Wednesday Night #1413

see wednesday-night.com for photos (especially the magnificent Hermitage La Chapelle) and videos

Wednesday Nighters were intrigued by the cover story in The Suburban trumpeting Wajsman for Mayor, and brought by the Man of the Cover. He assured all that the story was for real and that, tired of nanny-state mentality, he was calling for an end to all inspectors – a splinter came off that plank in response to a horrified question “restaurant inspectors?”. It seems that under the Wajsman administration, those worthies will retain their jobs.  April Fool or Trial balloon?
Nobody was entirely convinced that this might not be an attempt to equal the brillliant Westmount Examiner April Fool issue that proudly announced Trent about to release debut CD ‘Westmount Skyline’, along with a delightful account of Stanley Baker’s most recent travels “Baker will be presenting an illustrated account of his Swiftian adventure later this month at the Westmount Public Library. His presentation will include video footage he shot of the Lilliputians and Brobdingnagians”.

Whether it was the promise of exceptional wine, or the exceptional people – perhaps a combination of the two – Wednesday #1413 was an elegant SRO occasion.

When the elephant is sick the fleas do well

The current recession has forever changed the economic game of musical chairs. In the nineteenth century it was Great Britain that called the tune, in the twentieth it was the United States and it appears that in this, the twenty-first century, the financial world will be led by China and more likely, India.
The current recession really began in 2007 and is now touching many countries and populations world wide. The U.S. is committed to the expenditure of some ten trillion dollars, part of the vast sums appropriated by countries around the world, some of which will help solve the problem,  while others will simply help people believe that something is being done. What is certain  is that whatever the effect, much if not all the money spent will be have to be repaid through inflation which will return in the second half of the next decade, although neither excessively nor equally in all countries. It appears unlikely, but if that expected inflation is not contained, a depression could very likely result.
Japan, currently in a deflationary state, is problematic with its stock market in decline.  Although there are some risks, it would appear that the world’s banks are taking the appropriate steps; the situation is expected to deteriorate for the remainder of 2009 with some stabilization by year end.  Corporate earnings have been in decline in the U.S. for six consecutive quarters, but bad news for the big players becomes fertile ground for the rapid growth of smaller, innovative entrepreneurs.  Recovery is expected to begin late this year into next.  Evidence of this is reflected in the current rise in the stock markets, although conditions for a sustained full market remain a long way off as any stability is currently  more the result of government spending than to entrepreneurial ingenuity.  The business cycle will probably begin to recover in 2009-2010 but sub-par economic activity is expected to last for at least five to six years.  In the last month, government money invested in solving the problem appears to have been working and has been largely responsible for the positive stock market reaction.   It is to be hoped that this direction can be maintained by the beneficiaries of the government’s actions.

The North American auto industry has been poorly run.  While governments may not manage it better if history of government run enterprise is an indicator, President Obama has a lot to face and is very sensitive to the public’s wants and needs, so he is taking serious risks.  Unfortunately, although the record of government run enterprises has been less than impressive, the anger of American taxpayers over what they perceive as being held financially responsible for the folly of the leaders of non-governmental businesses has made this a serious option for him.  The more interesting issue is that there is a change in that if you take billions of dollars from the electorate, you will ultimately have to be accountable to them, the inference being that unfettered free capitalism is now dead and will not come back to life during our lifetime in its current form.  Capitalism, however, will not disappear.  The near or actual demise of problem-ridden large enterprises will most certainly spawn a new generation of smaller, hungrier enterprises that can be expected to thrive and grow as has been the case in the past.

A lot of the surprises and lessons of the last three years can be expected, as well as many errors, some of them geopolitical.  There is a lot of risk on the downside because of global growth.  Certainly the nature of western capitalism has changed. The consumption function that has driven Western capitalism will eventually be reduced in importance by government.  The United States economy has been leveling out, that of China and especially India have been on the rise.   Global investors are shifting their focus from Australia to Canada following recent publicity about the strength of Canada’s banking system as well as its wealth in commodities.

In the Middle East, the reaction has been mixed.  Abu Dhabi is still moving ahead, but at a reduced rate.  There is still a lot of wealth in Saudi Arabia that, as elsewhere, is waiting to be invested at an appropriate time.  Israel is focused on innovation.

In this the twentieth anniversary of the fall of the Berlin Wall, there is concern  in Europe, mostly Eastern Europe, over the extent of social unrest arising from the current world financial crisis.  Concurrent the fall of the wall, the Stasi, the secret police of East Germany, crumbled.  It is said to have employed ten percent of East Germany’s population and its demise would have been expected to lead to high unemployment and unrest.  The youth, however, have migrated to and have been integrated into West Germany, leaving an elderly population in the east and so what a potential source of social unrest during the present crisis has been avoided. However, in other parts of Eastern Europe, notably Hungary, Ukraine, Belarus and Romania, government finances are in poor shape as those governments are unable or unwilling to raise taxes causing much concern about possible instability.

