A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Two U.S. economists, the mostly-centrist Josh Barro and the adamantly left-leaning Paul Krugman, attempt to debunk what they see as a U.S. conservative love affair with Canadian economic policy.
Professor Krugman's post in the New York Times summarizes Mr. Barro's view – our economy benefited far more from resource wealth and NAFTA than fiscal austerity – and concludes (apologies for the long excerpt but it's all relevant): " The gap between Canadian and US spending narrowed during the recession, because the recession was far worse in the US. This meant that any given level of spending was larger as a share of GDP, and it also led to a temporary spike in US spending, mainly on unemployment insurance and other safety net programs, but also briefly on stimulus. But that's all in the past, and we are once again back to the normal situation in which Canadian spending as a share of GDP is quite a lot higher than ours."
"Conservative Canadian Cockroach" – Krugman, New York Times
"The New Conservative Love Affair With Canada" – Barro, Upshot (New York Times)
China's Finance Minister Lou Jiwei noted that the country will not focus on "any one economic indicator" to determine policy and markets immediately interpreted this as a warning that no credit-related economic stimulus is on the horizon. Commodity prices, particularly iron ore, headed south in a hurry along with resource-related currencies including the loonie and Australian dollar.
Bloomberg also piled on by noting that commodity prices are at post-crisis lows. I'll be writing more about the trend this week and its obvious negative implications for domestic equities.
"Futures lower after China policy comments" – Reuters
"Commodities Drop to 5-Year Low in Capitulation to China" – Bloomberg
"China slowdown and strong dollar signal end of 'Iron Age" – Telegraph UK
"Nouriel Roubini's firm warns of 20% Australian dollar slump" – Sydney Morning Herald
"China risks 'balance-sheet recession' as stimulus impact wanes" – Financial Times (subscription may be required)
The Atlantic's Quartz business site produces a list of the global economy's most important charts and it's always worth a look even if it's often (although not this week) too U.S.-centric for a lot of Canadian investors.
The featured charts include helpful data on wage and employment growth, inflation, U.K. home prices and the rapidly improving economic outlooks for Ireland and india.
"The week's 17 most important economic charts" – Quartz
I try and avoid economic theory as a topic – it has become too polarizing – but will make an exception for a brilliant post by economist Steve Randy Waldman on Universal Basic Income (UBI). There is still a lot of opposition to the idea, which involves the government paying every citizen a basic amount – from both the right and left.
I like UBI for non-obvious reasons and Mr. Waldman explains them better than I ever could: "UBI — defined precisely as a periodic transfers of identical fixed dollar amounts to all citizens of the polity — is by far the most probable and politically achievable among policies that might effectively address problems of inequality, socioeconomic fragmentation, and economic stagnation."
A moralist view of economics leads to disgust with the idea of paying people not to work. But, UBI does remove the main political hurdle to the proliferation of technology which could improve the standard of living for everyone. I think automation and the spread of technology is inevitable in the long term anyway and UBI appears to be a way to ease the economic transition.
" The political economy of a universal basic income" – interfluidity
"Towards a New Golden Age" - Pieria
Tweet of the Day is from hedge fund manager @mark_dow: "We infer too much abt global fundamentals from commod moves. Since advent of electronic access, commod markets been dominated by speculators"
Diversion: Trolling? Blasphemy? The New York Times says post-secondary education is a decadent waste of time.
" College has long ceased to be about education. It is purely a lifestyle choice and signaling device for kids/parents." New York Times
Scott Barlow