Monthly Archives: March 2012

Stratfor: 20120327

The United States in Korea: A Strategy of Inertia

March 27, 2012 | 0857 GMT

By George Friedman

After U.S. President Barack Obama visited the Korean Demilitarized Zone on March 25 during his trip to South Korea for a nuclear security summit, he made the obligatory presidential remarks warning North Korea against continued provocations. He also praised the strength of U.S.-South Korean relations and commended the 28,500 U.S. troops stationed there. Obama’s visit itself is of little importance, but it is an opportunity to ask just what Washington’s strategy is in Korea and how the countries around North Korea (China, Russia, South Korea and Japan) view the region. As always, any understanding of current strategy requires a consideration of the history of that strategy.

Living In a Hypothesis

In a recent speech at the National Association for Business Economics Annual Conference, Washington, D.C. March 26, 2012, Fed Chairman Ben Bernanke talked about the US job situation and monetary policy designed to rectify the problem. That Fed policy is consistent with central bank policy worldwide makes this speech worthy of study. The frightening aspects are that this policy represents untried economic theory – a “hypothesis”, the results to date are a failure, the future impact is unknown beyond some theoretical speculation, and central banks will continue to implement it magnifying future effects.

Credit Bubble Bulletin: 20120323

In this letter, Interesting Juncture, Doug Noland, “The Prudent Bear”, examines a number of premises that would support his contention that equity markets are in a bubble. If the premises are valid we should see clear evidence of a bubble in the coming weeks.

He begins with the premise that global central bank market interventions are in the end destabilizing. He states that These types of policy-induced market dislocations spawn market anomalies and uncertainties. Next, he says he would contend … that global markets have never been as susceptible to performance-chasing herd behavior. And, finally, he notes that market participants have generally been conditioned to expect buoyant markets and loosened Credit conditions to prove constructive for economic activity.  He concludes that these types of dynamics have in the past supported bullish market runs with legs.

Time To Get Ready for the Next Big One

Reuters had an informative article today on TB: Drug-resistant “white plague” lurks among rich and poor. Drug resistant varieties of TB have been around for years. More recently, multi-drug resistant TB, or MDR-TB, has been encountered. Now, Reuters reports new cases of so-called “totally drug resistant” TB [or TDR-TB] in India suggests the modern-day tale of this disease could get a lot worse.

Why should we worry about what’s going on in India? Do you want to bet your life on the answer to this question? No? Too bad, because in fact the bet has already been placed.

Things That Make You Go Hmmm…: 20120318

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Summary points:

  • Grant begins by noting the price differential between WTI (West Texas Intermediate) and Brent prices of oil. Brent in particular, has recently set new all-tine highs.
  • The official American response has been to blame the high price on “speculators” and “evil” ones at that. The real issue is high oil prices produce high gasoline prices which reduce economic growth and make voters cranky. This is not what the administration wants in an election year. [This may be why Obama does not want a war with Iran until the end of the year, after the election since this would drive oil prices much higher.]
  • He cites another analyst, Ronni Stoeferle from Vienna who has a detailed report available HERE (write and ask). It notes that Mexico, Saudi Arabia, and Russia have made the most accurate forecasts in the past including the actual price last year. This year, Saudi Arabia expects an average WTI price of USD 97, Mexico forecasts USD 116, and Russia USD 120/barrel.
  • Grant says that the issue with oil is clearly one of supply and capacity right now. He cites a recent article entitledUnderstanding TheNew Price Of Oilby Gregor McDonald as to why supply is now primary. New oil is simply much more costly to produce and no mega-fields are coming on line in the next 3 years.
  • On interest rates: The increase in the price of oil that is attracting so much attention currently is partly down to supply constraints, partly down to inflationary pressure and partly down to fear.
  • On the canary to watch: The turn in the bond market is absolutely the most important thing to be watching for currently because when it comes, and once it picks up some steam there will be no stopping it.

The Fiscal Cost of Immigrants to Canada: $6000 Each Per Year

In 2011, Patrick Grady and Herbert Grubel (G&G) of the Fraser Institute published a study titled Immigration and the Canadian Welfare State 2011. In it, they estimated that in 2005, Canada’s immigrant selection policies resulted in an average fiscal burden on taxpayers of $6,000 per year for each immigrant. Later that year, Mohsen Javdani and Krishna Pendakur from the economics department at Simon Fraser University (J&P) presented an alternative estimate of this fiscal burden at $450. In a follow-up review titled Fiscal Transfers to Immigrants in Canada: Responding to Critics and a Revised Estimate, (G&G) refute the J&P response and using new and additional data, confirm their original estimate.

We examine some of their key observations below.

Placing Spain on Deathwatch

Originally with our idea of ‘tracking’ posts, we began them with a discussion or preamble followed by a chronology that is updated as news-worthy events come in. We have decided to reverse the structure so the reader has ready access to the latest events. Below are what we consider to be major events leading to a Spanish default on debt, possible political revolution and withdrawal from the eurozone.

Keeping a Running Tab on the Situation

Stratfor: 20120313



The State of the World: Germany’s Strategy

By George Friedman | March 13, 2012
Security WeeklyThe idea of Germany having an independent national strategy runs counter to everything that Germany has wanted to be since World War II and everything the world has wanted from Germany. In a way, the entire structure of modern Europe was created to take advantage of Germany’s economic dynamism while avoiding the threat of German domination. In writing about German strategy, I am raising the possibility that the basic structure of Western Europe since World War II and of Europe as a whole since 1991 is coming to a close.

If so, then the question is whether historical patterns of German strategy will emerge or something new is coming. It is, of course, always possible that the old post-war model can be preserved. Whichever it is, the future of German strategy is certainly the most important question in Europe and quite possibly in the world.

King World News: March 2012


This is a site we follow. It’s principal focus is on how precious metals and mining stocks are behaving in the markets. They’re good to listen to if you have this bias. They also touch on other topics of high relevance to today’s principal events in economics, finance, and geopolitics. We will try and make key observations if you don’t have the time to listen. Note that we do not link all audio and blog files. If you do listen, the first minute or so is advertising which you might want to skip. The links appear chronologically from most recent for the month, backwards.

Deconstructing the Bank of Canada

This is the top-level post in a series that will study the structure and operation of the Bank of Canada (BoC). This is more of a project than a simple show and tell, so we expect it to grow over time.

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