Monthly Archives: November 2013

Canada: I heard the sound of a thunder, it roared out a warnin’ …

The OECD, in its current General assessment of the macroeconomic situation of the global economy, gives 2 Tables, A1a and A1b, titled Indicators of potential financial vulnerabilities. These tables list 12 categories of macroeconomic activity that could warn of financial vulnerability. They are:

  • Potential GDP growth rate – actual GDP growth rate differential, 2012
  • Actual unemployment rate – NAIRU differential, 2013 Q2
  • Current account deficit , 2012 [1]
  • Relative unit labour cost, 2000Q1-13Q2 [2]
  • Household gross debt, 2012 [1]
  • Non-financial corporation gross debt, 2012 [1]
  • Real house prices, 2000Q1-13Q2 [2]
  • Core Tier-1 capital required to reach 5% of assets in selected banks [1]
  • Nonperforming loans to total loans, latest
  • Financial corporation gross debt, 2012
  • Headline government budget deficit, 2012
  • Gross government debt, 2012
  • Real 10-year sovereign bond yield-potential GDP growth rate differential, 2013Q3

Israelis, Saudis and the Iranian Agreement

Stratfor

By George Friedman

A deal between Iran and the P-5+1 (the five permanent members of the U.N. Security Council plus Germany) was reached Saturday night. The Iranians agreed to certain limitations on their nuclear program while the P-5+1 agreed to remove certain economic sanctions. The next negotiation, scheduled for six months from now depending on both sides’ adherence to the current agreement, will seek a more permanent resolution. The key players in this were the United States and Iran. The mere fact that the U.S. secretary of state would meet openly with the Iranian foreign minister would have been difficult to imagine a few months ago, and unthinkable at the beginning of the Islamic republic.

Obama Has Secured His Legacy …

… as the most inept and disastrous president in American history.

In terms of domestic policy, Obamacare continues to unfold as a colossal socialist blunder. Never mind that the implementation has been a total screw-up and that initial projections of enrollment are out by an order of magnitude or more. Never mind that it has created structural damage to the employment  situation where tens of thousands of jobs have been deleted or changed from full-time to part-time (read Mike Shedlock: Jobs vs. Employment Analysis Suggests Huge Obamacare Impact (And Way Less Job Growth than Anyone Thinks)

It is the ongoing personal cost hidden in millions of little stories of people who have lost all coverage (such as: Latest Obamacare Glitch: One-Third of Enrollees May Not Get Insurance) or are paying multiples of what they previously paid for less coverage. Watch for massive fraud arising from phony insurers and lost personal identification information (read: No security ever built into Obamacare site: Hacker). A major negative transformation is taking place in the American healthcare system, one which will take years to fully emerge – if it survives at all.

King Abdullah’s October Bombshell

This essay is part one in a new series by Paul Merkley, Saudi Arabia and the Interminable Arab Spring, reprinted by permission of Paul and from The Bayview Review. See the links at the end for direct access to the rest of Paul’s work.

“Saudi Arabia Rejects U.N. Seat Security Council Seat in Protest Move,” runs the headline in the October 18, 2013 edition of the International New York Times.

Our major news-outfits have not given much attention to this story and the efforts of their editors to parse its meaning have not generally been distinguished. Puzzlement has been the principle motif. Was it not a fact that the Saudi delegation had been lobbying aggressively for two years to gain this seat, one of ten Non-Permanent seats that become available on a rotating basis to the other Members-in-general of the UN.? Don’t all nation states covet the privilege of sitting for two years in the same room with the Five Permanent Members (U.S., U.K., France, Russia, China) and making this world a better place? Wasn’t it true that the Saudi delegation had already begun celebrating (in their Muslim way) when the King abruptly announced to the world that his Kingdom had lost all respect fro the UN Security Council and would not lower itself to keep company with the Five Immortals?

Is Friday November 22, 2013 Really Friday the 13th?

A Black Swan Worth Monitoring

We received the following link to a BBC article from our friend and contributor Dr. Paul Merkley: Esa’s satellite Swarm launch to map Earth’s magnetism. Within what might be a ho-hum article we found the following information (emphasis ours):

The strength [of the Earth’s field] has fallen by some 15% in the past two centuries. The movement of the north geomagnetic pole has also accelerated.

Researchers have speculated that Earth may be on the cusp of a polarity reversal, which would see the direction of the field flip end to end. North would become south, and vice versa.

This has not happened for 780,000 years, but the phenomenon has nonetheless been a regular occurrence through geological time.

The mission’s lead proposer, Prof Eigil Friis-Christensen, said:

You could say we’re overdue, …

We talk about the weakening of the global field but in some local areas, such as in the South Atlantic, the field has gone down 10% in just the last 20 years. But we do not know whether we will go into a reversal or whether the global field will recover …

No timeline was suggested and the speed with which a reversal could occur is unknown. So be a good Boy Scout – Be Prepared – just don’t ask us how.

