Question: “So how do I know if the menu is in the right place?” Response: “once people stop asking you where the menu is !”
September 28, 2006
September 26, 2006
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Back in the middle of June we provided an analysis of the likely path of global economic growth over the next eighteen months. Briefly, we argued that there was a growing appetite among policy makers and analysts that a global downturn was required to rectify global trade imbalances, the parabolic growth of housing prices (the property bubble) and to preemptively moderate inflationary pressures. Since then we have been witness to a shift by the major central banks to a policy of hold. To some this would seem to contradict our call that central banks were poised to tighten monetary policy in a bid to cool economic growth.
Such an interpretation would however be remiss because the the Fed has raised interest rates for 17 consecutive quarters making it the longest period of a Fed rate rise in history. Hence, to take the Fed’s call to hold rates as a sign that they are not interested in monetary tightening would be the wrong inference.
This is necessarily so because there is a lag between central bank policy and its effects on the macroeconomy. That is to say, increases/decreases in interest rates take time to work their way through the macroeconomy. Bernake’s constraint was that given the lag he could not be sure that his rate increases had overshot the mark or not. That is, there maybe only a knife edge between a cooling off and severe recession. Hence the Fed’s descision to pause: they needed to know what effect the past rate increases were going to have in the future.
Moroever, when we talk of Fed policy of course we are not talking just about any other central bank (as when we talk about the US dollar we are not talking about just any other currency). The fact is that the Fed has been providing global liquidity by providing dirt cheap terms for borrowing in US dollars and thereby enabling a historically unprecedented current account deficit in the US BoP and on the balance sheet of US households. This deficit in turn has been the source of what can only be described as massive US currency reserves among countries who export to the US. As we remarked back in June, one of the forces potentially driving the appetite for a global slowdown is the increasing intransigence of developing countries. At the time we pointed to the most obvious suspects:
Another explanation for the increasing appetite for a global downturn is the increasing militancy of key developing countries in Latin America and the Middle East. One sure way to break the militancy of developing countries is to undermine the high commodity prices underwriting that militancy. There is no need to bomb Iran, invade Venezuela or unleash the Dogs of War on Morales. A simple correction in the demand for commodities will do the trick.
Yet as Andy Xie at Morgan Stanley has recently pointed out, US concerns about its location within the global hierarchy of states extends well beyond commodity producers to its ability to influence policies amongst developing countries which produce manufactured and semi-manufactured goods, e.g., India and China.
Xie further argues that American influence has traditionally relied on two pillars: the carrot of US dollars for those who play and the stick of military intervention for those who refuse the invitation of empire. Xie sums thus:
While the US may be sincere in its efforts, its position is undermined by the massive US current account deficit. The US’ superpower status is based on dollar or gun diplomacy. The US current account has undermined the former, as developing countries have extensive dollar holdings. The latter is encountering major challenges in Iraq and has lost some credibility.
However, there is another pillar to US hegemony and that is access to its consumer markets (to be fair Xie would argue that this is part of the dollar carrot because all things being equal such access translates into US dollar holdings as most imports into the US are paid for in US dollars). Access to the US as the consumer of last resort has been a crucial tactical arrow in the quiver of the US imperial armoury. The problem is, as Xie alludes to in the above quote, that because the US Fed has pumped so much liquidity into the global economy and as such developing countries have little need for US dollars. Moreover the threat of protectionism has also become less credible. Not only is the US embedded in multilateral and bilateral trade agreements which make the cost of protectionism higher but the US also relies on access to cheap imports to fuel its own domestic economy and underwrite the average American’s standard of living. Add to this that much of the imports into the US are done through US MNCs abroad. So there is a substantial part of US capital that has no truck with protectionism.
We believe that taken together all of these constraints on the US’s capacity to influence other states points in the direction of a global slowdown if not outright recession in the next 12-18 months. For it is only by cooling the global economy to the point where developing countries are indeed once again hungry for US dollars that they will become more pliable to US demands. The up side of this strategy is that such a slowdown would also help to trim the overhang on the US current account, and clean up the froth in housing prices. The downside of course is that it is workers who will ultimately bear the costs of such corrections ion terms of the value of their homes, pensions standard of living and access to gainful employment.
