derryl

Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases

E Nuff Said:
Good point about turning around a "hopeless" fiscal situation.

In 1995 Finance Minister Paul Martin balanced Canada's federal budget by cutting the federal health and social transfer to the Provinces by $11B. Scaled up 10X to the US economy that would equal a $110B reduction in annual transfers from Washington to the states. Canada's provinces use the health and social transfer mainly to fund health care and education, which are provincial responsibilities under Canada's constitution. The provinces all squealed but responded by rebalancing their own budgets and cutting whatever they could from the 2 big ticket provincial budget items, health and education. So if there was 'pain' it was dispersed as widely as possible by Martin's budget balancing move. And now Canada leads the OECD in fiscal (and banking) health.

In 1993 Alberta Premier Ralph Klein and Treasurer Jim Dinning attacked Alberta's deficit spending, that began with the oil collapse and depression (in Alberta) of 1982. They required ALL gov't departments to find 5% cuts, which actually happened. Alberta had a 25 year plan to pay off its net debt, but after oil began rising in 1998 and natural gas took off the debt was paid out in full 10 years early. Alberta now has no net debt (some debts are longer term and can't actually be paid out until they come due, but Alberta has set money aside to pay these). This year due to the collapse in natural gas, Alberta's major royalty cash cow, Alberta is running an $8B deficit. But over the past few fat years the province has saved $17B in a sustainability fund, so no new borrowing will be required to fund the deficit. Gas royalties are still low but tarsands construction is starting up again so Alberta should endure the present recession quite well.

Most other Cdn provinces have been behaving as fiscally responsibly as Alberta (and some are doing even better which is why political change is in the Alberta air), with the exception of Canada's biggest province--Ontario. Ontario's socialist premier is determined to 'go green'. Admittedly, Ontario has suffered fully 1/2 of all Cdn manufacturing job losses as steel and autos are way down, but if you want to see what Obama's greenonomics might do to America just have a look at Ontario.

The Commodities ETF Crackdown Continues

I agree with Alan Young. If you're not a commodity producer or consumer then buying and selling futures is 'speculating', which is a zero sum game for speculators as a whole.

Let's assume that producers and consumers will sell and buy at market clearing prices. If speculators add buy money into this equation they can raise prices. But when they try to sell to realize gains the additional selling they add to the market drops the price at least as far as their buying raised it. Some speculators can make gains, but ALL of these gains are simply the losses of the other speculators in this market. John Stuart Mill pointed this out in his "Principles of Political Economy" published over 160 years ago, and the arithmetic hasn't changed.

One thing that has changed, though, is that there is now a huge volume of US dollars in the US and floating around the world, and the dollar is devaluing. So to hedge against currency devaluation people buy commodities and keep their money in this market. So the price is kept elevated for an extended period and will only drop to its true market level when all the speculators sell and take their money out. Speculators may suffer some losses at rollover time but if those losses are less than the amount the dollar is declining their hedge strategy is still working for them.

Meanwhile the price of the commodities is held higher than the 'pure' market price, with suppliers enjoying all the gains.

The Agriculture Re-Boom Is Coming

przem23:
Sunspot minimums are the problem. Sunspot maximums are clear sailing. We have 400 years of reliable data on sunspot activity. The most famous minimum, the Maunder Minimum from about 1645-1715, coincides with the most severe weather Europe suffered during the Little Ice Age. Agriculture went for s___ during that time as the weather was completely erratic and unpredictable.

As a matter of interest, variation in sunspot activity is pretty much perfectly correlated with variations in Earth's weather. There is no correlation between CO2 levels and weather, except that CO2 levels increase about 800 years after a warm spell (probably due to the long timeframe of the oceans' carbon cycle). Incidentally, the Medieval Warm Period ended about 800 years ago, which may account for recently observed increases in atmospheric CO2.

When the sun is more active (i.e. more sunspots) the Earth is warmer and our climate more benign. When sunspot activity declines the planet gets cloudier and cooler and the weather gets more extreme. Anybody who thinks 'global warming' is a bad thing should read a little bit of geological history.