Flash Point: Typhoons in Perspective

Typhoon Haiyan that hit the Philippines recently has been classifies as a ‘super typhoon’ and the most powerful storm ever (read CNBC: ‘Most powerful storm ever to make landfall’ batters Philippines …); Express: ‘Biggest ever storm’ devastates Philippines …; The Guardian: Typhoon Haiyan the biggest yet as world’s tropical storms gather force). Anthropogenic global warming (AGW) enthusiasts have been quick to blame climate change (e.g.: The Visible Face of Anthropogenic Global Warming). The truth is somewhat different.

Flash Point: If You’re American, You’re Now Really Screwed – Yellen’ About it Won’t Do No Good

ZeroHedge today reports: Yellen Timestamp: “No Bubble”. We have added emphasis below.

  • YELLEN SAYS FED DOESN’T SEE BUILDUP OF FINANCIAL RISKS
  • YELLEN SEES LIMITED EVIDENCE OF ‘REACH FOR YIELD’
  • YELLEN SAYS FED LOOKS OUT FOR ANY POTENTIAL ASSET PRICE BUBBLES
  • YELLEN DOESN’T SEE `MISALIGNMENTS’ IN ASSET PRICES

Since ZH doesn’t provide a source link we go to Fox Business: Yellen Senate Confirmation Hearings Begin. Quotes from this source areare:

  • Yellen in her opening statement credited the Fed’s interventionist policies with supporting the ongoing recovery and described the economy as “significantly stronger.” [The economy has not recovered to its pre-recession levels and may be rolling over. Contrary to what the Fed might believe, the business cycle remains, even if it is severely distorted by Fed intervention.]
  • Quantitative easing is intended to keep longer-term interest rates on loans such as mortgages low “to spur demand in the economy,” Yellen explained. [after an initial boost there is no ongoing effect. Indeed, the 30 year rate has been rising.]
  • Yellen, addressing questions related to potential asset bubbles, said Thursday she doesn’t currently see any “price misalignments” that “would threaten financial stability.” [compared to normal times, risk in the bond market and the stock market is totally mispriced.]

In short, Yellen will perpetuate the Fed policies that have so damaged markets, partly due to a blindness toward their ineffective and destructive nature.

David Stockman, in a King World News interview reinforced the above analysis:

The greatest danger is the Fed.  It has become a serial bubble machine.  We have seen this move three times already this century … and now they have inflated it even more fantastically for the 4th time.  And yet we now have testimony from Yellen, yesterday, in which she couldn’t even use the word, ‘bubble.’  She kept referring to it (the bubbles) as a ‘misalignment of prices.’

So we have a complete disconnect between the Main Street economy, which is struggling and floundering, and financial bubbles throughout Wall Street and the financial system that are clearly being fueled by the lunatic policies of the Fed.  And now we have a (Fed) chairman who can not see them, or even hear the word.

These comments crystallize the divide between private sector analysts and economists and the Fed. They represent the antithesis of what the private sector sees and in particular with QE, what academic research is beginning to dismiss as having any ongoing effectiveness.

Socialism: Venezuela As Another Failed Latin America Socialist Experiment

We have not tracked the economic and social decline in Venezuela since Hugo Chavez took power in 1999 and began dismantling the democratic state by chang[ing] the Venezuelan constitution, amending the powers of congress and the judicial system (biography). How fragile and impermanent is democracy. The government has previously confiscated a number of natural resource developments including the Las Cristinas gold deposit (21 million ounces) and much of the foreign-owned oil and gas sector.

More recently they have begun feeding on themselves. This week, ZeroHedge reports how the government has  arbitrarily set prices for appliances and electronic goods, supporting the looting of Daka appliance stores (read: Watch Socialist Paradise Central Planning In Action: Venezuela Looting Edition, Venezuela Dispatches Army To Enforce Appliance “Fair Price” Ceiling After Looting Ensues).

When socialist governments arbitrate prices instead of allowing market forces to determine fair prices, businesses fail. Daka can’t survive. So citizens got cheap or free TVs today but tomorrow they’ll have to go online for them since the stores will have been driven out of business. Does Amazon ship to Venezuela?

With this incident we begin coverage of the descent of Venezuela into social chaos and revolution sparked by the destruction of the economy by socialist policies.

The Timeline of Events

When we started this essay yesterday we had not decided if we wished to track further events. Today Zero Hedge presented us with another one so we will chronicle the actions of the government leading up to the revolution, starting with the Daka incident above. The list follows:

Socialism: The Socialist Paradigm in a Simple Allegory

From Armstrong Economics (h/t ZeroHedge) we present this lovely example that distills the socialist paradigm. Whether it is a true story or an allegory makes no difference. Here it is:

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”.. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that.

Here are the 5 key points distilled from the story by Martin Armstrong:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Table of Contents for This Series

Ontar-I-Owe

Almost two years ago we started this blog and one of the early posts was Congratulations! You’ve Sold Your Kids and Grandkids Into Economic Slavery. In it we reviewed the debt position of Canadians and particularly Ontarians. We thought we would see where Ontarians stand after two more years of socialist government policy and corruption.

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