Brahm

Friday Outlook: Commodities, Global Markets

You hit it right this time! Most of the maladies we have been encumbered with can go away with something like the old Glass-Steagle in place again. However, you are also right that this will never happen. We have the best set of politicians (and surprisingly this "people's" administration) and lobbyists on K Street that Wall Street money can corrupt.

Tuesday Outlook: Commodities, Emerging Markets, More

David Fry presents excellent analysis as usual. However, dumping on the speaker ain't cute at all. Perhaps, dumping on the scrumptious crowd that implicitly said "She hurt our feelings and exposed our hypocrisy of the last 25 years of pinhead economics" is probably more to the point.

What's Next for Brazil's Economy?

This article is well argued, but it is too long and touches on too many important points. One can disagree on the degree or extent of the effects on the global economy. My strong feeling is for a painful slowdown of the overall global economy with different levels of effects in different regions. But no deep global slowdown. It will be somewhat painful for Western Europe, Japan and the US. Perhaps outright recession in Europe nd Japan. The US is already in mild recession (desoite the official GDP numbers!), but will perhaps be not be in as serious recession as in the foregoing two regions. Because the US tolerates a higher level of inflation, than Europe or Japan. The US's banking and housing sectors are in more bad shape than elsewhere, and will need the Fed's "moderation" which will be forthcoming at least in this political year.

India is actually trying to moderate or slow its economy to get a handle on its inflation problem. So there will be a lowering of the growth rate for the GDP.However, a reduction of its GDP, to say 5-6%, would be painful for India. The Government would want to avoid going lower than this rate.

China has room to crank up its domestic economy as exports to Europe and Japan pullback somewhat. But will it? Inflation is rampant in China as well. The extent of the slowdown in China requires an expert in reading Chinese tea leaves to figure out how China will act or not act!

Brazil is an interesting case. My take here is that commodity prices will have some effect on the export revenues. However, I do not expect severe decrease as commodity prices will moderate probably by only 10-15% overall. Don't expect massive decrease in revenue because a disproportionate fraction of exports of commodities is to emerging economies. These economies will not have much decrease in infrastructure investment, and hence the need for commodity imports will remain significant as most of the economies do not serious balance of payment problems.

Food imports by emerging economies (China, Pakistan and others) will continue without appreciable benefit of decrease in food commodity prices (supply and demand issues here!). Unlike in the past, Brazil has a healthy balance of payment situation. The marginal decrease in export revenues for a year or two can be taken in stride. I do not expect serious slowdown in Brazil's economy.

Unmentioned is Russia. The Russian economy is expected to continue growing, perhaps with marginal rate decrease, as most investment is infra-structiure related, consumer demand and energy/commodity export related production. The Russian balance of paynebt situation is comfortable to make for some slack in exports, if any at all.

Overall, my take is still for marginal growth of 2% at least for the global economy. But that will be painful in some regions.

Russia's Too Risky - Barron's

To me it looks like Russia is no different than any other major orsuper power or colonialist. Dangerous? Perhaps so; depends on the beholder, or one's appreciation of history. The US did not tolerate even the Sandanistas in Nicaragua, except that the Sandanistas were not so much a Soviet lackey but in fact only local leftists fed up with corruption and authoritarian elites supported by the right wing barons tacitly backed by the US. Ditto in Cuba before Castro was squeezed by the US. What can one say about a small enclave subjected to "liberation" overnight in Granada? Perhaps, leftists and authoritarians of the Left variety, but n o more mendacious than any third world potentate!.

Then there was Vietnam cooked up by the US to be an international Communist conspiracy by Russia and Mao, and posing a threat and take-over of Southeast Asia by international communism. Less than one year after the conclusion of the Vietnam war, China and Vietnam (uncle Ho!) went at each other in a war that lasted a few weeks with before the Chinese withdrew with a bloody nose! There was 1500 years of history between China and Vietnam which was ignored by the conspiracy theorists in the US. This history of conflict and repeated attemtpts to subjugate Vietnam by the Chinese militated overwhelmingly against the conspiracy theoreticians of the USA hawks!
Yet, it did not prevent an American blunder, as bad as Iraq.

There are parallels from British and French colonial history in the Middle East and elsewhere in the the world.

Much of the foregoing prompts me to be skeptical about this drumbeat beating in the West against Russia. Russia is just asserting its interests on its borders. [Just like us with our Monroe Doctrine in the nineteenth and twentieth centuries!] Russia is not going to tolerate hostiler neighbours or influence/threats from distant powers on what it thinks its neighbourhood or sphere of influence. If it can help it! This is classic defence, and the way a major/super power always responds to those who threaten to upset the balances on its borders or perceived sphere of influence!