So how did China pull off an economic growth rate of 8.9pc in the fourth quarter?
'I strongly suspect that the trade and power data reveal the true state of China’s economy'. Read on here.
US GDP confirms recovery, but slightly disappointing, 30/1.
The team at nab report that US GDP grew by 0.7% (or 2.8% annualized) in the December quarter. While slightly below market expectations, it was the strongest quarterly growth rate in one and a half years, maintaining the upwards trend in US GDP growth since the very weak March quarter result.
The composition of GDP growth in the quarter was less positive. While consumption strengthened slightly, business investment weakened noticeably and net exports detracted from growth. Over half of the growth was due to a pick-up in inventories which is not a sustainable source of growth.
Because of these poor ‘fundamentals’ we have revised our forecasts for US growth down slightly in 2012 to 2.3% (previously 2.4%). Nevertheless, while we expect a slowdown in the pace of growth early in the year, the economy will continue to grow and gather momentum as the year unfolds.
The Fed has extended the period over which it anticipates economic conditions will warrant an exceptionally low level of the fed funds rate from mid-2013 to at least late 2014.
'President Obama thinks that the improving economy will win him a second term, the New York Times reports today. Whatever he’s drinking, order me a double. His poll numbers look a little better because the Republicans have spent the past several months in a fratricidal bloodbath. Fortunately, the memory of the American electorate for such antics is short. Once we choose a candidate (and I am happy with Romney, Santorum, or Gingrich) and unite behind him, we will win, unless, of course, we find a way to sabotage ourselves.
'People are hurting, and badly. The official unemployment rate may have fallen, slightly, but the real unemployment rate — the number of working-age Americans who aren’t working — rose from about 12% before the 2008 crisis, to about 23%, and hasn’t come down. That includes people who have retired early because they can’t find work, spouses who used to earn a second income but have gone back to homemaking because work isn’t available, self-employed people whose businesses have collapsed, young people who live in their parents’ basement because they can’t afford tuition and can’t find work. The chart below, courtesy of the Shadow Government Statistics website, shows (in the blue line labelled “SGS alternative”) the way unemployment feels to Americans: one in four Americans who could be working, isn’t. That’s roughly twice the pre-recession level'.
Courtesy Shadow govt data website
IMF tries to help, 24/1.
The powers are making certain that suitable warnings have been issued, almost certainly too little, too late, but one must applaud their efforts.Last week it was the World Bank that got in for its chop, as Henry’s old Mum used say.
‘THE global economy faces a depression-era collapse in demand if Europe doesn't quickly act to dramatically boost the size of its debt crisis firewall, implement pro-growth policies and further integrate the eurozone, the head of the International Monetary Fund warned overnight'.
'ALAN Greenspan and the Strait of Hormuz: One is an ancient feature of the global landscape, and the other is a bottleneck in the Persian Gulf.
'But there is a deeper link. Back in the day, bulls spoke fondly of the "Greenspan put": the notion that any time markets fell, the former chief of the Federal Reserve would cut rates to pump them up. These days, any time that a nuisance like weak demand from a slowing global economy threatens oil enthusiasm, Iranian officials and energy bulls talk up the chances of a conflict blocking the Strait and disrupting oil supplies, juicing prices.
'Oil jumped again overnight after the European Union confirmed it would embargo Iranian oil imports. But there are big questions over whether Iran could block the Strait for long, or would really want to risk the consequences.
'Even if Iran did, though, oil inventories in the Western world are now high.
'US net imports of oil have dropped on weaker demand and surging domestic production. So even though stocks have remained relatively flat since early 2009, the number of days of import cover has jumped.
'As of October, inventories covered 224 days of net imports, the highest level since early 1995'
'China's GDP rose 8.9 per cent from a year earlier in the fourth quarter, slower than third quarter's 9.1 per cent growth, the National Bureau of Statistics said today'.
It is probably unnecessary to point out that the indicated 'decline' from 9.1 % to 8.9 % is well within any (insignificent) margin of error. In fact, both numbers are probably not distinguisable from 10 %, China's long-standing benchmark.
