Wednesday Night #2066 with Peter Berezin

Written by  //  October 20, 2021  //  Wednesday Nights  //  No comments

The Annual Meetings of the World Bank and IMF concluded on 17 October. Thus, we are particularly happy to have Peter Berezin with us and look forward to his usual measured and reassuring assessment of the global economy.
His most recent Strategy Report, he highlights the following points:
• A perfect storm has engulfed global energy markets. Strong economic growth, adverse weather conditions, and politically-induced supply disruptions have caused energy prices to surge.
• Fortunately, the global economy has become less vulnerable to energy shocks. Not only has the energy intensity of the global economy declined over the past few decades, but central banks are now less inclined to respond to higher energy prices by raising interest rates.
• Stock returns have been positively correlated with oil prices over the past decade. This suggests that equities can withstand the current level of oil prices.
• Markets are betting that energy prices will come down. Yet, given the diminished feedback loop between higher energy prices and slower economic growth, energy prices can stay elevated for longer than the market is discounting.

The Bretton Woods Project issued a comprehensive report as the Annual Meetings of the World Bank and IMF concluded:
Annual Meetings Wrap-up: despite urgent climate and development needs, geopolitics and deference to private finance rule the day
(See also Long reads below: IMFC communiqué analysis – Annual Meetings 2021)

All is not rosy as indicated in the IMF’s World Economic Outlook of October
The global economic recovery is continuing, even as the pandemic resurges. The fault lines opened up by COVID-19 are looking more persistent; near-term divergences are expected to leave lasting imprints on medium-term performance. Vaccine access and early policy support are the principal drivers of the gaps. But there is more. Concern over supply chain problems is almost daily headline news (Supply chain chaos is already hitting global growth. And it’s about to get worse and The Absolute Simplest Explanation for America’s Supply Chain Woes). As Aryan Khanna and Eswar Prasad write in the October 2021 update to TIGER [Tracking Indexes for the Global Economic Recovery]: The global economic recovery is in danger of stalling. And on Wednesday evening, the (quite panicky) lead story on CBC was the increasing inflation in Canada and its impact on citizens, business and ultimately politics. It’s been nearly 20 years since inflation has been this high in Canada

The IMF also warned that cryptocurrencies may threaten financial stability without regulation which seems pretty self evident.  And regulation, according to  Aleh Tsyvinski: Cryptocurrencies’ Next Stage far from spelling disaster for the crypto industry, is vital to its long-term prospects.

Jeremy Kinsman and Larry Haas discuss the current friction between China and the U.S. over Taiwan and the underlying struggle as China moves aggressively to supplant the U.S. sphere of influence in Asia from flaunting the freedom of the seas governing the Straits of Taiwan to the tech competition led by Huawei.
Cleo, meantime,  testified on Wednesday before a House Subcommittee on the strategic importance of the Pacific Islands. Here is her  written testimony , or if you prefer,  the oral version at 54.35. We believe she is the first Wednesday Nighter to testify in U.S. Congressional hearings.

C. Uday Bhaskar writes about Challenges in India’s bid to be military power
In the revamp, over 70,000 employees of the erstwhile OFB have been transferred to the seven new DPSUs and this is being hailed as a reform that will enable India to develop a modern military industry. If the OFB was originally inefficiency-riddled, it defies logic as to how the new entities (with the same HR) in their corporate avatar will become ‘productive & profitable’.

We believe the news from the EU, including Austria, Poland, Hungary and the Czech Republic  is too important to relegate to cursory discussion, so propose to defer to next week. Likewise, events in the U.S.

Canada
We are still waiting for the new Trudeau cabinet to be announced. Lots of conjecture, but the only thing we know for sure is that Chrystia Freeland stays put.
Meantime, the PM finally made it to Kamloops and apologized over and over. Depending on what media you follow, the apology mended fences or not. We do not think this will go away quickly.
Quebec
Claiming that ‘No minority in Canada is better served than English-speaking Quebecers’ Premier François Legault gave his inaugural speech to the new session of the Quebec legislature on Tuesday and has defined the historic English-speaking community as people who are eligible for English schooling in Quebec. Wow! How many people do we know who meet that criterion? The QCGN is up in arms: See Wednesday’s press release True Impact of Bill 96 on English-speaking Community Now Abundantly Clear and for good measure read the October 18 Bill 96 is profoundly flawed and must be withdrawn.
How can M. Legault and his minions be so impervious to the international impact of the proposed legislation. We have received several worried messages from friends in the U.S. based on the recent NYT A Language Bill Deepens a Culture Clash in Quebec
Interesting times ahead in Alberta? Jason Kenney cannot be happy.
As Naheed Nenshi and Don Iveson step away from their successful tours as mayor respectively of Calgary and Edmonton -and we all wonder what comes next for both of them-
New mayors elected in historic victories in Calgary and Edmonton
Jyoti Gondek to be Calgary’s 1st female mayor as Amarjeet Sohi becomes 1st South Asian Edmonton mayor
Gondek will replace Naheed Nenshi, who held the city’s top job for more than a decade.
In Edmonton, former federal cabinet minister Amarjeet Sohi, a Sikh immigrant from India, will become the city’s first mayor of South Asian origin.

Varia
October 19, 1781 Hopelessly trapped at Yorktown, Virginia, British General Lord Cornwallis surrenders 8,000 British soldiers and seamen to a larger Franco-American force, effectively bringing an end to the American Revolution.
Effects of lack of sleep
when you don’t sleep, you can’t react as quickly, remember information, solve problems, make plans, multi-task or regulate and understand emotions as well as you could if you were well rested.

Long reads
IMFC communiqué analysis – Annual Meetings 2021
The communiqué of the 44th meeting of the International Monetary and Financial Committee (IMFC) was issued on 14 October, during the World Bank and IMF Annual Meetings. The IMFC is the direction-setting body of finance ministers and central bank directors for the IMF. The communiqué of the IMFC usually sets out the consensus position about the direction of the Fund and key reforms. Individual ministerial statements to the IMFC, often revealing of the true differences of opinion amongst the IMF’s membership, are also made available online. The next IMFC meeting is expected to be held on 21 April 2022. Many useful links below main article

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