Recovery’s Rocky Road, The Big Three, China’s Bailout, Hopeful Commodities, Libre Quebec Libre

Articles about the global economy, ever hopeful commodities, and why it is so hard to be a separatist in Quebec.

We forget sometimes that however big China and other middle income countries are getting, the high income countries still make up the lion’s share of the global economy, and there, recovery is a rocky road.

Martin Wolf explains.

Financial Times – The Road to Recovery Gets Steep
What is one to make of recent economic data, particularly in the advanced countries? Is the world economy slowing? If so, should policy do anything about it and, if so, what might the alternatives be?


A nice mid-year review of the Big Three macro trends: structurally wounded US economy, rising inflation in middle and low income countries, and Europe’s sovereign debt crisis.

The Bagehot Post – Macro Factors and their Impact on Monetary Policy, the Economy, and Financial Markets
Coming into 2011 we suggested there were three major themes that would play out in the course of this year.

News that local Chinese governments were bailed out by Beijing raises issues about how solvent parts of China are. Thanks to David of Toronto for sending this in.

Finance Asia – China’s Coming Collapse
It became clear last week that China has probably not dodged the financial crisis at all, after Beijing quietly bailed out local government to the tune of $463 billion.

Quote worth quoting.

“While we can’t predict where complex systems will go, we know that the longer their volatility is artificially suppressed, the more emphatic will be its release when it does come.”

We have made the case elsewhere that Club of Rome-Jeff Rubinesque (ed’s note – not to be confused with Rubenesque from Flemish painter Jean Paul Ruben who liked fat and plump female models for his paintings) fear mongering about the world running out of commodities has no basis in economics or the history of commodities.

Rising prices have two wonderful effects, first they change the pace and direction of demand (consume less and something else), and second they encourage new, unknown replacements.

Our great friend David of Victoria sent in this that tells a similar story about dangerous permanent optimism around iron ore demand and China.

Barrons – Scrappy Rival Nips Iron’s Price
The bullish outlook for iron ore, traditionally a key steel-making ingredient, is dimming.

Quote worth quoting.

"From 2015, we believe an additional industry dynamic will enter the fray: the increase in Chinese domestic scrap supplies.”

Still hope springs eternal.

Financial Times -- Indonesia: Regional Economic Boom
It is Saturday morning at the Superblock mall in downtown Balikpapan, a mining town of less than half a million people on the eastern coast of the island of Borneo.


While standing on the first tee at Victoria golf course during the recent federal election with our large Friday Open contingent one fellow let loose a long diatribe about how Quebec separatists were treasonous, that the pensions that Bloc Quebecois MPs had earned should be stripped away, and that separatists political parties should be banned.

All of that would be great I murmured if you wanted to live in a country where you were constantly on the look out for unaccompanied bags in subways and restaurants, where the opportunity of absorbing someone else’s language and making it your own was seen as crime not as a gift, and where the instinct to suppress moved to the centre of your political imagination instead of the periphery.

Then we all hit away (ed’s note -- I actually hit a good drive so maybe it was helpful to get a little steamed).

This long lead in to the news that the leadership of the Parti Quebecois seems to have come to the conclusion that running on sovereignty will result in another electoral defeat – again -- but that backing away from that goal has resulted – again – in a fatal back bench backlash.

Libre Quebec Libre!

La plus ca change …

Globe and Mail -- Soft-pedalling sovereignty, Marois courts her demise
If the past is any indication, the crisis rocking the Parti Québécois this week has irreparably shaken Pauline Marois’s leadership and cast doubt over the party’s ability to achieve independence for Quebec.

The fact that Canada has accepted that with a clear question and fair vote that Quebec is free to separate, and that Quebec based taxpayers who vote in federal elections can send anyone they please including separatists to Canada’s Parliament -- that operates in both English and French – defangs the cause.

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Twin Virtues: Inequality of Outcomes & Equality of Opportunity©

Twin Virtues

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, marshalling 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.

Free trade is a wonderful thing. Time and time again economists have proven that free trade creates enormous wealth for each country 'on the whole'. Historians have shown that free trade is usually associated with rising political, social and cultural liberty. The perennial problem is that free trade always creates tremendous disruption for thousands even millions of individuals often concentrated in one geography, and where the state is idle, not investing in best in class instruments of social justice, free trade can be a permanent ticket out of the middle class, down, not up.

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.

Public policy should be designed to decrease inequality before the law and increase equality of opportunity.

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).

Welfare strategies are best designed as a hand up, not as a hand out.

Political debate should not be fact free fighting.

Explanation lasts longer than eloquence.

Always favour empowerment over dependency.

The most enduring public figures are embraced for the causes they fought for and not the concept of themselves they hoped others would remember them by.

Find your voice and don't be the echo of somebody else.

It is possible to operate on two different levels: the practical, cautious and conservative; and the realm of ideas, open, free, and radical.