Andy Sutton's Extemporania
Weekly Commentaries and Occasional Observations
Tags: finance
Consumer Confidence Hits Multi-Decade Low
(Reuters) – Consumer confidence has fallen further after weeks of intensified economic concerns and broad stock market declines, and Conference Board data due later this month could be even weaker than current projections suggest, Consumer Edge Research said on Monday.
Readings from high, middle and low-income consumers all deteriorated sharply, due mainly to dramatic declines in outlook, the independent equity research firm said.
The firm’s Consumer Economic Index is now at 45.4, down 10 percentage points from July and down 1.5 points from the 46.9 level it reported on August 10. Two days after that report, the Thomson Reuters/University of Michigan’s preliminary August reading showed that U.S. consumer sentiment had fallen to its lowest point since May 1980.
The 45.4 reading is the lowest since Consumer Edge Research began its index in March 2010.
Consumer Edge Research forecast that the Conference Board’s full-month Consumer Confidence Index would deteriorate 8 to 10 percentage points from an unadjusted 59.5 in July when its report is issued on August 30.
As of Friday, consensus was calling for a 2.5 percentage point decline, “so we believe there is downside risk to current expectations,” Consumer Edge Research said.
While low-income and middle-income consumers felt the most impact from July to August, high-income earners have deteriorated the most since the peak seen in February, Consumer Edge Research said.
Compared with July, the confidence level for low-income consumers, those with incomes under $40,000, declined 10 percentage points; middle-income consumers with incomes from $40,000 to $100,000 had an 11 percentage-point drop; and high-income consumers, those making more than $100,000, had a 7 percentage points drop.
Business owners are also feeling more stressed. The roughly 5 percent of consumers who own businesses with at least one employee had an index of 63, the lowest point since the firm began calculating the index for that particular group in February.
Consumer Edge noted that it has less conviction in its Conference Board forecast and now feels its own index more accurately reflects “true underlying consumer sentiment.”
In February, economists noted that a change in Conference Board’s survey data provider prompted revisions back to November 2010. Since that change, the link between that index and Consumer Edge Research’s index has deteriorated, the firm noted.
Consumer Edge Research surveys at least 2,500 U.S. consumers online, generally during the first 18 to 23 days of the month.
Andy Sutton to Appear on ‘Liberty Talk Radio’
This Wednesday at 8PM EDT, I will have the honor and privilege of appearing on ‘Liberty Talk Radio’ with host Joe Cristiano. While callers often drive the direction of the topics, we are planning on covering the state of the general economy, the labor market, commodity prices, prospects for more inflation from the Fed (QE3, 4, etc), and as many other topics as time will permit. The show lasts one hour.
Joe said to pass along his toll-free call-in number for anyone interested in asking a question or getting into the discussion – (888) 773-4496. The show can be heard on the Internet by visiting blogtalkradio.com
I’ve been appearing on this show monthly for quite a while, but Joe and I both feel that this month’s discussion is going to be key given everything going on, hence the dispatch to everyone. The show will also be posted on our website this Thursday morning for anyone who missed the original broadcast.
Reich: Beware the Double-Dip
Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip — but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.
Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.
The Reuters/University of Michigan survey shows a 10 point decline in March — the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.
Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.
What about the 192,000 jobs added in February? (We’ll know more Friday about how many jobs were added in March.) It’s peanuts compared to what’s needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016.
But isn’t the economy growing again — by an estimated 2.5 to 2.9 percent this year? Yes, but that’s even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we’d expect growth of 4 to 6 percent.
Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.
Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can’t pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.
There’s no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year’s budget.
In other words: Watch out. We may avoid a double dip but the economy is slowing ominously, and the booster rockets are disappearing.
So why aren’t we getting the truth about the economy? For one thing, Wall Street is buoyant — and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street’s creativity hasn’t been watching.
To the extent non-financial companies are doing well, they’re making most of their money abroad. Since 1992, for example, G.E.’s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. taxes). In fact, the only group that’s optimistic about the future are CEOs of big American companies. The Business Roundtable’s economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.
