Canada to follow U.S. into ‘fiscal cliff’ recession

Jim Flaherty, Canada’s Finance Minister, is reported as having said yesterday that if the America hits the so-called fiscal cliff on December 31 Canada will follow the U.S. into recession. I believe that out of necessity U.S. politicians reluctantly will cooperate before, and perhaps even after December 31 (retroactive changes to scheduled deficit reductions and tax changes could always be made after December 31) to forestall U.S. fiscal cliff issues. However, consider that U.S. Federal deficit and debt ceiling (a separate issue from the ‘fiscal cliff’) eventually have to be dealt with.

I don’t see an obvious solution, other than further postponement, to America’s monthly net trade deficit and Federal deficit issues. Overspending always must lead to problems. In a ‘fiat currency and globalized world’, I believe this to be true even for the country enjoys the privilege of being able to print the world’s reserve currency. Note my specific use of the word ‘enjoys’ in the context of the world’s reserve currency. America is not guaranteed that privilege, and no one in my view should think that it is. You might want to read Economists Worry About Fiscal Cliff Resolution, from the Wall Street Journal’s Real Time Economics Blog. Written after Tuesday’s U.S. election results were known, the article cites the comparatively little change in the makeup of the Office of the President, the House, and the Senate as being worrisome in the context of bi-partisan cooperation in resolving fiscal cliff (and I assume ‘debt ceiling’) issues.

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Topical References: Fiscal cliff will plunge Canada into recession: Flaherty, from The Financial Post, from Canadian Press, November 7, 2012 – reading time 2 minutes. Also read Economists Worry About Fiscal Cliff Resolution, from Real Time Economics, from The Wall Street Journal, Michael S. Derby, November 7, 2012 – reading time 2 minutes.

Greek Parliament approves austerity budget

Late yesterday the Greek Parliament by a narrow margin passed the austerity bill presented to it on Monday. This ought now to pave the way to enable Greece to receive further financial advances, thereby averting its November 16 sovereign debt repayment obligations. That said, there may be much more to come on this unfolding story, as protests in Athens were reported as being somewhat violent as the bill was being debated – see Anti-austerity Greek protests get violent. Topical Reference: Greek austerity bill approved in parliament, from FxStreet.com, November 7, 2012 – reading time 3 minutes. Also read Anti-austerity Greek protests get violent, from CBS News, November 7, 2012 – reading time 4 minutes.

Hyperinflation – for the United States, a myth?

Many commentators continually forecast imminent hyperinflation in the developed countries. Seldom do these commentators defined hyperinflation, but some seem to think for a developed country that is an annual inflation rate at or above 20%. Of course, that number may simply be convenient because that is what the inflation rate in Canada and the United States ‘topped out at’ in the early 1980’s, before then Chair of the U.S. Federal Reserve Paul Volcker stepped in. If you trade or invest in the financial markets, and particularly if you hold physical gold or silver directly or indirectly (through an ETF for example) I suggest you take the time to read and think about what is said in an article titled US Hyperinflation Is A Myth. You may not agree with the author’s positions, but I think you may find yourself ‘better informed for the reading’. Topical Reference: US Hyperinflation Is A Myth, from The Automatic Earth, Raul Ilargi Meijer, October 20, 2012 – reading time 5 minutes.

U.S. Economic Chart Website

If you are interested in doing your own ‘U.S. economic statistics’ research you ought to visit it the ycharts website if you are unaware of it. While its premium service is expensive at about $500 per month, it offers limited free access to a wealth of U.S. economic data in exchange for one’s e-mail address and password creation.

U.S. said to be only 12^th most prosperous country – Legatum Institute

Surveys are surveys. That said the Legatum Institute, a self-proclaimed “independent non-partisan public policy organization whose research, publications, and programmes advance ideas and policies in support of free and prosperous societies around the world” has just published a report saying that the U.S. has fallen out of the top 10 (to 12^th) in ‘most prosperous country ranking’. The survey, as shown in the following table, ranks countries on eight different attributes, and then consolidates those attributes into an ‘overall ranking’. Whether or not meaningful or even accurate, it is at least interesting to note that out of 142 countries the United States is ranked:

• 20^th as a world economy;
• 12^th in ‘entrepreneurship and opportunity’. Think of that in the context of the American mantra of ‘we are the best at innovation’;
• 27^th in safety and security; and,
• only 14^th in personal freedom, and interesting survey finding given the U.S. Constitution’s 1^st (freedom of speech) and 2^nd (right to carry arms) amendments.

Something to think about both generally, and in the context of the U.S. and world financial markets. Topical Reference: U.S. slips out of top 10 most prosperous countries, while Canada keeps No. 6 ranking, from The Financial Post, from Bloomberg News, November 5, 2012 – reading time 4 minutes.

Important Highlights From Today’s Commentaries

Highlight #1: Note my specific use of the word ‘enjoys’ in the context of the world’s reserve currency. America is not guaranteed that privilege, and no one in my view should think that it is. Highlight #2: At November 8, 2012 there may be much more to come on the unfolding story in Greece, as protests in Athens were reported as being somewhat violent as the bill was being debated – see Anti-austerity Greek protests get violent. Highlight #3: If you trade or invest in the financial markets, and particularly if you hold physical gold or silver directly or indirectly (through an ETF for example) I suggest you take the time to read and think about what is said in an article titled US Hyperinflation Is A Myth. The Legatum Institute, a self-proclaimed “independent non-partisan public policy organization whose research, publications, and programmes advance ideas and policies in support of free and prosperous societies around the world” has just (in early November, 2012) published a report saying that the U.S. has fallen out of the top 10 (to 12^th) in ‘most prosperous country ranking’.