Gleanings II ~ 485 Nick Rost van Tonningen Posted by John on November 13, 2012

Quote of the week : “It is better for the reputation to fail conventionally than to succeed unconventionally – John Maynard Keynes (one economic activity in which this idea is doggedly adhered to, with some honourable exceptions, is in the money management business).

John Mauldin’s Thoughts from the Frontline (that anyone can access on the Internet) is often a useful read. His November 12th issue contains charts on global calorie intakes & meat consumption, on farmland prices relative to gold, & flags the November premiere of a documentary Money for Nothing : Inside the Federal Reserve that includes vignettes with illuminati from Paul Volcker & Jeremy Grantham down. The calorie chart suggests that in 1965, when the world population was 3.3BN, 1BN ingested > 3,000 calories/day & 2BN < 2,200 calories but that by 1998 over one-third of the then 5.5BN global population was consuming 3,000+ calories &, more significantly, that those having to make do with < 2,200 calories had dropped 80% to 400MM. And the meat consumption chart shows China’s went from 10MM tons in 1980 to 5x that by 2000, & to 70+MM tons since. And its demand for dairy products is growing by 20% per year - all this will put major pressure on (the price of) farm inputs worldwide, incl. land, fuel, fertilizer &, most importantly, water. In 1992 87% of all US voters were white. By 2008 that had declined to 74%, & in this election to 72%. Since 2008 over 10MM new voters have been registered, with young people, many Hispanic (50,000 Hispanics are now said to be reaching voting age each month), making up the bulk thereof (in Florida alone the number of registered Hispanic voters increased by nearly 200,000 since 2008). And exit polls indicated that only 30% of them supported Romney (vs. 44% George W. Bush in 2004). When all the counting was done, 62.088MM Americans (down from 69.456MM in 2008) had voted for Obama & 58.783MM for Romney (down from McCain’s 59.934MM); so neither party did a particularly stellar job of ‘getting the vote out’, especially since, as noted above, there were 10+MM more registered voters. Voting district boundaries for the US House of Representatives are adjusted after each census by the state governments. In this process “gerrymandering” (redrawing them in weird ways to create a political advantage for the party of one’s choice) is the rule rather than the exception. In the November 6th election this produced some contrary results. Thus in Florida where Obama ultimately eked out a narrow win in the popular vote, the Democrats ended up with just 10 of its 27 seats in the House, in Michigan the vote went 54-45 in favour of the President & yet the Democrats got only 5 of the state’s 14 seats, in Ohio the result was 50-48 & the Democratic seat tally 4 out of 16, in Pennsylvania 52-47 & 5 out of 18, in Virginia 51-48 & 3 out of 11, and in Wisconsin 53-46 & 3 out of 8. On the other hand, in Arizona the Republicans, with 54% of the popular vote, got only 4 out of the state’s 9 seats but in Colorado with 47% 4 of its 7 seats. There is now growing talk in Washington about “capping” personal income tax deductions at, say, US$50,000 (a Romney idea long lost in the shuffle) and, more generally speaking, about putting the axe to “tax expenditures” such as home mortgage interest deductability, charitable giving & the tax-free status of employer-funded healthcare insurance - the last of these never made sense at a macro level & was purely a vested interest-driven idea to benefit a privileged group of workers. And while Robert Rubin, a Goldman Sachs alumn, a former Clinton Secretary of the Treasury (where he was instrumental in Glass Steagall being repealed, thereby contributing to the financial fiasco one decade later, & subsequently Vice-Chairman of Citigroup (which benefitted in the short run, while he personally did longer term, from that repeal) recently in the NYT pooh-poohed the idea of infringing upon home mortgage interest deductability, sniffing that at best it would only yield $100-150BN (which seems like a low ball estimate, given the fact that there is US$10+TR in household mortgage debt outstanding). According to cables leaked by Wikileaks in 2010 the State Department, over Secretary Clinton’s signature, instructed its embassies abroad to surreptitiously collect DNA samples from foreign Heads of State & senior UN officials - this is nothing new : back in the late 70's the CIA tapped into the toilet drain from the suite in the hotel in which Breshznev was staying during a foreign visit to try & get a reading on his health status. The past two decades have seen the three most destructive hurricanes in modern US history, all categorized as “natural disasters”. But a 2005 Princeton University study begged to differ; for it said rapid population growth in coastal areas had long been an accident looking for a place to happen, that the risks this had