The other interesting thing to note is now that we have seen how the new “leaner and meaner” welfare state works at the top of the cycle, should our call on global growth be right, we are going to get a chance to see how it performs at the bottom of the cycle.
The big question of course is how severe is the downturn going to be: Correction, Recession or Depression? Probability says somewhere between the first two.
September 13, 2006
In the last federal election there was much sound and furry over the issue of strategic voting unfortunately signaling nothing. The problem was and is that strategic voting, within first past the post voting system as we have in Canada, makes little sense as a strategy during general elections federal or provincial. However, during By-Elections strategic voting may make sense. Thus it may be the case that a vote for the Greens is a vote for the Liberals in Parkdale-High Park. In what follows we will establish why strategic voting works in By-Elections and may deployed only in a limited sense in General Elections.
Let us take the case of the current By-Election being held in Parkdale-High Park. If we take the results of the 2003 general provincial election the Libs took over 55% of the vote. This could be considered a safe seat if it were determined that similar such results were obtained in the past (which they were). For our purposes what is clear is that the Libs have a strong base of support in this electoral district. In such a case it would be fair to say that voters should vote their party of preferences because even if all parties pooled their votes to single candidate Kennedy would still have won the race.
However if we turn to the latest opinion poll numbers a different logic emerges. The last opinion poll Liberal support was @ 38%, the NDP @ 33%, the Cons @ 19% and the Greens @ just over 10%. In this case either Con or Green supporters could play the role of king maker. Turning directly to the question of whether or not a vote for the Greens is a vote for the Liberals? The answer of course depends on whether or not Greens are more predisposed to the NDP or Liberals. If they are more predisposed to the former then a vote for the Greens, in this case, is a vote for the Liberals. Nothing of course stops the Liberals from deploying the same strategy with Con voters, ie., a vote for the Cons is a vote for the NDP.
In the next part of this article we will demonstrate why strategic voting is less applicable as a general strategy during General Elections.
September 12, 2006
Just when you thought you had seen it all. Cherniak now says he is putting his comments list on moderation because people are being mean and he is sick of the insults. Whoa big guy, did someone say you were advocating that pedophiles be ordained? Or did someone say that you planned to move drug dealers into your neighborhood? Or did someone accuse of saying that there was little difference between Jesus and a serial killer?
If so we would not only be shutting down our comments section we would be suing these libelous bastards. Really, don’t go all mommas boy on us after you have already used your blog to destroy two careers within the Liberal party and are now trying to destroy the reputation of an NDP politician. Even Kinsella does not pull this cry baby crap. Then again Kinsella does not allow comments and refuses public debate. After what happend in BC perhaps a good move on his part.
September 12, 2006
By Goodwin Ginger
What a difference 48 hours can make. Kinsella and Cherniak are busy trying to cover their collective ass by moderating their smear against Rev. DiNovo. Problem is that it is too late and their antics are threatening the already fragile reputation of the Liberal party. First they made the argument that Rev. DiNovo advocated for the ordination of pedophiles, which she did not. When that lie would not stick they then moved to the more moderate smear that Rev. DiNovo compared Homolka to Christ, which she did not. All she said was that society creates scapegoats for its contemporary troubles as did the Romans with Christ. The point of comparison therefore was the phenomenon of scapegoating not in the character of the two individuals being compared.
Now all of this is pretty standard fair within Christian theology: Protestant or otherwise. That Cherniak and Kinsella have decided to attack Rev DiNovo for preaching this means that they have ended up having to reject one of the central tenants of Christian morality. This extreme form of political warfare is indeed a sad state of affairs.
Kinsella is of course a beast unto himself having no official connection to the Libs. Cherniak on the other hand is not. Indeed he is one of Stephane Dion’s foot-soldiers and a central figure within the Liberal Party of Canada. It is high time that Dion and the Party took a stand for maintaining a certain standard of decency in Canadian political discourse and called Cherniak to heel. Dion and the Liberals must rise above the din by simply and quickly demanding that Cherniak resign from his positions with Dion and the Liberal Party of Canada.
