Daily Digest

Daily Digest 1/31 - New Era of Global Food Revolutions, Consumer Spending, Irish Central Bank Lowers Growth Forecast

Monday, January 31, 2011, 12:00 PM
  • Egypt And Tunisia Usher In The New Era Of Global Food Revolutions
  • Mauldin: A Bubble in Complacency
  • What Happens Next: The US Consumer Sector Gets Crushed
  • The 5 Black Swans That Keep Dylan Grice Up At Night... And How To Hedge Against Them All
  • Consumer Spending in U.S. Rose More Than Estimated
  • Euro Rises Versus Dollar as Inflation Accelerates; Canadian Dollar Climbs
  • Irish Central Bank Lowers Growth Forecast for 2011

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Economy

Egypt And Tunisia Usher In The New Era Of Global Food Revolutions (patrickhenry)



The surge in global food prices since the summer – since Ben Bernanke signalled a fresh dollar blitz, as it happens – is not the underlying cause of Arab revolt, any more than bad harvests in 1788 were the cause of the French Revolution. Yet they are the trigger, and have set off a vicious circle. Vulnerable governments are scrambling to lock up world supplies of grain while they can. Algeria bought 800,000 tonnes of wheat last week, and Indonesia has ordered 800,000 tonnes of rice, both greatly exceeding their normal pace of purchases. Saudi Arabia, Libya, and Bangladesh, are trying to secure extra grain supplies.

Mauldin: A Bubble in Complacency (jrb)



My points were that much of Europe is getting ready to give us a real crisis, sooner rather than later. Great Britain is headed for what looks like a recession and further problems. Japan, as I am wont to say, is a bug in search of a windshield. We are going to get some great real-time lessons on what happens when you don’t deal with a problem in time. The longer you wait, the worse the results will be when you are forced to deal with the issues.

What Happens Next: The Us Consumer Sector Gets Crushed (pinecarr)



Now that the food crisis is in full swing, I want to write about what happens next. Before hyperinflation begins in America, the US consumer sector is going to experience economic disintegration, crushed out of existence by two competing forces: skyrocketing costs and weakening demand.

The 5 Black Swans That Keep Dylan Grice Up At Night... And How To Hedge Against Them All (pinecarr)



Few are willing to accept and recognize the humility that they really know little if anything about how a non-linear, chaotic system evolves. Which is once again why we believe that Grice is among the best strategists out there: in his attempt to hedge the stupidity of the crowd, he has coined a term that may well be the term that defines 21st century finance and economics: instead of foresight, Grice believes the far more correct term to explain the process of prognostication should be one based on foreblindness.

Consumer Spending in U.S. Rose More Than Estimated



Households are driving demand at companies from Coach Inc. to Ford Motor Co. and bolstering the recovery. The economy needs even faster growth to reduce unemployment, which is projected to average more than 9 percent this year, one reason Fed policy makers are pushing ahead with a second round of monetary stimulus worth $600 billion. “The consumer is doing OK, and household spending will continue to grow this year,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “We expect it to continue to play a part in this recovery.”

Euro Rises Versus Dollar as Inflation Accelerates; Canadian Dollar Climbs



ECB policy makers will discuss the inflation outlook at their meeting Feb. 3, a day before European leaders gather in Brussels to advance their response to the sovereign-debt crisis. ECB President Jean-Claude Trichet has said he only expects euro- area inflation to “moderate again” toward the end of the year. U.S. inflation slowed further below the central bank’s long-term forecast. The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.7 percent from December 2009, the smallest increase since records began in 1959.

Irish Central Bank Lowers Growth Forecast for 2011



Ireland’s government said in December it plans to cut spending and raise taxes by 6 billion euros ($8.2 billion) this year, double an earlier target. The central bank’s October forecast was based on a budget package of 3 billion euros. Irish Finance Minister Brian Lenihan unveiled the tougher austerity measures as part of an 85 billion-euro rescue package from the European Union and International Monetary Fund. The government aims to lower the budget deficit to below the EU limit of 3 percent of GDP in 2014 from about 12 percent last year. Including the cost of bank bailouts, the shortfall amounted to 32 percent of GDP in 2010.

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13 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

"Left unchanged, Medicaid will cost Ohio taxpayers an additional $1.6 billion next year.

That's a 49 percent jump in the state's share of costs for the health-care program covering more than 2 million poor and disabled Ohioans, pushing to $4.9 billion the cost to the state for the next fiscal year.