created were wholly ‘predictable’, & that what were deemed ‘Acts of God’ were in reality the outcome of inadvertent land use planning, i.e ‘Flaws of Man’. Last year there were 765,000 foreign students on US university campuses, 20+% of them Chinese (about 6x as many as on Canadian university campuses) who, according to the Department of Commerce contributed US$22.7BN to the US economy - given the cost of tuition, this Commerce Department estimate looks like a gross underestimate. There is much talk across North America that, to remain competitive in a globalized world, the output of the educational system needs to be dramatically improved. For those in the education ‘biz’ this simply means more money. Unfortunately experience has proven time & again that adding money to an underperforming situation almost invariably merely succeeds in creating a bigger underperforming mess & that more money can only produce a Return on Investment once the management/attitudinal challenges are dealt with. Examples of inappropriate priorities in education are a dime a dozen (although there are also sufficient examples of educators focused on educational outcomes achieving astounding results with limited resources to provide reasons for optimism). Thus Edmonton over the summer witnessed the case of a teacher with 30+ years’ experience being bullied by his principal, & subsequently dismissed by the School Board, for insisting on giving students zeroes for work not handed in, a stand overwhelmingly supported by parents (which raises the question as to whose views on issues such as these should prevail, those of the parties the system is supposed to be serving, in this case the parents, or those of ‘nanny state’, politically-correct bureaucrats who are supposed to enable those ‘at the sharp end’ to do the serving?) - in the end the public school system lost-, & the charter school system gained-, a committed, experienced educator with integrity, the School Board all but conceded the error of its ways by re-assigning the principal to other non-specified duties of an administrative nature, and the school in question got a new principal (& a new parents’ council unequivocally committed to marks based on results). And David Staples in the Calgary Herald recently came up with an even more egregious finding. In Alberta Grade 12 diploma marks depend for half their total on class room work marked by the teacher & for the other half on Department of Education-set, & administered-, exams (the long form answers of which are marked by two teachers on a “double blind” basis, i.e. neither knows the student nor the mark his/her colleague has given). Bewailing the lack of uniformity in teacher assessments of student achievements, & the evidence of “grade inflation”, he noted “There are cases in this province where ... the teacher has given every student in a class an A, ... a mark over 80, and not a single soul in that class passed the (diploma) exam” - teachers who fail so badly in their fiduciary responsibility to parents ought to be tarred & feathered, and run out of town on a rail. On November 26th the Harper government faces three by-elections, one each in Ontario’s Durham riding (North & East of Oshawa), Calgary Centre & Victoria. The former two were previously held by Conservatives & the last one by a member of the NDP, and all had been expected to be coronations of new representatives from the same parties. But a November 12th Forum Research poll suggests the Calgary Centre one may turn out to be a squeaker; for it showed that the Conservative candidate’s support had slipped to 32%, from 48% two weeks earlier, with the Liberal candidate nipping at her heels with 30%, and the Green Party & the NDP trailing with 23% & 12% respectively - if its candidate were to come out on top on the Prime Minister’s home turf that couldn’t help but boost the Liberal Party’s spirits a great deal; but the soup is never eaten as it is hot & with only 376 people polled, both polls have a far greater margin of error than most. In his opening remarks to the 18th Party Congress President Hu Jintao noted among others : • “On the basis of making China’s development much more balanced, coordinated and sustainable, we should double its 2010 GDP, and per capita income for both urban and rural residents, by 2020" - this is interesting; for it implies a compound annual growth rate of 7.2% for the decade (& less still when the 2011 9+% growth is netted out); • the need to fight corruption (this in the wake of the New York Times’ recent allegations about Premier Wen Jiabao’s, & more recently Bloomberg’s about President Xi Jinping’s, families’ wealth accumulation?) since “If we fail to handle this issue well, it could prove fatal to the Party, and even cause the collapse of the Party and the fall of the state”; • “We should enhance our capacity for exploiting marine resources, resolutely safeguard China’s maritime rights and interests, and build China into a maritime power” - all