Wednesday Night #1842

Welcome back Peter Berezin!
Peter’s latest report, titled Stocks Are From Mars, Bonds Are From Venus? makes the following points:
• The divergence between global bond yields and equity prices is not as puzzling as it may first appear.
• Thus far, lower inflation has dampened the need for central banks to tighten monetary policy. This has caused bond yields to fall, lifting stocks in the process.
• Looking out, the combination of faster growth and dwindling spare capacity will cause inflation to rise. This is particularly the case for the U.S., where the economy has already reached full employment.
• The “blow-off” phase for the U.S. economy is likely to last until mid-2018. The dollar and Treasury yields will move higher over this period.
• The euro and the yen will suffer the most against a resurgent greenback, the pound less so.
• China’s economy will remain resilient, helping to boost commodity prices. This will support the Canadian and Aussie dollars.
• Stronger global growth will provide a tailwind to emerging markets. However, at this point, most of the good news is already reflected in EM asset valuations.

Writing for Project Syndicate, former World Bank Chief Economist of the World Bank Kaushik Basu makes some bold predictions regarding The Global Economy in 2067
“in 50 years, I predict that the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20% per year, and income and consumption doubling every four years or so. …we are in the midst of dramatic technological breakthroughs, with advances in digital technology connecting all corners of the world. As a result, workers are not just becoming more productive; they are gaining greater access to employment. Individuals in developing countries, for example, are now able to work for multinational companies. The upshot is that more workers are participating in the labor market.”
He continues, “The key to breaking through this ceiling is to change the kinds of work in which people are engaged. Through improved education and training, as well as more effective redistribution, we can facilitate more creative work – from art to scientific research – which machines will not be able to do in the foreseeable future. This outcome is likely, but it is not certain. Ensuring it will require fundamental changes to our economies and societies. …  Consumption patterns will also need to change. … The right incentives will be needed to ensure that a large share of our wealth is directed at improving health and achieving environmental sustainability.”
Realistic or overly optimistic? We wonder what the warehouse workers at Whole Foods (Amazon Robots Poised to Revamp How Whole Foods Runs Warehouses) will think

As always, there are many more excellent articles on Project Syndicate including Europe’s Gradualist Fallacy by Yanis Varoufakis

“Davos in Dalian” begins. The World Economic Forum’s annual summer meeting in China kicks off on Tuesday, with discussions focused on innovation and technology.
The world’s second-largest economy has made waves recently with its fast-growing tech sector, marking what experts say is a noticeable shift away from the old image of a copycat China. And it’s a move that China needs — looking toward the new economy driven by the private sector and entrepreneurship.

The UK and Brexit
George Soros says in Brexit In Reverse?  that poor UK economic indicators will add to the factors compelling a new approach to EU withdrawal.
“Economic reality is beginning to catch up with the false hopes of many Britons. One year ago, when a slim majority voted for the United Kingdom’s withdrawal from the European Union, they believed the promises of the popular press, and of the politicians who backed the Leave campaign, that Brexit would not reduce their living standards. Indeed, in the year since, they have managed to maintain those standards by running up household debt. … The British are fast approaching the tipping point that characterizes all unsustainable economic trends. I refer to such a tipping point as “reflexivity” – when both cause and effect shape each other. Economic reality is reinforced by political reality. The fact is that Brexit is a lose-lose proposition, harmful both to Britain and the EU. The Brexit referendum cannot be undone, but people can change their minds.”
Who knew that The Guardian has a Brexit policy editor? His name is Dan Roberts and he writes As the Brexit vote turns one, leaving has never been more uncertain – A year after the UK voted to leave the EU, the way forward is murky and the path to Brexit could turn into slippery slope to no exit.
Jeremy Corbyn’s appearance at Glastonbury’s music festival has launched a bevy of commentary (just Google Jeremy Corbyn & Glastonbury), but leaves one citizen unmoved as he explains in his Letter to a young Corbynista
“I believe 20th-century history provides a graphic demonstration that socialism is an economic disaster. And after the world’s two most populous countries — China and India — permitted more capitalism in their countries, their economic performance suddenly surged. This is the main reason why the past 30 years have seen the biggest reduction in extreme deprivation that the world has ever seen.”
In another vein is Cleo Paskal‘s usual perceptive analysis Grenfell fire tragedy leads to battle for narrative
“Frankly, the situation is a mess. The Grenfell fire disaster and how it was used brings to the fore many complex issues that need addressing, or at least discussing. But it is unclear how that will happen. So, the situation is likely to continue, feeding division and hardening positions, until the next disaster notches it up one more level.”
One of those complex issues is “freedom from red tape”, but as George Monbiot writes “what they call red tape often consists of essential public protections that defend our lives, our futures and the rest of the living world. The freedom they celebrate is highly selective: in many cases it means the freedom of the rich to exploit the poor, of corporations to exploit their workers, landlords to exploit their tenants and industry of all kinds to use the planet as its dustbin.” Although he speaks of ‘successive governments’ in Britain, his thesis is acutely pertinent to today’s regulatory ambiance in the U.S.

