Wednesday Night #1587

While the eyes and ears (via television, radio and Internet) of the world are turned/tuned to the London 2012 Olympics –even though after the spectacular Opening Ceremony, almost any development will be slightly less dramatic – the globe continues to spin in its orbit and the economy remains a major preoccupation. Thus, we are fortunate to have Peter Berezin with us to look at the latest edition of Bank Credit Analyst, The Weak U.S. Labor Market Mainly A Cyclical Problem. For Now

The quick summary is:
“The euro zone is on the edge of collapse. With bank runs accelerating in the periphery, a ‘muddle through’ solution is no longer viable. For the time being, investors should take a cautious attitude towards risk assets. The Special Report in this month’s Bank Credit Analyst argues that although the unemployment rate has risen mainly for cyclical reasons, there is a risk that the unemployment problem will become more structural in nature as the long-term unemployed continue to drop out of the labor market.”

On the eve of the opening of the Olympics, there was bad news of the British economy – Britain sinks far deeper into recession than forecast In Britain is losing the economic Olympics, Anatole Kaletsky of Reuters puts forward an interesting comparison between the U.S. and British economies, suggesting that they represent the closest thing to a controlled experiment. He concludes that:
“Britain’s heroic spending cuts and tax increases imposed by the Cameron government may contrast starkly with lassitude and cowardice displayed by politicians in Washington. But this dramatic political contrast has made absolutely no difference on the debt and borrowing outcomes the two countries have actually achieved, because the British austerity has simply prolonged recession, while U.S. fiscal laxity has allowed the economy to grow.” However, the Economist’s analysis The economy is struggling, but not as hard as the official GDP figures suggest is somewhat more optimistic.

Spain remains a serious concern, following the IMF’s annual report and news that unemployment, already the highest in the European Union, rose to 24.6 percent in the second quarter. The Business Insider has published 10 Terrible Facts About Spain , but other reports are more sanguine in light of European Central Bank President Mario Draghi’s pledge to do whatever was necessary to protect the euro zone from collapse, sending a strong signal that inflated Spanish and Italian borrowing costs were in his sights.

We don’t believe that Peter and his colleagues at BCA would consider themselves to be futurists, but nonetheless, they and others should be interested in the WorldFuture 2012 Conference, taking place this weekend in Toronto. We particularly like the concept of the ‘technology petting zoo’ for new inventions.

Last week’s premiers’ conference – or if you prefer the more pompous title, the Council of Confederation – focused on two issues, one contentious and the other not. Starting with the second, Premiers forge own health-care path; Canada’s premiers are taking the lead on health-care reform without direct leadership from Ottawa, a departure from the way the country’s cherished but increasingly expensive system has long been managed. We are encouraged by their willingness to work together to achieve the aims of the report prepared by Brad Wall and Robert Ghiz to identify innovative ways in which to more efficiently deliver health care.

However, discussion of the National Energy Strategy (that would be Now or Never: Canada Must Act Urgently to Seize its Place in the New Energy World Order (2012) which was released on July 19) was derailed/bogged down when Christy Clark announced that she’s not interested in discussing a national strategy until Alberta and the federal government are willing to address her conditions for the Northern Gateway pipeline project. Allison Redford, who served as the champion of the strategy in the absence of Mr. Harper (seems he doesn’t like meeting with the premiers en groupe), was not pleased. This looks like a long, drawn-out fight.
To make matters worse, with perfect timing, Enbridge has had another oil spill, almost exactly two years after the disastrous spill in the Kalamazoo River that Bloomberg describes in an anniversary piece Enbridge’s Quiet $765 Million Oil Spill – the Globe & Mail states the obvious: The news will not help Enbridge build public trust in its network, which has come under scrutiny following several high-profile incidents, including a spill in Alberta last month and the massive leak in Michigan two years ago. Less diplomatically, Congressman Ed Markey, the top Democrat on the Natural Resources Committee, said in a statement,”Enbridge is fast becoming to the Midwest what BP was to the Gulf of Mexico, posing troubling risks to the environment.” It will be noted that on the same day as the spill, Enbridge gets OK to reverse pipeline flow east – at least the National Energy Board approved the change with safety conditions attached.

More on energy
While the deal between Nexen and CNOOC (China National Offshore Oil Co.) must be approved by Investment Canada and the Competition Bureau to go ahead, it may also require approval of U.S. regulators because of Nexen’s offshore holdings in the U.S. Gulf of Mexico.
Don’t miss the debate between two Wednesday Nighters, David (Jones) Exploiting existing oil options is more practical than the alternatives vs. David (Kilgour): Use oil revenues to invest in alternative and renewable energy solutions

We think it best to say as little as possible about Mitt Romney’s not-so-excellent adventure in London, but will watch with curiosity his progress in Israel and Poland.
Speaking of Mr. Romney, we are heartened by reports that In Bipartisan Vote, Massachusetts Senate Calls on Congress to Enact Constitutional Amendment Reversing Citizens United – seems that while we were all focused on other news, cities and towns across the nation have voted on similar measures. In Massachusetts, 68 communities have voted in favor of a Constitutional Amendment including Boston, Springfield and Worcester. If a similar resolution is passed by the House, Massachusetts will join the state legislatures in California, Hawaii, Maryland, New Mexico, Rhode Island, and Vermont in voicing their states’ opposition to the decision and support for a Constitutional Amendment to address its ramifications.

Will we have confirmation by Wednesday that the Quebec election will be held on September 4^th? All the signs are pointing to it. Is it too early to start placing bets on the outcome? We note that Tasha Kheiriddin has given Mr. Charest a grudging endorsement – will the electorate follow her lead? What will be the impact of the debate of striking students on whether to return to school or to continue enforcing their walkouts? Remember that about one-third of Quebec post-secondary students have yet to complete their spring session. Stay Tuned.

Finally, don’t forget that Catherine Gillbert is climbing Mount Kilimanjaro July 30 – Aug 5 to raise money for Our Harbour, a community organization that provides housing for people living with mental illness. She has been working as a volunteer with this organization for 10 years and they have recently lost a major donor, a foundation that has moved its focus to Toronto. She says that this is her “small” effort to help replace some of those funds. Follow her at,http://www.teamkilimanjaro.com/, open the drop down menu in ‘Home’ and click on ‘Track a Climber’ or go directly; the code is JAPH x 3, July 30 – Aug 5.
Please donate to encourage her and support people with mental illness at ourharbour.org.