of which will strikes fear in the hearts of its neighbours despite US’ new “pivot strategy”, since Washington is in the process of downsizing the US Navy’s operational capabilities. John Garnaut trained for, & practiced, commercial law in Australia before turning to journalism in 2002. He now is the China correspondent for the Sydney Morning Herald & a contributor to Foreign Policy, and has been living in Beijing since 2007 (where he also lived when his father was Australia’s ambassador there in the 80's). His new book, The Rise and Fall of the House of Bo chronicles how the rise of Bo Xilai, who as Party Chief in Chonqquing revived & fueled “anti-capitalist roader’ sentiments while his family & friends grew rich, troubled ‘reform-minded’ Party leaders who feared his elevation at this year’s 18th Party Congress to membership in the all-powerful Standing Committee could set the stage for another Cultural Revolution & destroy the myth of a unified, one-party state - the Epoch Times, the mouthpiece abroad of the Falun Gong, however, claims that when, in 2007, prior to the 17th Party Congress, Bo was mooted for promotion from Minister of Commerce to Vice Premier, Premier Wen Jiabao put the kibosh on that; for it quotes from cables from the US Consulate in Shanghai made public by Wikileaks that Wen “argued against this promotion, citing the numerous lawsuits brought against Bo in Australia, Spain, Canada, England and elsewhere by Falun Gong members (for his overzealous implementation of the anti-Falun Gong policy laid down in 1999 by the then President Jiang Zemin, when he had been the Party Chief in Dalian Province before becoming Minister of Commerce) ... (saying that) Bo’s significant negative international appeal made him an inappropriate candidate to represent China an even higher international level.” And he seemingly succeeded; for Bo was all but banished to faraway Chonqquing (which, however, didn’t seem to have derailed his campaign to be elected to the all-powerful Standing Committee, at least not until the attempted defection by his longtime sidekick & hatchet man, Wang Lijun, who, in the 24 hours he spent in the US Consulate in Chengdu early this year, spilled the beans to US consular staff about the sordid affairs of the Bo family). And speaking of the Standing Committee, its size, as expected, was cut from nine to seven members, four of whom are said to be in the ‘conservative’ camp of Jiang Zemin. During the closing session of the 18th Party Congress the Party’s constitution was changed, among others by making promotion of “ecological progress” a part of its development strategy. According to Peabody Energy China over the next four years will add 240 GW of coal-fired power-generating capacity, boosting its current fleet of 620 coal-fired plants by 160. Be that as it may, a government White Paper issued last month targets, in the context of cutting carbon emissions by 2020 to 60% of their 2005 level, having 30% of all of China’s power-generating capacity non-fossil fuel-powered by 2015 - this would require an additional 400 sq. kms. of solar heat surface collectors & 100GW of additiona’wind power capacity (1.6x that in place in 2011). There are 27 EU member nations. One-third are net contributors to its Budget & the other two-thirds net drawers. On a Euro per capita basis the former are : Sweden (117), Denmark (116), Netherlands (110), Finland (93), Germany (90), Italy (78), France (77), UK (75) & Austria (70). As the Europeans & the IMF squabble in the background (although their disagreement bubbled to the surface at a joint press conference on November 12th when IMF Managing Director Christine Lagarde was seen shaking her head & rolling her eyes at what Jean-Claude Juncker, the President of Luxemburg & the President of the Eurozone Finance Ministers, was saying) as to whether the target for Greece should be to cut its debt-to-GDP ratio to 120% by 2022 or 2020 (from an expected 190% in 2013), the market on November 13th helped Greece avoid default on the 16th (when it has 6BN Euros debt maturing) by buying 4.063BN Euros in T-bills (2,765BN @ 3.95% due in one-, & 1.298BN Euros @ 4.20% due in three-, months) - perhaps the most germane observation was “Greece will not be allowed to default this week.”