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Economic Outlook

The Dark Night: North Korean Strategy

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Posted by George Friedman - This Week In Geopolitics

on Monday, 21 March 2016 18:35

To understand North Korean strategy today, we must first understand the implications of its geography. Korea is a peninsula jutting southward from Manchuria. The waves of the Yellow Sea break on its western shores, and the waves of the Sea of Japan roll in on its eastern flank. It shares a 30-mile-wide border with Russia, its northeastern border about 70 miles from Vladivostok, Russia’s major eastern port. The southeast corner of Korea juts to within 100 miles of Japan to its south, and the peninsula’s southwest corner angles westward only about 300 miles from Shanghai. In hostile hands, Korea can threaten Japan’s access to the East China Sea and the Pacific from the Sea of Japan. Korea can also potentially interfere with China’s access to the Yellow Sea and potentially to Shanghai.

Japan and China have invaded the Korean Peninsula on several occasions. Its geographical position and size relative to Japan and China made these incursions inevitable. From the Chinese point of view, Korea served as Japan’s axis of advance in China. From Japan’s point of view, if a hostile power were to hold Korea and thereby gain access to the Sea of Japan, it could threaten maritime trade and open the door to invasions of the home islands from the west and the east. When the peninsula was in Japanese hands, Manchuria and the Russian maritime regions, including Vladivostok, were threatened.

Surrounding 20160321 TWIG



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Economic Outlook

Life and Times During the Great Depression

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Posted by Visual Graphics

on Wednesday, 16 March 2016 07:09

Screen Shot 2016-03-16 at 7.02.11 AMThe economy of the United States was destroyed almost overnight. 

More than 5,000 banks collapsed, and there were 12 million people out of work in America as factories, banks, and other shops closed.

Many reasons have been supplied by the different economic camps for the cause of the Great Depression, which we reviewed in the first part of this series

Regardless of the causes, the combination of deflationary pressures and a collapsing economy created one of the most desperate and miserable eras of American history. The resulting aftermath was so bad, that almost every future Central Bank policy would be designed primarily to combat such deflation.

...view and read more HERE



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Economic Outlook

A Common Theme

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Posted by Robert Levy - Border Gold

on Saturday, 12 March 2016 07:00

Screen Shot 2016-03-11 at 7.48.51 PMThe theme of divergence has been playing out in the global economy. One example is how the US Federal Reserve has begun their path of gradually raising interest rates whereas central banks like the Bank of Japan or European Central Bank have acted in recent months to lower policy interest rates and provide further economic stimulus through quantitative easing. Another, in the United Kingdom there is talk of a “Brexit” where citizens will vote in a referendum this June whether to remain a part of the European Union. Even in Canada we see divergence in the form of how the BC economy performs compared to the rest of the country.

Over the course of 2015, as commodities prices continued to tumble, the Canadian energy sector has had a net negative effect on the countries labour market. The province of Alberta lost more jobs last year than they did in 1982 when they were in recession. BC on the contrary, has seen employment growth of 3 per cent in the twelve months trailing February 2016. It leads the pack of Canadian provinces and is one of three to actually add jobs over the last year. Parts of this country are very challenged with economic opportunity while other regions are forecasted to show modest growth.

This in itself presents a very difficult challenge for the new Federal Liberal government as we begin to examine and digest the details of their first budget over the next couple of months. There are very clear have and have not regions of this country, and they must insure stimulus spending is (to quote Harvard economist Larry Summer’s) “targeted, timely, and temporary.”

Of the three T`s, all imply their own level of importance, but I`ll expand on the notion of being temporary. Whether the government runs a deficit amounting to half a percent or full percent of GDP is really inconsequential in the short run. That being said, TD`s Economics department updated their projections for the Fed`s budget with the latest data from the Finance Department and found from their estimates they are on track for run deficits totalling 150 billion over the next five years. This would in-fact twice break a Liberal promise of first capping deficits at 10 billion per annum and then second keeping the debt-to-GDP ratio fixed. This risks government spending creating negative connotations for returning to economic growth over the long run and having a debt that runs away like during the late 1980`s and early 1990`s.