In the USA, signs of recovery abound, albeit measured recovery.
The Economist, whose graph (posted below) is interesting, suggest the American recovery gives President Obama a chance of re-election.
Courtesy The Economist
The Eurozone makes a man despair. All so predictable. Self interest (of Germany) so obvious, a German racehorse yoked to several Eurozone drafthorses (France, Austria, maybe Spain) and a large number of Club Med ponies, all trying to pull a colorful gypsy cart with bureaucrats writing new regulations. Recent rating downgrades by the three-quarter dozen will complicate matters mightily.
The global mining boom and effects on the Australian economy, 10/1.
'The Australian mining industry experienced a remarkable turnaround during the 2000s'.
Before the 2000s, commodity prices had experienced a long term decline with occasional upward spikes - 'dead cat bounces' in retrospect. Since the late nineteenth century it seems, which was a serious dampener for the mining industry. For a longer perspective than in this paper, see the wonderful book by Charles Howe, Natural Resource Economics. Issues, Analysis, Policy, Wiley, 1979.
'The rapid growth of emerging economies in Asia drove a surge in demand for commodities, particularly those used in steel and energy generation. With global supply unable to respond quickly, prices surged to historically high levels'.
We are all familiar with the China story, or the China-India story, but some of the facts presented by Ellis Connolly and David Orsmond are startling. (See for example their Chart 4, World Steel Production.)
'In response, mining investment in Australia rose to record levels as a share of the economy by the end of the decade'.
In a historical context, the mining boom in the 2000s was much larger as a share of the economy than the mining booms in previous decades in terms of sales revenue, investment and employment (Figure 8). Mining revenue increased from 6 per cent of GDP in 2000 to 14 per cent by the end of the decade, driven by the growth in bulk commodity export receipts. Mining investment rose from 1½ per cent of GDP in 2000 to over 4 per cent recently, to be well above the levels during previous booms. Mining employment increased from under 1 per cent of total employment in 2000 – the lowest share in at least a century – to 1.7 per cent by the end of the decade – the highest share in over 50 years.
Read on here for Henry's tribute to the Reserve Bank and two of its researchers for a most informative paper.
Note that, like Dr Gruen from Treasury, these researchers claim lower volatility but not higher growth in the 2000s compared with the 1970s.
US jobs cheer, 8/1.
LONDON (AP) — 'A strong U.S. jobs report failed to boost world markets for long on Friday as nagging worries about Europe's debt crisis dragged stocks back down and sent the euro currency to a new 16-month low.
'The U.S. Labor Department said employers added 200,000 jobs in December, pushing the unemployment rate down to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months. The job gains cap a six-month stretch in which the U.S. economy generated 100,000 jobs or more in each month — something that hasn't happened since April 2006.
'An improvement in the U.S. labor market is crucial for global markets because American consumer spending accounts for a fifth of the world's economic activity. A recovery in the U.S. would also mitigate the impact of the sharp slowdown in Europe.
But longer-term concerns about the euro and the region's financial system pulled stock markets back down shortly after the Wall Street open. They also pushed the euro currency to a 16-month low of $1.2681, the weakest since early September 2010'.
Decline of the middle class, 6/1.
The greatest thinkers have long worried about the issue of inequality, widely seen (with persistent unemployment) as one of the great risks to current 'light touch' capitalism.
Now the specific concern is the decline of the middle class, fortunately not so evident in Australia as it is in the USA and other major developed nations.
The year just ended saw waves of bad news, principally emanating from Europe but including China's attempts to slow its bubble economy, 4/1
Europe remains like a slow motion train crash and we should all prepare ourselves for some sort of 'Lehman moment' as Eurozone nations and banks struggle to survive.
The good news is that China seems to be regaining some momentum and the economic signs are also better in the USA.
But if the net effect of Europe in recession, the US in slow recovery and China's attempts to restore house price and goods and services price stability produces still lower commodity prices, Australia will be under the hammer.
By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total ...understand where this plan started just to bring all states at the same end ...understand how this type of plans are established...