Most of the increase to Ohioans is due to the loss of federal stimulus money. The federal government has been covering a higher share of Medicaid costs to help states during the recession, but that help ends June 30. In addition, state officials are projecting an increase in enrollment and utilization of services, both of which also will drive up costs."

"Next year is "absolutely the worst budget year certainly in three decades," according to Jay Himes, executive director of the Pennsylvania Association of School Business Officials. And most York County districts, like those around the state, are looking to trim costs any way they can.

Himes said 2011-12 presents districts with the "school budget trifecta" -- decreasing federal, state and local revenue. It's not a question of if districts have deficits, it's a question of how much."

deficits

  • Other news, headlines and opinion:

European Inflation Quickens to Two-Year High of 2.4%

Moody's cuts Egypt a notch to Ba2, negative outlook

Food staples starting to run out in Egypt

French, British Banks Have Most Exposure to Egyptian Loans, BIS Data Show

Support grows for lengthening Greek debt payback

Spain Lenders May Need $52 Billion of Capital, JPMorgan Says

Superintendent: 'Perfect storm' threatens Arlington school system (NY)

Espirito Santo Sells Loans as Iberian Lenders Plan Abandon Infrastructure

Chrysler Posts $199 Million Net Loss as Vehicle Shipments Fall

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Marteen
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

Dollar down! This reminds me of my first confrontation in 2005 when I first discovered fast Internet (changed europe for Venezuela and Nigeria before the internet hype) This 49min documentary, the day of the fall of the dollar changed my view on the financial world and dragged me into a financial fear of a collapse of the dollar and financial institutions. CM has helped me to conquer this fear with very helpfull advise. The documentary is in my native Dutch tong but subtiteld. Enjoy

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Hagen
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

Maybe not that important but interesting nontheless,

its just a short article but it came in as "Breaking News" (kind of funny) and was published on www.Spiegel.de (one of the most acknowledged news agencys in germany - mainstream but not blind -imo-). In short it says that the price of the oil produced in the North Sea has risen to 100,2 Dollar a barrel which is is biggest price increase since end of 2008.

For those who speak german^^

http://www.spiegel.de/wirtschaft/soziales/0,1518,742750,00.html

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Johnny Oxygen
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Re: Daily Digest 1/31 - The 5 Black Swans That Keep Dylan Grice
China and the US are in the early stages of an arms race

http://online.wsj.com/article/SB10001424052748703808704576061674166905408.html

China has made rapid progress in developing a capability to produce advanced weapons, also including unmanned aerial vehicles, after decades of importing and reverse engineering Russian arms. The photographs throw a fresh spotlight on the sensitive issue of China's military modernization just as Washington and Beijing try to improve relations following a series of public disputes in 2010.

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Poet
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Low-wage jobs dominated hiring so far in job market recovery

Low-wage jobs dominated hiring so far in job market recovery
"'Growth has been concentrated in mid-wage and lower-wage industries. By contrast, higher-wage industries showed weak growth and even net losses.'"

"Bernhardt's analysis of the first seven months of 2010 found that 76% of jobs created were in low- to mid-wage industries..."
http://money.cnn.com/2011/01/31/news/economy/low_wage_job_growth/index.htm

Related article (from 2010):

New Job Means Lower Wages for Many
http://www.nytimes.com/2010/09/01/us/01jobs.html

Poet

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mrobinson
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

Insightful and clear thinking article as always from Andy Xie.

http://english.caing.com/2011-01-19/100218740.html

The numbers still blow me away.

In the wake of the crisis, there are observable divergences in the types of responses by developed economies. The challenge is to bring down leverage. A good measurement for national indebtedness is the ratio of the total debt level of the real economy-government, non-financial companies and households relative to GDP. For example, the U.S. government debt is US$ 14 trillion, the household sector 13.4, and the non-financial corporate sector 11. The total debt is US$ 37.4 trillion. The U.S.'s nominal GDP in 2010 is probably US$ 14.8 trillion. That would put the U.S.'s national indebtedness at 253 percent. The same indicator for the euro zone is about 250 percent, for the UK 280 percent, and Japan, 370 percent.

The U.S.'s approach hasn't worked well so far. Its government debt has risen to US$ 14 trillion now from US$ 8 trillion in the third quarter of 2008 when the Crisis hit. The increase is equal to 40 percent of last year's GDP. The Federal Reserve's balance sheet has bloomed to US$ 2.6 trillion from US$ 900 billion during the same period and is likely to rise to US$ 3.2 trillion on QE 2 early next year.