Washington, meanwhile, doesn’t want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.
Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They’d rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we’ll get more jobs and higher wages).
I’m sorry to have to deliver the bad news, but it’s better you know.
Food Inflation Hidden in Smaller Packages
Editor’s Note: This has been going on for a LONG time now. It is interesting that it is finally getting some attention. This is another way that the BLS can fudge the CPI numbers too. They don’t take into account the unit cost, just the total cost. It never ends.
As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages.
With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.
For Lisa Stauber, stretching her budget to feed her nine children in Houston often requires careful monitoring at the store. Recently, when she cooked her usual three boxes of pasta for a big family dinner, she was surprised by a smaller yield, and she began to suspect something was up.
“Whole wheat pasta had gone from 16 ounces to 13.25 ounces,” she said. “I bought three boxes and it wasn’t enough — that was a little embarrassing. I bought the same amount I always buy, I just didn’t realize it, because who reads the sizes all the time?”
Ms. Stauber, 33, said she began inspecting her other purchases, aisle by aisle. Many canned vegetables dropped to 13 or 14 ounces from 16; boxes of baby wipes went to 72 from 80; and sugar was stacked in 4-pound, not 5-pound, bags, she said.
Five or so years ago, Ms. Stauber bought 16-ounce cans of corn. Then they were 15.5 ounces, then 14.5 ounces, and the size is still dropping. “The first time I’ve ever seen an 11-ounce can of corn at the store was about three weeks ago, and I was just floored,” she said. “It’s sneaky, because they figure people won’t know.”
In every economic downturn in the last few decades, companies have reduced the size of some products, disguising price increases and avoiding comparisons on same-size packages, before and after an increase. Each time, the marketing campaigns are coy; this time, the smaller versions are “greener” (packages good for the environment) or more “portable” (little carry bags for the takeout lifestyle) or “healthier” (fewer calories).
Where companies cannot change sizes — as in clothing or appliances — they have warned that prices will be going up, as the costs of cotton, energy, grain and other raw materials are rising.
“Consumers are generally more sensitive to changes in prices than to changes in quantity,” John T. Gourville, a marketing professor at Harvard Business School, said. “And companies try to do it in such a way that you don’t notice, maybe keeping the height and width the same, but changing the depth so the silhouette of the package on the shelf looks the same. Or sometimes they add more air to the chips bag or a scoop in the bottom of the peanut butter jar so it looks the same size.”
Thomas J. Alexander, a finance professor at Northwood University, said that businesses had little choice these days when faced with increases in the costs of their raw goods. “Companies only have pricing power when wages are also increasing, and we’re not seeing that right now because of the high unemployment,” he said.
Most companies reduce products quietly, hoping consumers are not reading labels too closely.
But the downsizing keeps occurring. A can of Chicken of the Sea albacore tuna is now packed at 5 ounces, instead of the 6-ounce version still on some shelves, and in some cases, the 5-ounce can costs more than the larger one. Bags of Doritos, Tostitos and Fritos now hold 20 percent fewer chips than in 2009, though a spokesman said those extra chips were just a “limited time” offer.
Trying to keep customers from feeling cheated, some companies are introducing new containers that, they say, have terrific advantages — and just happen to contain less product.
Kraft is introducing “Fresh Stacks” packages for its Nabisco Premium saltines and Honey Maid graham crackers. Each has about 15 percent fewer crackers than the standard boxes, but the price has not changed. Kraft says that because the Fresh Stacks include more sleeves of crackers, they are more portable and “the packaging format offers the benefit of added freshness,” said Basil T. Maglaris, a Kraft spokesman, in an e-mail.
And Procter & Gamble is expanding its “Future Friendly” products, which it promotes as using at least 15 percent less energy, water or packaging than the standard ones.
“They are more environmentally friendly, that’s true — but they’re also smaller,” said Paula Rosenblum, managing partner for retail systems research at Focus.com, an online specialist network. “They announce it as great new packaging, and in fact what it is is smaller packaging, smaller amounts of the product,” she said.
