Confounding and confusing events 5/16/22
Recently, a vote was held in Northern Ireland with a surprise outcome. Sinn Fein, which has long been in favor of unification of Northern Ireland with the Republic of Ireland gained the greatest number of seats in parliament. It appears that there may be some question as to whether or not they can form a government, but the mere fact that they prevailed in the election demonstrates a substantial change in their political fortunes. It is also interesting to note that the platform that they ran on had nothing to do with unification, but were typical pocketbook issues like jobs, inflation, etc., and they were successful. Maybe Democrats should learn something from that.
As fed rates go up, there is a likelihood that consumers and businesses will become much more aggressive in searching for the best rate to invest their cash. Currently, as we all know, interest rates paid by banks are extremely low. Banks currently are awash in cash and unable to loan that money out at rates sufficient to add to the bank’s profitability. Thus, banks may not object to people moving their cash to other institutions, at least not in the short term.
Canada is considering a tax on foreign-owned properties which is raising concern on the part of US officials. The proposed tax would be about 1% on residential properties in Canada held by owners who are neither Canadian residents, nor citizens with the tax being calculated based upon the current assessment or its most recent sales price, whichever is higher. There are exemptions in this proposed legislation for nonwinterized homes, those located in communities with less than 30,000 residents, and homes occupied for more than four weeks without a break per year would be exempt.
It appears that both Canada and Mexico are preparing to accept Americans who will seek abortions in the event Roe is overturned. The decision to seek an abortion in Canada or in Mexico as opposed to other states in the United States is likely geographically dependent in the sense that one person living in a state that bans abortion near the Canadian border would likely go to Canada, while someone living in a state abutting Mexico may more likely go there. My suspicion is that the states that border Canada in the north that restrict abortion will likely be in the central and western part of the United States up to the Rocky Mountains, while Mexico may be flooded because of the red states which abut its border.
The tech industry is now warning that as remote working has grown as a result of the pandemic, it will likely result in jobs headed out of the US. This is not solely a function of the pandemic, but also a function of the Trump administration’s immigration rules which have kept many talented people out of the United States because of his prejudices and uneducated view of the tech industry and other technical industries. I do not wholly disagree with the idea that we need immigration reform, and that it should, in many instances mirror what is done in Canada, so that those who were admitted to the country come with skills that are needed. The reality is that with 11 million jobs open, we need workers at every level and we need to be making sure that we are admitting those that we need. The philosophical discussion about whether or not America should have, if you will, open immigration is much more complex. We did start out as a nation of immigrants with relatively speaking open immigration policy, but that was when the need was great, and now that we have approximately 350 million people, that need has lessened and changed, and we need to adapt to that.
The value of US-Canada energy trade rose when compared to 2020 as the US came out of the COVID-19 pandemic. The value of energy exports from Canada increased $22 billion from a low of $16 billion in 2020. Crude oil imports rose to 64% as Canada replaced Venezuela as a source of crude. There are really no surprises here, and certainly the cost of moving crude from Canada to the United States is less than moving crude from Venezuela as it is from the Middle East. Again, we need to be making rational and sensible decisions about the sourcing of our imports, and making sure that we are buying from people who support us, not only economically, but militarily and strategically.
The market continues to tank, and seems to be getting worse while inflation may have peaked. The balancing act that the Fed must go through in terms of bringing inflation under control but not sinking the economy will continue to be a very tricky one. Supply chain issues continue to crop up, and are hearing China is having significant difficulties, in part, because of their zero-tolerance policy, but also the general malaise in their economy as the result of COVID.
The Fins have requested to become part of NATO and to get it done as quickly as possible. This is a clear threat to Mr. Putin, at least from his psychological point of view, even if, in fact, it is not in reality a significant military threat. Clearly, if he has designs on Finland, this should put real pressure on him, but also on NATO to respond if he did take action. We continue to teeter on the border between appropriate responses and escalation, and we can only hope that we can stay on the side of the border that does not bring us to escalated conflicts with the Russians, either in Ukraine or along another portion of the Russian border with free countries. This operates in concert with the recent defeats that Russia has absorbed, and the evidence that they cannot maintain control of the areas that they have asserted control. This, to me remains an oddity of this war, that the Russians appear to be so incompetent, not only from a fighting point of view, but also from the point of view that their logistics and the quality of their equipment. I have commented before that the Pentagon must be absolutely gleeful with the ineptness of the Russians.
Mr. Powell was confirmed for a second term as the Fed Chairman by a vote of 80 to 19 in the Senate.
Canada’s dairy supply management system is now under attack by New Zealand. This has been a major issue under the USMCA and now New Zealand is using the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to challenge this problem.
And finally, CNN recently reported that Justice Thomas, in several speeches, indicated that in effect, liberals were challenging institutions and trying to coerce them into acting. I find this incredibly ironic when one looks the tea party, the conservative caucus in Congress, Trumpism and January 6, 2021. His wife is an actor in many of these movements and his decisions are far right. This is a delusional person who lacks any introspection nonetheless, there he sits.