. The reason the Europeans have problems with the IMF’s earlier date is that it implies a second round of ‘haircuts’ for bondholders. And private bondholders, after the round of haircuts earlier this year, now hold only 60BN of Greece’s 350BN Euro debt (& in any case would resist having to take a second “hit”), the ECB’s Mario Draghi told a press conference last week it has done enough & will have no truck or trade with any write-down of the Greek government bonds it holds & the idea of their government taking a haircut on its Greek bonds will go over like a lead balloon with German voters less than a year before the next election. A propos Greece it may be worth noting that in the Third Quarter, its 17th consecutive quarter of negative economic growth, its GDP shrank at a 7.2% annualized rate, far worse than the Second Quarter’s 6.2% & the Government’s Budget assumption of 6.5%. Compared to that, Portugal’s negative annualized Third Quarter growth of 3.4% looks simply stellar unless, of course, one is a Portuguese for whom this creates very tangible problems. GLEANINGS II - 486 Thursday November 15th, 2012 CONSUMER SENTIMENT IN U.S. INCREASES MORE THAN FORECAST (Bloomberg) • The widely-followed Thomson Reuters/University of Michigan Preliminary Consumer Sentiment Index for November rose for the fourth month in a row to 64-months’ high of 84.9, up from 82.6 in October & well above the 82.9 median estimate of 71 economists surveyed. Joseph LaVorgna, whose 85.0 call had been spot-on, observed “This is a slow, uneven economy that continues to mend ... The confidence numbers reflect a bit better job growth in the quarter ... and news in housing that has really been quite good.” This is up from 72 in July & a two-year low of 55 in August of last year. While the news may be “quite good”, this is true only in relative terms; on the other hand, if this is a function of Americans starting to downsize their expectations, it would be a very positive development. US CALLS FOR TIGHTER CONTROLS ON CHINESE INVESTMENT (Shanghai Times) • The U.S.-China Economic and Security Review Commission advises Congress on the national security implications of the relationship between the world’s largest two economies. The primary recommendation in its latest annual report urges it to tighten the screening of investments by Chinese state-owned companies in the US (because they are “unfair competition”) by broadening the mandate of the committee chaired by the Secretary of the Treasury that screens foreign investment proposals. And it says “Growing Chinese investment may offer an important new source for US job creation and economic growth, but it is too early to know whether the benefits will outweigh whatever long-term economic costs Chines state-owned and state-controlled investment may bring”, notes that, despite three decades of economic reform, state-controlled entreprises still account for half of China’s economy, that their role had been enhanced by the US$85BN government stimulus program during the 2008 slowdown & that they benefit from preferential financing from state-owned banks, cheap land, fuel & electricity, regulatory exemptions & tax preferences. Not surprisingly no mention is made of reciprocity. OBAMA II AND ISRAEL (Haaretz, Daniel Levy) • The fault lines are starting the show. The upcoming election may well prove a watershed in Israel-US relations. Israel’s (or is it Netanyahu’s?) chauvinistic turn is increasingly out of sync with America’s values. Netanyahu is no longer a useful ally. And Obama has different priorities (& a war with Iran is not one of them). Thomas L. Friedman voiced a similar view in his recent NYT column entitled My President in Busy in which he says the shift in US foreign policy from the Near-, to the Far-, East may make it easier for Israel to remain in the West Bank in the short run but longer term will be to the detriment of Israel’s survival as a Jewish democracy (echoing the sentiment of one Israeli political analyst prior to the 2009 election - from which Netanyahu’s Likud Party emerged with one less seat in the Knesset than Kadima - that “a vote for Netanyahu is a vote for a unitary state” (the reason for this is that only older Palestinians still talk about a two-state solution). OILSANDS POLLUTION SURPRISES SCIENTISTS (Postmedia News, Margaret Munro) • Federal scientists have found contaminants from Alberta’s oilsands plants on the bottom of lakes up to 100 kilometres away & so remote as to receive only atmospheric inputs, that snow within 50 kilometres contaminated with many “priority pollutants” & melt water from snow collected near oilsands plants being toxic to newly hatched minnows. This suggests their pollution “footprint” is 4x the size identified in 2010 by the UofA’s water expert, Prof. David Schindler, whose finding were questioned at the time by scientists from the same government department, Environment Canada). One must wonder, given its track record on such issues, why the Harper government ever allowed these findings to get out in the public domain & to be presented on November 14th at an international toxicology conference in the US. While these findings will be used by oilsands detractors to bolster their case that their development is inherently evil, to those with a less jaundiced eye on this issue it is merely evidence that their development has been, & continues to be controlled by quarterly earnings growth-obsessed companies, aided & abetted by only marginally less-shortsighted governments. ISRAEL, GAZA SLIDE CLOSE TO WAR NEITHER SIDE WANTS (NBCNews, M. Fletcher) • Israel has called up army reservists, its standing army is set for a ground invasion of, and