Irish ‘Bailouts’ Really a Loss of Sovereignty
DUBLIN – Ireland’s banks were hit with downgrades Friday — one to junk bond status — as speculation mounted that an EU-IMF bailout of Ireland could require senior bondholders to help cover the massive losses.
Prime Minister Brian Cowen saw his own hold on power slip another notch, as his ruling Fianna Fail party lost a special election for a long-empty seat in parliament. The winner vowed to force Cowen from office before he can pass an emergency 2011 budget being demanded as part of the international rescue.
The New York-based Standard & Poor’s credit ratings agency said it was lowering Anglo Irish Bank six notches to a junk-bond B grade. It also cut the ratings on Bank of Ireland one notch to BBB+, and downgraded both Allied Irish Banks and Irish Life & Permanent one notch to BBB.
The agency said bonds issued by Anglo are particularly at risk of being discounted as part of an euro85 billion ($113 billion) rescue mission by the European Union and the International Monetary Fund. It says Ireland “may be forced to reconsider its current supportive stance toward Anglo’s unguaranteed debt.”
Junior bondholders at Anglo already have been forced to accept losses of 80 percent to 95 percent on their loans.
“People are already joking on Twitter that Anglo’s move is really an upgrade,” said Constantin Gurdgiev, finance lecturer at Trinity College Dublin, reflecting widespread surprise that S&P’s ratings on Irish banks had been so benign until now. “There really is a serious question as to whether Anglo Irish Bank should even have a banking license.”
Gurdgiev said it was inevitable that the emerging EU-IMF bailout would require even senior bondholders to take “a haircut” — lose part of their stake — on the money they could claim back on their loans to Ireland’s debt-crippled banks.
“It’s becoming clearer by the day there is really no other solution,” he said.
In the northwest county of Donegal, an Irish nationalist who has vowed to vote against Ireland’s austerity plans won a seat in parliament, cutting Cowen’s majority to just two seats.
Sinn Fein candidate Pearse Doherty said his dominant performance in a six-candidate field showed that people want to elect a new government that will force foreign banks, not Irish taxpayers, to bear the cost of Ireland’s enormous financial crisis.
Doherty had successfully sued the government over its 17-month refusal to permit an election in Donegal, given Cowen’s unpopularity and narrow hold on power.
Voters “are telling Brian Cowen to get out of office. It’s not clear that this budget will pass. It is completely unfair and unjust to attack the weakest and most vulnerable in this society,” Doherty said. “The government should suspend the budget, call a general election, and let the people have their say.”
Cowen is unveiling an emergency budget Dec. 7 that seeks to cut euro6 billion ($8 billion) from Ireland’s 2011 deficit. He and European officials say that budget must be passed to clear the way for the EU-IMF bailout loan for Ireland.
Ireland’s 2010 deficit is running at 32 percent of GDP, the highest in Europe since World War II. The country’s severe financial problems are rooted in its enormous bailout of Irish banks who gorged themselves on overpriced real estate.
Andy’s Monthly Appearance on Liberty Talk Radio
Andy Sutton appeared on Liberty Talk Radio with host Joe Cristiano for their monthly conversation about the economy, financial markets, and anything else Joe had up his sleeve. Some topics included:
- A frank discussion of the dilemmas of quantitative easing
- What the economic and financial landscape will look like if the present course is not changed immediately
- Natural resource constraints – China understands, but do we?
As a reminder, these appearances are the third Wednesday of each month, starting at 8PM Eastern Time. The call-in numbers are 888-773-4496 and 646-652-4620
My Two Cents – The Great Currency Wars
On 9/18/2009 I wrote an editorial called ‘The Quiet Grab’. It discussed China’s deal cutting on the natural resources front, specifically in the rare earth element and petroleum sectors. The article pointed out that the Chinese were quietly provisioning ready supplies of strategic assets for the turmoil that lay ahead, particularly arising from a disdain and mistrust of paper instruments, especially currencies. With the USFed’s second iteration of quantitative easing now underway, the currency battles are starting to heat up and so is the rhetoric. This week we take a look at the ongoing (and intensifying) currency wars, strategic assets, and why we are behind the proverbial eight ball.