Thankfully Canadian politics have exhibited a level of civility that is absent in most other western nations making headlines at the moment, and our new government has been given a mandate to spend as they see fit to reignite the Canadian economy. As BC`s forecasted to be most prosperous province through 2016 though we should hope for two things. The first being that the fiscal stimulus measures of the federal budget can provide an effective temporary lift to the Canadian economy. But, the second is certainly be careful what we wish for as the risks to over spending mean either higher taxes down the road or higher deficits bigger than planned as the government gets itself mired in debt.

 
 


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Economic Outlook

Peddling Fiction, Ignoring Fact

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Posted by Peter Schiff - Euro Pacific Capital apital

on Tuesday, 08 March 2016 18:40

 
In his seventh, and final, State of the Union address this January, President Obama, clearly looking to bolster his legacy as the president who vanquished the Great Recession, boldly asserted that “Anyone claiming that America’s economy is in decline is peddling fiction.”  Unfortunately for the President, more and more Americans seem to believe (with an adequate basis in proof) that the fiction is emanating from the White House.
 
It’s hard to imagine how anyone can really assert with a straight face that the economy is currently “strong.” The most recent Gross Domestic Product (GDP), from 4th Quarter 2015, shows us barely inching along at a 1% annualized growth rate (Bureau of Economic Analysis, 2/26/16). Given that moderate growth used to be measured in the 3%-4% range, and that recent declines in the trade balance could further subtract from both 4th (2015) and 1st quarter GDP, we could be forgiven for raising an eyebrow or two in reaction to Obama’s boast. 


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Economic Outlook

Helicopter Money Comes To Canada: Ontario Pledges "Basic Income Experiment"

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Posted by Tyler Durden - ZeroHedge ZeroHedge

on Tuesday, 08 March 2016 09:23

imagesEarlier today, we explained why so-called “helicopter money” can’t save the world when ZIRP, NIRP, and QE have all failed to revive global demand and boost inflation.

The reason: QE is helicopter money. That is, we’ve been doing this for 8 years and it hasn’t worked yet. 

Some readers were reluctant to buy this rationale, but the fact is, just because the bank intermediary failed to do its part for Main Street doesn’t thereby mean this entire experiment isn’t still a farce. Think about the mechanics of it: 1) the government prints a liability (a bond), 2) that liability is sold to a primary dealer, 3) the central bank buys that government liability with yet another liability (dollars) that the government also prints.

That’s a scam. It’s deficit financing with one (very tenuous) degree of separation. The fact that the middlemen (the banks) didn’t pass along the benefits to you doesn’t make the mechanics of it any less ridiculous.

But if that’s helicopter money “v.1,” Main Street thinks it didn’t work out so well. Banks recovered, Jamie Dimon and Lloyd Blankfein became billionaires, financial assets soared, and everyday people got....continue reading HERE



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Economic Outlook

Saudi Arabia—a Failing Kingdom

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Posted by John Mauldin - Mauldin Economics

on Monday, 29 February 2016 16:36

Screen Shot 2016-02-29 at 3.31.58 PMTo say that Saudi Arabia is on the verge of its most significant change in decades is not an exaggeration.

Inside Saudi Arabia—a Failing Kingdom you will learn:

  • How the House of Saud could collapse in four years… and what it means to the region and the globe.
  • Why the Saudi government is considering an IPO of its crown jewel—after it helped drive oil prices down.
  • Why OPEC is defunct and may never return to its glory days.
  • How the Saudis' policies are empowering ISIS.
  • What Middle Eastern oil policies mean for the future of the US shale industry… and why it matters to you.