Canada
Canada 150: The National Mood and the New Populism
Gauging the national mood at Canada 150 in a carefully constructed sample of nearly 6,000 Canadians, this piece assesses how Canada is looking at its political options and how this connects to its economic outlook and a variety of other new forces.
(Ekos Politics) The voter landscape doesn’t mean much as we are still two years away from an election; but it does reveal some interesting new features. Most notably, we see a tightened race with the Conservatives enjoying a post-leadership bounce from the election of Andrew Scheer. The Liberals maintain a slight – but statistically significant – lead of 2.3 points, but this is greatly diminished from the large lead that they enjoyed a year ago. The NDP and Green Party remain stuck at around 15 points and nine points, respectively, with neither party showing any indication of moving one way or the other.
What is perhaps most notable about the demographic patterns underlying these numbers is the sharp re-occurrence of the education division that defined the Harper era. At the outset of his mandate, Justin Trudeau enjoyed near uniform support across the educational spectrum. Two years later, however, his support is becoming increasingly confined to those with a University degree. Those with a high school or college education seem to be returning to the ranks of the Conservative Party. These shifts can be connected to a uniquely Canadian expression of populism which is reshaping our political landscape.
and this from the New York Times: Canada’s Secret to Resisting the West’s Populist Wave which paints a somewhat rosier picture of inclusion in Canada (“Both whites and nonwhites see Canadian identity as something that not only can accommodate outsiders, but is enhanced by the inclusion of many different kinds of people.”) than is the reality.
Which brings us to the recent, troubling, news item Trudeau Liberals take Human Rights Tribunal to court over First Nation children ruling. Reading the story, we can only deplore that the issue has been handled through tribunals instead of by people of good faith sitting together and working out a reasonable compromise.

A must read for students of history and those who deplore their lack of knowledge of more recent history Jeremy Kinsman‘s comprehensive and eminently readable review of Canadian foreign policy, “Our Diplomatic Identity: A Canadian Balance of Reason and Passion”

U.S.
It is really hard to report news of the U.S. in timely, accurate, fashion because it changes so fast and is often subject to many interpretations.
Thus in the past 24 hours, we have leaned that the Supreme Court (SCOTUS) has agreed to a review of the president’s travel ban in October, but clearly hopes—and strongly hints—that the case will be moot by then.
After daily tallying of the possible GOP defections, on Tuesday Senator Mitch McConnell announced that he will delay a vote on the legislation to repeal the Affordable Care Act until after the July 4 recess. Meanwhile all those senators will face their people at community events, and many of those people are angry.
The dedication of the Trump administration/U.S. Congress to repealing the Affordable Care Act aka Obamacare along with environmental protection and – and the lack of reaction from the Trump base who are likely those who will suffer the most, all in the cause of giving tax cuts to the 1% – remains a puzzle for many outside observers. This post goes a long way towards explaining why that base is so resistant to the arguments presented by progressives of whatever hue and on whatever policy.
An Insider’s View: The Dark Rigidity of Fundamentalist Rural America
In deep-red white America, the white Christian God is king.
The real problem isn’t East Coast elites who don’t understand or care about rural America. The real problem is that rural Americans don’t understand the causes of their own situations and fears and they have shown no interest in finding out. They don’t want to know why they feel the way they do or why they are struggling because they don’t want to admit it is in large part because of the choices they’ve made and the horrible things they’ve allowed themselves to believe.
Education is the enemy of fundamentalism because fundamentalism, by its very nature, is not built on facts.
When a 2,700-year-old book that was written by uneducated, pre-scientific people, subject to translation innumerable times, and edited with political and economic pressures from popes and kings, is given higher intellectual authority than facts arrived at from a rigorous, self-critical, constantly re-evaluating system that can and does correct mistakes, no amount of understanding, respect or evidence is going to change their minds and assuage their fears.
For us “coastal elites” who understand evolution, genetics and science, nothing we say to those in flyover country is going to be listened to because not only are we fighting against an anti-education belief system, we are arguing against god. You aren’t winning a battle of beliefs with these people if you are on one side of the argument and god is on the other.

In  “A Thought for the Fourth of July: Can the U.S. Constitution Accommodate a Rogue President?” Friend of Wednesday Night, Rodrigue Tremblay, worries that the senior generals who have been brought into the Trump administration “now form a sort of parallel government. Donald Trump may want to hide behind them to shift the political conversation from his domestic predicaments in Washington D.C. And, a war abroad is often a convenient rallying point for an American politician who is low in the polls. In other words, an escalating war in Syria could be in Trump’s short-term personal political interest.”
Dr. Tremblay argues that “a would-be dictator can be elected, most often, as history shows, with a minority of the votes. And no democratic constitution in the history of the world is totally protected against violations of its principles, if an oligarchy in power tolerates or welcomes them and when a substantial part of the population approves of them. That is why it would presumptuous for Americans to believe otherwise.”

To lighten the mood before closing, we refer you to this marvelous Bird & Fortune skit about the British army in Oman (or anywhere else in the Middle East).

Good (local) news: The Willow Inn in Hudson is reopening this summer under new ownership and with a British-inspired menu. We have always loved the location, but our last visits were very disappointing, so we look forward to new beginnings.