its air force & navy are pounding ‘specified targets I, Gaza’, most of the said to be Hamas fighters & weapons facilities. While both sides say they don’t really want a war, Israel is determined to end the rocket attacks on its southern cities, 100 of them in the five days before it retaliated & another 150 since, and Hamas cannot afford to lose face by being seen as bowing to Israel’s overwhelming military might. Israel claims to now have destroyed most of Hamas’ Fajr rockets whose a 47 mile range pose a threat to all of Southern Israel, incl. Tel Aviv. All it will take to turn this into a real conflagration would be for Hezbollah and/or Syria to join the melee (thereby opening a ‘second front’). And even if they don’t, the damage being done to Israel’s image among its ill wishers & few remaining friends alike by its air planes ‘shooting fish in a barrel’ is going to be long-lasting, if not permanent. One puzzling aspect of all this is that , with the firing of rockets from Gaza into Southern Israel having gone on for years, Israel never seems to have been able to come up with a better defensive strategy than building bomb shelters, periodic bombing raids (that almost inevitably entail ‘collateral damage’) or an outright punitive ground expedition during the 2008 Christmas Season. SYRIAN OPPOSITION SEEKS INTERNATIONAL RECOGNITION (Reuters, Rania el-Gamal) • On November 12th Syria’s 20-month civil war threatened to spread further across it borders (it had earlier led to incidents on its Turkish & Lebanese borders) as the IDF for the second day in a row directed artillery fire at targets on the Syrian side of the border in the Golan Heights in response to incoming mortar fire. Meanwhile, after days of haggling & wrangling in Qatar under intense US & Qatari pressure, Syria’s ethnically & religiously fractured opposition agreed to create a government-in-waiting, the Syrian National Coalition for Opposition and Revolutionary Forces, headed by Mouaz Alakhatib, a Damascus imam whom a prominent Syrian human rights defender described as “a dynamic, progressive Islamist, popular in Damascus and the rest of Syria ... He is not a trigger-happy Jihadist, and he can play a role in containing the extremist groups.” The next day, November 13th, France became the first Western country to recognize it as ‘the only legitimate authority’ in the country. In the short run its creation should be beneficial, if only because it will internally provide a focus & externally give the rebel forces more legitimacy; thus the Gulf Cooperation Council earlier recognized it as the “legitimate representative of the Syrian people.” Longer term, however, who knows, the fissures in Syrian society are deep, emotional & of long standing, Alakhatib lacks Mandela’ stature & the less moderate Islamists can be counted on to try & exploit those fissures. SANCTIONS SQUEEZING IRAN’S ECONOMY (DT, David Blair) • On November 13th the IEA reported that Iran’s oil exports in October had been 1.3MM bbld, down 43% YoY. This is creating a notional US$100+MM/day revenue shortfall for the regime (likely a lowball estimate since buyers are getting discounts from world prices) which, on an annual basis, equals one-third of its budget. But Paul Stephens, a Senior Fellow on Energy at London-based Chatham House, thinks financial sanctions & the government’s own inept policies have done more harm than the EU’s oil embargo (which only came into force July 1st). And whereas last June Iran’s 3MM bbld output was OPEC’s second largest, its 2.7MM October output put it in 4th place (after Iraq & Kuwait) and, bereft of outside investment, its oilfields are being run down into the ground &, when the time comes, will take some time to recover. IRAN SEIZES SAUDI FISHING BOATS NEAR NUCLEAR PLANT (Oman Tribune) • On November 12th Iran’s FARS news agency reported that Iranian naval vessels on November 8th had seized four Saudi fishing vessels & its 17 Indian national crew members for illegally entering, & fishing in, its territorial waters about 30 miles from its Bushehr nuclear power plant (that, after almost four decades & with help from Russia, will finally start producing electricity at a commercial scale before the end of the year). The last time such an event occurred was in 2007 when the Iranians first arrested 15 British sailors & Marines, a few months later, three Emirati fishing boats, for the same reason. CHINESE STEEL PRODUCTION UP IN OCTOBER (Bloomberg) • It was up 2% MoM, & 6% YoY (albeit down slightly on a per diem basis) amidst signs of a pickup in demand. Baoshan Iron & Steel, China’s largest listed steel producer, raised the prices for most of its cold-rolled steel products for the first time in three months & the price of the benchmark hot-rolled coil is up 21% in two months. All this is due to the government’s September 7th announcement of plans to rapidly increase infrastructure spending, especially on projects in the transportation & environmental sectors. While