dimanche 24 février 2019



FAT CATS SMOKING BIG CIGARS BEHIND GOLDEN DOORS


Giggling onto avoid downfall of the US « establishment »


By Daniel Paquet                                               dpaquet1871@gmail.com

« Tackling income and gender inequality can have a huge economic impact »,
- says Christine Lagarde
(Managing director of the International Monetary Fund)
Towards a legacy of inclusion

« What kind of a legacy do we want to leave? It is a question we need to ask ourselves as we seek to solve the great challenges of the 21st century. The United Nations’ Sustainable Development Goals (SDGS) embody the contours of the world we want and need: fairer, free of poverty and deprivation, a world that respects natural limits.

The SDGS overlap with the mandate of the International Monetary Fund to the extent that they affect sustainable and inclusive economic growth. They are the antidote to the loss of trust in institutions of all kinds, and the loss of faith in global co-operation. To achieve these goals by 2030, we must place emphasis on inclusion—both in terms of income inequality and gender equity. This should be a priority for 2019 and beyond.

Start with income inequality, which has become one of the global economy’s greatest challenges. Some regions have seen remarkable progress in reducing poverty and expanding the middle class over the past few decades. But although inequality has been reduced among countries, this has not happened within countries.

Since 1980 those in the top 1% globally have seen twice as much of the gains from growth as the bottom 50%. Over that period, income inequality has been on the rise in most advanced economies. This is partly due to technology, partly to global integration and partly a result of policies that favour capital over labour.