September 11, 2006
By Goodwin Ginger
Politics is a blood sport as we all know. Cherniak and Kinsella are of course rank amateurs in the sport. Apparently Kinsella and Cherniak think that the movie Bad Lieutenant was a pro rape film. We would act shocked, appalled or morally outraged but hey what is the point? “Warren King of Jews Kinsella” and his little protégé “Jason the Excommunicator of Jews Cherniak” are at it again this time they are going after Rev. DiNovo. What did the protestant Rev ever do to them you ask? She is running as a candidate for the NDP. And running she is: check out these numbers. QED.
We always knew Kinsella’s Catholic guilt was leading him to extremes we just did not think that Cherniak would come out against 2000 years of theological Christian debate over the concepts of Grace, Judgment and Sin. Apparently like the hard line Rabbis Kinsella and Cherniak have decided that Christian morality, particularly its protestant incarnation, is a plague upon civilization and victory. Why Cherniak and Kinsella are protestant haters we just don’t know.
Or perhaps we do. See the thing is these two are liberal party hacks with little to add to public debate or indeed in the way of sober counsel to the LPC. Forever destined to troll in the wilderness they are political mercenaries. They have their friends and they have their enemies and these change over time with the tea leaves. They have neither principle nor sophisticated intellect and as such are perfectly suited to the role of attack dogs in the political division of labour.
All one can hope to learn from their musings is who they hate, what are some of the fault-lines that are currently exposed within the LPC and perhaps which of their candidates is about to loose a safe seat. Outside of that all we can learn is who is responsible for the destruction of political discourse in Canada.
Yet on the question of Kinsella and Cherniak’s worthiness of redemption we leave that to the divine: as judgment is of course the provenance of G-D. Any other position would be blasphemous in any of the houses of Abraham.
Readers who are interested in the Reverend’s sermon which Kinsella and Cherniak have libelously spun can click here. Lets Hope DiNovo wins on Thursday perhaps the dogs will rest for a spell.
September 11, 2006
Scene 1: Washington, the Oval Office, September 1970. Dr Salvador Allende, a man of culture, grand bourgeois and charismatic founder of the Socialist Party, has just won the presidential election in Chile fair and square, with 36.22% of the votes. Nixon and Kissinger receive Central Intelligence Agency (CIA) director Richard Helms. Nixon tells Helms, according to Kissinger, that he wants “a major effort to see what could be done to prevent Allende’s accession to power. If there were one chance in 10 of getting rid of Allende, we should try it.”
Scene 2: Santiago, La Moneda Palace, September 11 of the year 1973, 8am. Allende, the democratically elected president of Chile, is worried about a general called Augusto Pinochet. Radio stations are mute. The navy has taken over Valparaiso – where the president was born. But he worries about his new army commander, chosen less than three weeks ago: “Poor Pinochet, he must have been arrested …”
General Pinochet is far from arrested: he is conducting a coup. Troops march over Santiago. At 8.30am a solemn military declaration makes treason official. Tanks roll into the city center. At noon, four Stuka planes destroy Allende’s private residence on Tomas Moro Street and bomb La Moneda Palace. The president chooses resistance, fighting the troops surrounding the palace and spurning offers of a plane for himself and his family to leave the country. When his capture is imminent, Allende presses his chin against the AK-47 that Cuban leader Fidel Castro gave him, and fires. At 2pm [Sept 11th], the military junta takes power. Systematic arrests, torture and executions start almost immediately.
Read the full article at Asia Times
Total deaths as a result of the coup 3,000
September 11, 2006
A Bloomberg/Los Angeles Times poll conducted in June showed that 37 percent would never vote for a Mormon for president, compared with 14 percent who wouldn’t vote for a Jew and 9 percent who wouldn’t vote for a Roman Catholic. Cue Cherniak and Kinsella to write a book on the growing anti-Mormon sentiment within the Liberal Party of Canada. Then we can all accuse them of being pro-polygamy.
At hat tip to Doug Henwood at LBO for pointing us to the poll