Global Imbalances, Exit, Inflation, Tipping Points, Chinese History, Vancouver’s Bubble, Us & Them, Bob Rae, Squeezed

The body blow that the global economy took from the financial crisis of 2007-2008 was nursed by unprecedented monetary and fiscal intervention by both high and low income countries.

The question facing monetary and fiscal authorities, as well as investors is, 'what comes next'?

This is particularly the case since despite these actions high income countries face a myriad of challenges consistent with weak economic growth namely anemic job growth and fiscal emergencies.

 At the same time, because of these actions low income countries face a myriad of challenges consistent with strong economic growth namely accelerating inflation.

Important articles that examine the policy challenges ahead, as well as the difficulty of pinning down tipping points, why China has the year 1679 in mind and an eye on the Bahamas, Vancouver's amazing property bubble, how Adrian Dix will position the BC NDP, Bob's waiting game, and how inflation bites.

Martin Wolf sounds the alarm.

Financial Times – Faltering in a Stormy Sea of Debt
It is astonishing that Standard & Poor’s can say anything about the best-known debt class in the world that is deemed to add value.

 

So just how does the Fed execute the exit?

Financial Times – US: When Timing is All
Just over a year ago, Ben Bernanke went to testify on Capitol Hill.

 

Quote worth noting.

“Much depends on circumstances, and policy rules come in many different flavours, but simple examples used by the Fed suggest a need to tighten policy by the time the unemployment rate reaches 8 per cent and core inflation hits 1.5 per cent – and probably somewhat sooner.“

Related.

Pdf below -- When Will the Fed Take the Punch Bowl Away?

Related.

Asia Sentinel – Hot Money Flows Into Asia Again
It is not just China that has been experiencing massive increases in money supply propelled by inward flows of money. Most of Southeast Asia is seeing the same phenomenon

What drives inflation expectations?

Federal Reserve Bank of New York -- What Is Driving the Recent Rise in Consumer Inflation Expectations?
The Thomson Reuters/University of Michigan Survey of Consumers (the “Michigan Survey” hereafter) is the main source of information regarding consumers’ expectations of future inflation in the United States.

Quote worth quoting.

“In sum, our research shows that expectations of higher nominal wage growth or concerns about increased growth of nominal government debt are unlikely to be behind the recent increase in short-term inflation expectations reported in the Michigan Survey. Instead, we suggest that this rise in inflation expectations reflects two factors: (1) sharp expected increases in food and especially gasoline prices and (2) the use of a survey question (“prices in general”) that results in reported expectations being more sensitive to these types of price change.”

The CIA famously missed the fall of the Soviet Union and the Arab Spring. It’s hard to blame them, calling tipping points is hard.

New York Times – Of Men and Last Straws
When the C.I.A. was criticized for not predicting the popular uprisings that are now roiling the Arab world, its director, Leon Panetta, was quoted as saying that although you can describe the tectonic fault lines that lie beneath the surface of the earth, you cannot predict the exact moment that an earthquake will arrive.

Why China sees danger behind the Dalai Lama’s retirement announcement just like in 1679.

New York Review of Books -- The Dalai Lama’s ‘Deception’: Why a Seventeenth-Century Decree Matters to Beijing
The Dalai Lama’s recent announcement of his planned retirement was not well received by China’s Foreign Ministry, whose spokeswoman described it as an attempt “to deceive the international community.”

 

Chinese construction companies make their way to the Bahamas. Thanks to David of Victoria for sending this in.

UPI – Chinese Takeaway
While World Bank President Robert Zoellick warns that the world is "one shock away from a full-blown crisis," China has broken ground and taken over the economic future of a country whose nearest island to the U.S. mainland is Bimini, only 50 miles away.

The Vancouver property bubble.

gurufocus -- There Is a Chinese Housing Bubble All Right; It Just Happens to Be in Vancouver, Canada
I’m not the sharpest knife in the drawer, but some things are just so obvious that even I can easily see it. And one thing that is obvious to me is that Vancouver housing prices are just not right.

Gary Mason ponders how Adrian Dix will position the BC NDP. Us and Them.

Globe and Mail -- B.C. NDP leader advised to ditch old campaign playbook
Adrian Dix would likely be a shoo-in to lead his B.C. New Democrats over the governing Liberals in the next general election if all it took to win was hard work and earnestness.

Waiting.

The Hill Times – Rae positioning himself 'if Iggy falls on his sword,' says York University professor Drache
With Harper heading for another minority government—and some say perhaps, just maybe, a slim majority—it might not be long before Liberal Leader Michael Ignatieff heads back to the halls of higher learning.

Sacrifice.

Squeezed.

Ottawa Citizen -- Skyrocketing prices put crunch on families
A seven-cent jump in the cost of a cup of coffee at Tim Hortons is the least of Lisa Greaves' worries.

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Ultimately, the most successful societies find the balance between the twin virtues of inequality of outcomes and equality of opportunity.

The new politics must marry the twin virtues of unequal outcomes and equality of opportunity.

When too few get too much everybody loses.

Feminism is about women living their lives on their own terms, marshaling the resources of the society to make that possible, and men embracing this as vital to a successful society and their own liberation.

Can it be that striving for equality of opportunity however imperfect the process not only benefits the individual but also creates benefits for the society that are unintended but wonderful?

Economics must be a 'moral enterprise' as much as politics claims to be. Economic outcomes need to be framed in terms of right and wrong not just efficiency if only because these often align in surprising ways that are good for society and the economy.

My vision of Canada is that any Canadian child from a family of limited circumstance can expect to have a chance at lifetime of unlimited opportunities.

Tax policy should be founded on the principle of generating steady tax revenues sufficient to maximise environmentally sustainable economic growth in order to fund fair government.

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Capitalism is not the problem; the problem is what we do with capitalism.

Content is always more difficult to argue than conspiracy.

Let the state regulate and the market operate (most things).

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Political debate should not be fact free fighting.

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