Is it wise to run portfolios in-house? Not everyone thinks so, especially looking at the Caisse which has not only been running its portfolios, but soliciting business to run portfolios for others

In the wake of the current situation the question inevitably rises as to whether the U.S. dollar will remain the world’s exchange currency.  It probably will, but massive currency realignment can be expected during the next decade.  Although gold is considered a currency rather than a commodity, its investment value is of importance only if when world is falling apart or in a period of high inflation, neither of which is applicable to the current situation.

Related to the financial health of the world and its constituent nations is the effect of environmental changes on energy structures including petroleum, hydro-electric and nuclear, changes that will at one point have to be addressed.

T H E  I N V I T A T I O N

BE ADVISED THIS IS NOT an APRIL FOOL – in fact, no fools will be present

This Wednesday, Hans Black OWN is generously contributing a large bottle of excellent wine for the pleasure of the company; we are also delighted that Maureen Farrow and Chil Heward will be with us.
With their guidance – and the participation of the many astute and well informed members of our ‘collectivity’, we should have much to discuss regarding the G20 Summit [the website is very informative – Key achievements ahead of the London Summit is worth reading] that starts on Thursday. Given the breadth and depth of the world’s problems, that gives lots of scope.
A few items to ponder and prepare for:
The 20 world leaders heading for the London summit this week on how to save the global economy are fighting off talk of an inter-continental split even before they sit down for talks [as] each [is] proposing different economic salvage plans, different ways to regulate financial markets and different sanctions to answer public anger over bankers’ bonuses. Ending tax haven secrecy and helping the world’s poor will also be hammered out in talks in a … conference centre … that faces the threat of an invasion by an army of anti-G20 demonstrators.
Will the Chinese have advance warning from GhostNet of everyone else’s positions? Or have the Canadians from the Munk Centre saved the day? – What a great story! A vast Chinese cyber-espionage network, codenamed GhostNet, has penetrated 103 countries and infects at least a dozen new computers every week, according to researchers.
Why did Stephen Harper think he should be doing media interviews (leading off with Fox) in the United States this weekend to explain Canada’s position in advance of [the G20] summit? Would he not do better to explain Canada’s position to the Canadian public?
Newsweek’s cover story on Paul Krugman : Obama’s Loyal Opposition – no major revelations, but surely it is an indicator when an economist (at least a living one) is the subject of a popular magazine cover?
Did everyone see the Maclean’s piece on Ian Brodie’s amazingly frank revelation of real politik at work in the PMO. “Despite economic evidence to the contrary, in my view the GST cut worked,” Brodie said at the annual conference of the McGill Institute for the Study of Canada. “It worked in the sense that by the end of the ’05-’06 campaign, voters identified the Conservative party as the party of lower taxes. It worked in the sense that it helped us to win.” Maclean’s notes that “What’s noteworthy is that Brodie doesn’t shrink from publicly asserting that such a major public policy decision can still be deemed a success—even in the face of “evidence to the contrary”—if that move paid the desired political dividends.”
As Russia becomes more aggressive with respect to claims in the Arctic, a new proposal would see An Arctic Circle of Friends, composed of the states and international organizations most involved in the Arctic, that would establish and manage everything above 88 degrees latitude north — a circle with a 120-nautical-mile radius — as a marine park. Sounds good to us.
Reporters without Borders has published its 2008 annual report – “Unfortunately nothing has changed in the countries that are the worst predators of press freedom,” the organisation said, “and journalists in North Korea, Eritrea, Turkmenistan, Cuba, Burma and China are still risking their life or imprisonment for trying to keep us informed. These situations are extremely serious and it is urgent that leaders of these countries accept criticism and stop routinely cracking down on the media so harshly.
“Each year new countries in less-developed parts of the world move up the Index to positions above some European countries or the United States. This is good news and shows once again that, even though very poor, countries can be very observant of freedom of expression. Meanwhile the steady erosion of press freedom in the United States, France and Japan is extremely alarming”.
And finally, two very different items from India:
Israeli arms firm’s ad raises eyebrows in India
Israeli arms manufacturer Rafael has produced a music video to woo the Indian market (see below). See the video here:
Dancing around trees is out. Cavorting around missiles is in. Using matkas-jhatkas of a Bollywood item number, Israeli armament company Rafael has let loose an unusual advertising missile this time. Unveiled for the first time during the Aero-India show at Bangalore in February, Rafael’s advertising music video to woo the Indian defence establishment and the public at large is evoking incredulity and derision in equal measure, both in the web world as well as South Block.
And this wonderfully encouraging item:
“Dalit Queen” looks to change history
Kumari Mayawati has her sights set on making history, becoming the first member of the “untouchables” caste to be seen has having a shot at attaining the prime minister’s office in the world’s largest democracy. The Toronto Star (3/26)