The Return of 1930’s Style Protectionism?
This morning, the head of the World Trade Organization (WTO), General Pascal Lamy, weighed in with that group’s position on currency wars.
Generating employment “is at the heart of the strategy of some countries to keep their currencies undervalued,” Lamy said in New Delhi. “Just as it is also at the heart of other countries’ loose monetary policies.”
Competitive devaluations, which have raised fears of a global currency war, could trigger “tit-for-tat protectionism”, he told a business audience.
What Lamy and most economists and policymakers neither want to acknowledge nor deal with is that their great paradigm of ‘borrow and spend to prosperity’ is broken. His argument that countries like China want to keep currencies cheap to export is absolutely true. His position that the USFed’s decision to try to keep the Dollar cheap is borne out of a desire to ‘stimulate’ the economy is also spot on. Where he misses the boat are on the causes for the current predicament, the very existence of his employer being front and center as a major contributor.
China is the World’s Biggest Wal-Mart
Not only do the Chinese provide the vast majority of the consumer goods on Wal-Mart’s shelves, they’ve stolen a page or two from the mega-retailer’s playbook. Or perhaps Wal-Mart swiped China’s modus operandi, but it really doesn’t matter. China has for years now been flooding the developed world with cheap goods and, with the cooperation of first world politicians, has been driving manufacturing jobs to the Third World. This has been done much in the same way Wal-Mart has destroyed thousands of Mom and Pop stores throughout the nation. They go into an area, undercut local businesses on price, put them out of business and then establish monopoly power. They don’t even need to raise prices once the competition is destroyed. Economies of scale produce sizable profits all on their own.
China is doing much the same thing. This is one of the reasons they have been ready and willing to buy our Treasuries for so long. It provided them with the ability to undergo their very own industrial revolution and establish a bridgehead as the world’s manufacturing power. In the process, how many American industries have fallen by the wayside? Too many to count. And we’re not their only trading partner either. Less than 25% of China’s exports actually made it to North America in 2007. That is a staggering revelation for most people, as we tend to believe that the Chinese somehow ‘need’ us to consume their products.
But China has her own problems. Their cheap currency, while enabling significant export gains, has also touched off a wave of domestic inflation, which is being manifested right now in politically sensitive soaring food prices. Americans should take note here.
America’s Ridiculous Demand
Perhaps the most ironic occurrence in the early stages of the currency war is the exhortations by American politicians and central bankers. They are demanding that China allow its currency to appreciate, which would in effect make it easier for American companies to export to China. We do export a significant amount of heavy equipment to China, as does Germany. After all, someone needs to provide the Chinese manufacturing machine with capital equipment.
But there is much more to this than meets the eye and that is where we all need to be paying attention. Think about what Bernanke, and many members of Congress are asking for. When they demand that China allow their currency to appreciate, they are in effect demanding that the Dollar be depreciated. They are saying essentially “Yes Mr. Jiabao; we want the Dollar to be worth less so Mr. and Mrs. America will have to pay more for your imported goods when they go to the store”. This flies totally in the face of the robotic ‘A strong dollar is in the national interest’ phrase uttered by Hank Paulson in what seems to be an eternity ago now.
In this reality lies the essence of our current problem. We have a choice. Our government is taking a stance that we can create jobs by depreciating the Dollar and somehow that is going to overcome the massive increase in costs of imports. This might work if we weren’t such an import-driven society, but that is certainly not the case. And it isn’t just the Chinese we import from either. Think crude oil and refined gasoline products. At current import rates and oil prices, we import almost $900 Million per day just in petroleum. That is around $27 Billion per month. We’ve seen what the devaluation of the Dollar has done to the jobs picture in just the past five years. Does any person with two brain cells to rub together really expect this nonsense to work?