The implications are alarming. In advanced economies, rising inequality is contributing to the withering away of entire communities and ways of life. It is leading to the unravelling of both social cohesion and a sense of a common destiny. And it is fuelling the growing tendency to replace deliberation with demonisation, partnership with parochialism.
Inequality undermines the idea of a meritocratic society, as a small minority gain access to the many tangible and intangible benefits needed to get ahead, whether it is education, cultural enrichment or well-placed connections. Such exclusion, whereby inequality of outcomes feeds through to inequality of opportunities, hurts productivity because it deprives the economy of the skills and talents of those who are excluded. »  (Lagarde, Christine, Towards a legacy of inclusion, The World in 2019, The Economist, London, page 96).
The wild-cats then perused on the latest report from Junior, pet name of Canada by US well-to-do.  In New York, they appreciate that this « independent » country – doing 75% of its business trade with USA - knows how to behave properly with Uncle Sam.
« Global economic growth is expected to moderate to a more sustainable pace of around 3­ 1/2 per cent in 2019 and 2020. Growth in the second half of 2018 is estimated to have eased by somewhat more than forecast, due primarily to temporary factors in the euro area and Japan. The US economy remained robust, supported by fiscal stimulus. The global outlook continues to face important uncertainties. The United States and China have taken some positive steps but have not yet reached an agreement on trade issues. The dispute is reducing US–China trade in products subject to the increases in tariffs and is weighing on activity and sentiment globally.
Among other geopolitical tensions, the future of Brexit is unclear as the scheduled date for the United Kingdom’s departure from the European Union approaches. The nature and timing of any resolution of these issues are difficult to predict. The Bank continues to incorporate the adverse effects of uncertainty and the impact of tariff actions into its outlook. The impact of the US–China tariffs discussed in the last Report remains in place in the Bank’s base-case projection, with the exception that the tariff increases scheduled for January are now delayed until Spring. The Bank’s base case continues to assume an orderly Brexit, with modest negative effects from uncertainty.
The confluence of trade conflicts, geopolitical tensions and emerging signs of their economic impacts is leading markets to reassess global growth prospects and reprice most asset classes. Many private sector forecasts for global growth have been revised down. There has been no net change in the Bank’s forecast for growth in 2019 because impacts of trade and geopolitical tensions had already been incorporated. Oil prices have fallen since the October Monetary Policy Report, driven by stronger supply and concerns about weaker global demand. Lower oil prices are expected to provide a modest boost to growth in oil-importing countries while dampening growth for oil exporters. Note: In the first round of tariff hikes, the United States imposed an additional duty of 25 per cent on US$50 billion worth of Chinese imports. China responded by imposing the same additional duty on US$50 billion worth of US imports. In the second round of tariff hikes, the United States imposed an additional duty of 10 per cent on another US$200 billion worth of Chinese imports. China responded by imposing an additional duty of 5 to 10 per cent on another US$60 billion worth of US imports. Sources: United States Census Bureau and Bank of Canada calculations.
A tightening of corporate credit conditions has been particularly evident in the North American energy sector, given the decline in oil prices. In 2018, central banks in many countries were taking steps to gradually normalize monetary policy. Amid indications that trade and geopolitical tensions are taking a toll on activity, markets now anticipate that major central banks will withdraw less monetary stimulus in 2019 than previously expected. In conjunction with falling government bond yields, the US yield curve has flattened further. Meanwhile, portfolio inflows to emerging-market economies (EMEs) have resumed since a mid-year sell-off, and most EMEs have seen their currencies appreciate from the low levels of last year. Oil prices have declined materially Global oil prices have recently averaged about 25 per cent lower than assumed in the October Report. Steadily increasing US oil production has been an important driver of the low prices. Global oil output was estimated to be about 3 million barrels per day higher in the fourth quarter of 2018 than in the same period in 2017, about two-thirds of which was due to higher US production (Chart 4). Since October, rising US shale production and output from members of the Organization of the Petroleum Exporting Countries (OPEC) have contributed to the price declines, alongside concerns that trade and geopolitical risks could weigh on global demand. Chart 3: Markets are repricing risks across asset classes Daily data a. Equity prices Index: January 2, 2018 = 100 Canada—S&P/TSX Composite United States—S&P 500 Euro area—STOXX 50 China—SSE Composite MSCI Emerging Markets b. Spreads relative to US Treasuries US high-yield non-energy corporate bonds US high-yield energy corporate bonds Emerging-market sovereign bonds Note: The spreads are the option-adjusted spreads between US-dollar-denominated bonds and US Treasuries. Sources: Bloomberg L.P., Bank of America Merrill Lynch and Bank of Canada calculations  
Looking ahead, OPEC and some non-OPEC oil-producing countries have agreed to cut output over the first half of 2019 to help offset some of the supply increases. In Canada, mandatory production curtailments for 2019, announced by the Alberta government in early December (2018), have narrowed the differential between prices received by western Canadian producers and global benchmarks (Box 1, page 9). There is considerable uncertainty around the future path for global oil prices. The most important considerations are whether supply continues to outpace demand and whether market concerns about the US–China conflict abate. The Bank’s non-energy commodity price index is modestly weaker than in October. The market reassessment of global growth prospects has been reflected in further declines in prices for base metals and agricultural products. US growth is expected to ease to a more sustainable pace The US economy has continued to expand at a pace well above potential in recent quarters. Consumption growth has been bolstered by the strong labour market and the 2018 tax cuts. Business investment growth continues to be healthy, even though it has softened recently. Meanwhile, residential investment is being held back by deteriorating affordability and supply constraints. Trade in goods subject to increases in tariffs has declined in recent months, with agricultural and steel and aluminum products most affected. There are signs that US producers facing higher tariffs from China are finding new markets, which has helped mitigate the impact of the tariffs on total exports. For instance, US exports of agricultural products to countries other than China have increased sharply. Over the projection horizon, growth of US gross domestic product (GDP) is expected to moderate to around 2 1/2 per cent in 2019 and around 1 1 1/2 per cent in 2020. This leaves US growth somewhat below the Bank’s  Global supply has weighed on crude oil prices Quarterly data Market balance.  Note: Market balance refers to the difference between production and consumption. Sources: International Energy Agency and Bank of Canada calculations. The slowdown mainly reflects the waning of fiscal stimulus, the adverse impact of trade actions and related uncertainty, and less accommodative monetary policy. Core inflation has remained close to 2 per cent in recent months and is expected to stay near the Federal Reserve’s inflation target as growth moderates. Euro area growth has disappointed Growth in the euro area was weaker in the third quarter of 2018 than expected. The auto sector played a key role in the weakness because automakers were adjusting to new emission standards. Recent survey data indicate a broader softening in both services and manufacturing activity, suggesting that trade policy uncertainty and geopolitical tensions are starting to have a negative impact on the economy. Consumer confidence has fallen in the face of fiscal challenges in Italy, renewed uncertainty about Brexit and social unrest in France. The labour market has nonetheless continued to improve, as reflected by rising wage growth. The Bank expects the euro area economy to grow at a rate just 12.5 demand and low oil prices. Core inflation remains subdued and is anticipated to rise only gradually. Growth in EMEs is moderating
Growth in China is expected to moderate from around 6 1/2 per cent in 2018 to just below 6 per cent in 2020. Policy-makers are continuing to provide support to offset headwinds from trade tensions and deleveraging. The adverse effects of trade tensions have become more evident in survey data about Chinese manufacturing. Authorities have encouraged more bank lending, particularly to small and medium-sized enterprises, and have announced expansionary fiscal measures. The financial stress experienced by Argentina and Turkey in 2018 is expected to continue to temper growth in oil-importing EMEs in 2019. Growth in this group of countries is anticipated to recover to around 4 1/2 per cent in 2020. Growth in oil-exporting EMEs has been revised down relative to the October Report, given the fall in oil prices. In addition, job growth has been strong, the unemployment rate is at a 40-year low and inflation is close to the target. » (Bank of Canada, Global Economy, Monetary Policy Report, Ottawa, January 2019, pages 1-5).
Curled up in their leather armchairs, the « kittens » agree that America needs a new « gourou », especially for the youth, or rejuvenate the Chicago School of Economics.  Or, let’s upon up the money bags :  but not too much!
Why?  For instance «… an Italian debt crisis is not just Italy’s business; it’s Europe.  A new crisis could turn all that Italian debt to junk. » (Reguly, Eric, Italy’s finances could clobber Europe’s banks, Report on Business, Toronto, Saturday, February 9, 2019, page B4).
Fortunately enough for capitalists around the world, « canadian banks enjoy an oligopoly and their long-time returns have been excellent.  To take one example, Royal Bank of Canada has posted an annualized total returns of about 12.5 per cent  over the past 20 years, assuming all dividends had been reinvested.  Banks also have some of the srongest dividend growth records in Canada.  Royal Bank – which hiked its dividend by 4 per cent when it announced first quarter earnings (in February 2019) – is now paying more than twice as much as it did in 2010. » (Heinzl, John, How much bank exposure is too much?, Report on Business, The Globe and Mail, Toronto, Saturday, February 23, 2019, page B12).
Aren’t they lucky those poor souls, communism is now completely disbanded.  More, ideas of Marx and Lenin are no more taught.
While rich capitalists are celebrating with champagne, vodka and caviar, communist ideology states that «… the emancipation of the workers must be the act of the working class itself.  All the other classes of present-day society stand for the preservation of the foundations of the existing economic system.  The real emancipation of the working class requires a social revolution – which is being prepared by the entire development of capitalism – i.e. the abolition of private ownership of the means of production, their conversion into public property, and the replacement of capitalist production of commodities by the socialist organization of the production of articles by society as a whole, with the object of ensuring full well-being and free, all-round development for all its members. » (Lenin, On the Organizational Principles of a Proletarian Party, Novosti Press Agency Publishing House, Moscow, 1972, pages 88-89).

The toilers of America must know that  the coming generations are : Youth with a Future! »


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