Supporting the euro is in China and Japan's best interest. They hold more dollar assets than anyone else and have a strong vested interest to safeguard the dollar's value. The only viable alternative to the dollar is the euro. If it is discredited, the Fed will be emboldened to print more money.

Down the road, China and Japan should work with OPEC countries to prepare for the post-dollar world. The three hold most dollar assets in the world. If they don't prepare an alternative, they are always at the Fed's mercy. When the Fed stimulates the economy by printing money, it dilutes their wealth. If they prepare a credible alternative, the Fed will have to think twice before it starts the printing press.

The key step for replacing the dollar is for oil to be priced in a different currency. For now, the euro is the only possibility. China, Japan, and the OPEC should begin discussions on trading oil in euros. Oil is mostly traded in London and New York now. Euro-denominated trading systems could be created in Dubai, Shanghai and Tokyo.

It's time to prepare for the post-dollar world.

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

"LANSING -- State treasurer Andy Dillon said today that his office will train 45 financial emergency managers next month to assist in what he expects will be a surge of local cities or school districts facing insolvency."

Mid-East contagion fears for Saudi oil fields (Ambrose Evans-Pritchard)

Barrick CFO: Central Banks May Shift More Reserves Into Gold

Russia lifts gold reserves in drift away from US greenback

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SagerXX
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Map of Middle East w/pop-up tweets from/about crisis in Egypt

They tend to repeat after a while, but interesting nonetheless...

http://www.mibazaar.com/egypt.html

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AinSophAur
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mrobinson's picture
mrobinson
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

Just a having a whinge

The weather is getting stranger or i should say the changes are more extreme here in Oz.

Floods to the east coast of Oz, now the biggest Cyclone to hit Qld (that’s 2/3rds of a 4,330mile of tropical coastline), and in Sydney we have had a heat wave of 118 degree f temperatures and it’s 89 degree f now at midnight.

What's going on?

A documentary tonight of a group of scientist in the Antarctic taking samples of seawater.

Seawater is diluting and becoming more acidic. Phytoplankton absorbing more carbon and increased algae blooms, less saline dense seawater being replaced with fresh water. Hhhmmm...interesting

I recal a program where this started the last ice age when the Gulf Stream stopped. Basically its the earth self regulating its own temperatures naturally.

Mother earth doesn't care who inhabits.

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mrobinson
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

Picture

http://www.bom.gov.au/products/IDE00902.loop.shtml

no more wheat, bananas, sugar cane, avocadoes and mangoes for a while.

Things could be worse.........million-man march in Egypt i guess.

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DRHolden
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Re: Daily Digest 1/31 - New Era of Global Food Revolutions, ...

mrobinson wrote:

The weather is getting stranger or i should say the changes are more extreme here in Oz.

Same here in the US.  We are in the middle of the largest cold (snow/ice) weather pattern ever recorded.  I think it's affecting 2/3 of the states.  Appears that climate change is accelerating...

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Damnthematrix
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Beijing blocks internet searches on Egypt

Beijing blocks internet searches on Egypt

By Girish Sawlani for Radio Australia

htttp://www.abc.net.au/news/stories/2011/02/02/3127427.htm?section=justin

Two of the country's biggest web portals have blocked search words such as "Cairo" and "Egypt".

This follows discussion on Chinese social media websites where bloggers have drawn parallels between the uprisings in Cairo and similar incidents in China, including the 2009 protests in the north-western province of Xinjiang.

Days of violent protests in Cairo have dominated news headlines across the world and it is no different for the mainstream media in China, except for one thing.

"These reports have been avoiding discussion of the problems in these countries leading to the uprisings," City University of Hong Kong Professor Joseph Cheng told Radio Australia's Asia Pacific program.

Beijing authorities are focused on web-based discussions - targeting two of China's biggest web portals, Sina.com.and Netease.com.

"We certainly see some censorship of media, especially at the internet level," Professor Cheng said.

Wanning Sun, a professor of Chinese media and cultural Studies at the University of Technology Sydney, sees the government's actions as a knee-jerk response.

"Individuals are saying interesting things about what is going on ... or they are perhaps thinking about some of the historical parallels between what is going on in Egypt and what went on in China more than 20 years ago," he said

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