Strategic Assets Trump Cash?
We are reaching the point where I believe the quiet grab by the Chinese over the past decade in terms of strategic assets is about to pay off. Anyone who runs a manufacturing operation knows that stable input prices and supplies are a key component of that business’ long-term success. Obviously any manufacturing operation built using the petroleum paradigm is going to use plenty of black gold. The same goes for a world that is hooked on handheld gadgets and green technology. Most hybrid owners don’t realize the amount of exploration, provisioning, and drilling/mining that goes into finding the materials necessary to make the high tech components of their vehicles. The same goes for the owners of the vast majority of consumer electronics. We just don’t think about it. The Chinese have. By virtue of their location, they have roughly 95% of the world’s rare earth elements at their disposal. They’ve locked down supplies of crude oil to fuel their manufacturing empire, at least in the short to medium term. Who really thinks the United States is going to win a trade war, a currency war, or any type of economic war with the Chinese at this point?
Given these realities, and how all of these circumstances are woven together, we can already be pretty sure of how the great currency wars will turn out. Those with the advantages will use them and those at a disadvantage with posture, pander, and talk. But in the end, talk is cheap.
November 2010 Centsible Investor Available
A quick status update on the Original Model Portfolio: Currently, the dividend-producing segment has a total return of 12.35% including dividends. This while the major indexes are off around 20% during the same time period (November 2007)
Overall, our conservative model portfolio with its newly added segments is up 10.37% with the Precious Metals leading the way, up 15% with only half the monies in the segment deployed at this time. The speculative segment is up 4.64%, and we only began adding to this slice a few months ago. The fixed income slice is up 5.78% with the first additions coming just 10 months ago.
November’s keynote focuses on the wasted effort that is QE2 and what some of the likely fallout will be in terms of consumers, trade, international relations, and financial markets.
The Marcellus Shales in the Eastern US is quickly becoming a hotbed of activity. Is it all good? What are the prospects for this key asset base now that a major player has entered the fray? We analyze an upcoming transaction that has not gotten much in the way of mainstream attention, but it has ours.
In lieu of the standard Gold and Silver report, this month we tear down the Rare Earth Elements sector and take a look at fundamentals and add a solid player to the speculative portion of the Model Portfolio. This report contains must-have information.
We dispatched a message to subscribers regarding a signal from our proprietary interest rate model two weeks ago, and the signal has proven to be spot on. This model is quickly gaining amazing credibility amongst its contemporaries and we show the results of the most recent run and discuss the corresponding move in bond rates.
If you find the research and analysis beneficial, please pay us the ultimate compliment and refer us to a friend, co-worker or family member. It is how we continue to provide cutting edge information and analysis.
Current Account Woes
Amid the recent rout of the USDollar, fears of an all-out trade war have been stoked globally. The G20 finance heads are currently struggling to find common ground on current account imbalances that will avert the inevitable. The point should not be lost on anyone that none of these leaders are really concerned about why these imbalances exist, but rather are only focusing on avoiding the negative consequences of poor fiscal behavior stacked up over the past several decades. It is for these reasons that any accords that are reached now will fail. The same forces that created the current dissatisfaction will create future dissatisfaction. As in many other arenas today, we appear content to kick the can down the road and try to keep the game going another month or year. This week we’ll take a look at the current account and some of the factors driving these imbalances.
Financial Responsibility DOES Matter
Using 2009 data, the United States ranked 181st out of 181 ranked nations in terms of current account at -$380.1 Billion. Anyone out there want to take a guess at some of the lowest ranking nations?
You guessed it. Spain, Italy, France, and Greece are right behind the US at the bottom of the heap. If anyone still thinks that debt doesn’t matter, this fact should provide a compelling argument to the contrary. The ongoing problems in Europe as a result of debt and the increasing violence in the French strikes portends a bad ending for those nations that insist on running massive debts to the rest of the world. This is particularly true when that borrowed money is used to prop up otherwise unsustainable social programs. People will not be quick to vote to end their own gravy train, and as such, these things usually end badly.