 

...continue reading HERE 



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Economic Outlook

Refugee Crisis Escalates: Greece Pulls Ambassador to Austria; Macedonia Announces Border Controls; 15,000 Trapped in Greece

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Posted by Mike "Mish" Shedlock - Global Economic Trend Analysishedlock - Global Economic Trend Analysis

on Thursday, 25 February 2016 12:53

100,000 refugees have entered Greece since the beginning of the year compared to 5,000 a year ago.

Where can they go? On February 16, Austria announced it will take at most 80 a day. Just this week Macedonia reduced the number of refugees allowed to transit through its territory to about 1,000 a day.

At least 15,000 are trapped in Greece, a country without resources to deal with them. In response to the growing crisis, Greece Withdraws Ambassador to Austria.

Athens withdrew its ambassador to Austria on Thursday in a sign of the mounting acrimony between EU countries over the bloc's failed refugee policies, a fight that increasingly risks destroying the continent's passport-free travel zone.

In a statement announcing the decision, Greece's foreign ministry accused the Austrian government of taking unilateral action outside of EU rules and recent agreements by capping the number of asylum seekers that it would accept across its southern border.

The move by Vienna has angered several member states, particularly Germany, which believe it was a direct violation of principles agreed by Werner Faymann, Austria's chancellor, at recent EU summits.

While Vienna is capping the number of daily asylum applications it accepts at 80, it is freely allowing as many as 3,200 refugees a day to pass through Austria en route to Germany -- even after agreeing not to do so at the most recent EU summit.

Despite anger in Athens and Berlin, Vienna has hastily put together a group of EU and non-EU allies along the so-called "Western Balkans route", most of whom met in Vienna on Wednesday to agree policies that could constrict tens of thousands of refugees in Greece indefinitely. Neither Germany nor Greece was invited to the Vienna meeting.

The EU's migration chief, Dimitris Avramopoulos, warned on Thursday that the bloc had 10 days to improve the situation "or else there is risk the whole system will completely break down".

Even the French and the Belgians have engaged in verbal sparring after Belgium's decision to impose border controls on its frontier with France. Belgium is concerned it could face an influx of refugees due to an imminent move by the French authorities to clear part of Calais' so-called "jungle" migrant camp.

Mr Tsipras said Greece would block an agreement at a refugee summit on March 7 that "does not ringfence an obligatory sharing of the responsibility and burden [of the refugee issue] among the member states in a proportional way".


Whole System Broken Down

I don't need 10 days to report the obvious: The whole system has already broken down.

The biggest problem at the moment is actually Greece. By letting all refugees in, even though passages to the North are severed, Greece is the problem child, not Austria, nor Hungary, nor Macedonia.

At the expense of its own citizens, with money it dos not have, Greece bears the brunt of the refugee crisis. The smart thing for Greece to do would be to close its own border just as Hungary did.


Border Control Map

40578
Larger Image

The above map is from the BBC on January 25. I added the blue anecdotes that show additional blockages since then.

Blockage Math

 

  • In 56 days, starting January first, 100,000 have entered Greece primarily from Turkey. That's 1,786 a day.
  • As the temperatures climb, the count will rise if Greece does nothing to stop the flow.
  • Macedonia reduced the number of refugees allowed to transit through its territory to about 1,000 a day.
  • 15,000 are already trapped in Greece and that number will rise by at least 786 a day. In one month, that's another 23,580.
  • If Germany refuses the pass through from Austria, the maximum flow would decline to 80 per day, and the trapped rate would rise from 786 a day to 1,706 per day (51,180 a month).

Not Broken Yet Thesis Recap

Don't worry. We are told the system is not broken yet. Greece says there's still 10 days to fix the problem.

Meanwhile, Greece has vowed to veto any solution that does not spread the refugees around, while Austria has called a summit of countries sympathetic to more blockages.


Related Articles

February 16, 2016: "Just Say No": Austria Announces Daily Quotas on Refugees: Yearly Flow Reduced to 37,500 from 1,000,000.

February 18, 2016: Pass Thru Politics: EU Says Austria's Refugee Quotas Violate Geneva Convention; In Praise of Austria.



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