Taking a look at the Eurozone both in totality and by its worst offenders, it becomes rather obvious that Germany is carrying the entire EU. While this is no surprise or great revelation, it should emphasize the inability of a few savers to make up for the gross negligence of the rest. Frankly, it should be a bigger surprise that Germany isn’t seeing the kind of civil unrest that France is. If nothing else, this should underscore an interesting characteristic of human nature. People who are having something (that for the most part unearned, at least in this example) taken away react much more violently than those who are being forced to pay for it.
Why Support the Dollar?
Also by contrast, the same data that showed the US as being ranked 181/181 showed Germany as being ranked #3 behind only China (1) and Japan (2). It should be a curiosity then why Japan is stepping in to support the Dollar. This action started a few weeks ago, with rhetoric, and has been followed up by somewhat meaningful action. The obvious question is why would a nation who ranks #2 in a valid measure of economic strength step in to support a dying currency paradigm? Especially when doing so will only be to its own peril? It is pretty obvious that just on a current account basis that the US is leading the way down followed by the UK and most of Europe. There are other offenders as well.
The answer is found in the most massive of imbalances, and the root of the current account and debt problem, which is the imbalance of manufacturing. Japan does a great deal of its business abroad and as such desires a ‘weaker’ currency to make its exports more competitive. It must compete with China, and the other Asian manufacturing hubs in foreign markets, and therefore it is to Japan’s advantage to keep the Yen cheap just as it is to China to keep the Yuan suppressed. This is a direct result of globalization, and it is this author’s opinion that this reality was an intended consequence of the actions of the 1980s and 1990s. Economists, political analysts, and historians will undoubtedly argue about the causes of the eventual decline of the US/UK/Eurozone. Was it the nearly exponential explosion of social entitlement programs or was it the decay of manufacturing capability and production that triggered the demise? The two happened nearly simultaneously here in the US, so the debate is wide open or so it would seem.
What Came First?
I would opine that the diminished manufacturing activity and increase of ‘great society’ style entitlement programs go hand in hand. The transition from production to consumption creates a gap in the wealth function and that must be filled if societal paradigms are to be maintained. Governments, in their infinite wisdom, thought it wise to steal from tomorrow to create a paradoxical utopia in the present. First the national savings were spent and then when that was exhausted, the borrowing spree began. What used to be the third world was anxious to participate because those nations saw it as an opportunity for their own industrial revolutions and a means to create economic superpowers. The problem with superpowers is that not everyone can be one; otherwise there’d be nothing super about it.
In summary, Treasury Secretary Tim Geithner is currently meeting with other finance ministers from the G20 to figure out a way to keep this mess going another year. Geithner’s plan is to create current account targets as a way of pushing China towards a revaluation of its currency.
“Setting numerical targets would be unrealistic,” said Japanese Finance Minister Yoshihiko Noda, while German Economy Minister Rainer Bruederle rejected a “command economy” approach. Indian Finance Minister Pranab Mukherjee said caps would be hard to quantify. In interviews with Bloomberg Television, Canadian Finance Minister Jim Flaherty said the idea was a “step in the right direction” and Australian Treasurer Wayne Swan called it “constructive.”
It is pretty obvious that the biggest offenders want help and the countries in positions of superiority don’t have a large affinity for further handouts in the form of currency revaluations. What is odd is Canada’s position. Canada ranked #22 in 2009 with a reasonable current account surplus and as such ought to be averse to such forms of charity. However, Canada’s position is being formulated by the creator of the tax plan that killed the Canadian Energy Trusts, so the common sense of his position could easily be called into question.
The central point of concern at this point is that the race to the bottom in the currency world is going to start a trade war. This race in currencies is caused by current account imbalances, which were in turn caused by an avalanche of social programs and a deindustrialization of much of the First World. While there are certainly other factors, the causality here should be rather clear.
page 1 of 10 »