Australian iron ore exports to China were down 21%, the most since the 37% decline in January 2009, at the height (or depth?) of the financial crisis, other news emanating from China seems to point to a resurgence. Exports were up 11.6% YoY, vs. a 10% consensus forecast and, with imports up only 2.3% YoY for the second month in a row (vs. the 3.4% expected), the trade surplus surged to a US$32BN five-year high. And domestically retail sales were up 14.5% YoY (vs. forecast of 14.4% & September’s 14.2%) & industrial production up 9.6% (vs. an expected 9.4%), and consumer price inflation down to 1.7% from 1.9% in September. WARM WORDS FROM CHINA, WITH A SUBTEXT OF WARNING (NYT, Jane Perlez) • Beijing welcomed Obama’s re-election but, woven into President Hu Jintao’s warm words was a warning that the US should become a more “cooperative” partner as China continues to rise in wealth & power. And Xi Jinping, his designated successor, has similarly expressed the idea of a “new type of relationship between major countries in the 21st century.” Meanwhile, Beijing views his Administration’s “pivot strategy” as an unfriendly attempt at containment while many people in Washington fear that, rather than wanting to share power, Beijing’s target is to unravel America’s alliances in Asia. Washington’s pivot strategy will prove a “Paper Tiger” if done on the cheap. But it is hard to see how in the present environment enough dollars can be sprung lose in the Pentagon budget for it to be anything but that unless & until its available resources are going to be deployed in a more cost-effective manner than they have in the past (by reducing the role of the Air Force). CHINA MANDATES ‘SOCIAL RISK’ REVIEWS FOR BIG PROJECTS (NYT, Keith Bradsher) • Beijing has ordered that all major industrial projects must henceforth pass a “social risk assessment” review before launch to forestall the large, & often violent, environmental protests of the past year which forced the suspension, or even outright cancellation, of among others chemical plants, coal-fired power plants & one huge copper smelter. It is becoming increasingly apparent that the Beijing government is not nearly as able to ride roughshod over popular sentiments as has traditionally been held to be the case. CHINESE INTELLECTUALS ARE SILENT AMID A WAVE OF TIBETAN SELF-IMMOLATIONS (NYT, Andrew Jacobs) • In the recent past 69 Tibetans have set themselves on fire, six of them in the last week alone, most of them with fatal consequences, in protest against their lack of “freedom”, “cultural genocide” & heavy-handed police tactics. Meanwhile, liberal and/or educated Han Chinese remain silent (a display of apathy that one of the more pro-active ones among them called “appalling”), the authorities call those involved “terrorists” (an abuse of the term legitimized by George W. Bush & used liberally ever since by repressive rulers to denigrate anyone disagreeing with their policies), the official propaganda paints Tibetans as rebellious, uncultured & unappreciative of the government’s efforts to raise their standard of living, and inside, & outside, the Great Hall of the People as the 18th Party Congress was in session a surfeit of fire extinguishers was if full view everywhere. And the Tibetans are only one of fifty-odd minorities in China in mostly peripheral areas of Beijing’s empire that are less than enamoured with the rule of the 90% majority Han Chinese. JAPAN’S GRIM GDP FIGURES ADD TO PRESSURE FOR ACTION (NYT, Takashi Naramichi) • In the First Quarter a stellar expansion seemed in the making. But in the Third Quarter GDP shrank at a 3.5% annualized rate, the most since the March 2011 earthquake cum tsunami as all three legs of economic growth, consumption, business investment & exports folded. The blame is being laid at the feet of the European debt crisis (which seems disingenious since it has seemingly been going on forever) & the ‘export-stunting’ high Yen exchange rate (as investors flee into it as a ‘safe haven’ currency - the Lord only knows why since Japan has debt-to-GDP that makes Greece’s look simply pedestrian). No, the real culprit is much closer to home, across the East China Sea where the dispute over the Senkaku/Diaoyu islands has caused Chinese consumers, aided & abetted by Beijing, to go on a Japanese car-buying strike, and Chinese businessmen have quit ordering Japanese-made equipment. UK RISKS TRIPLE-DIP RECESSION (The Guardian, Josephine Moulds) • In the Third Quarter the UK economy emerged from a double-dip recession as GDP grew at a 1% annual rate. But on November 14th, Bank of England Governor Mervyn King cut his 2013 GDP growth forecast to only 1% & warned output was more likely than not to remain below pre-crisis levels for the next three years (i.e. until the next election). He said that the Third Quarter outturn had been driven by one-off factors (first & foremost the Summer Olympics) & that, as a result, Fourth Quarter growth would likely fall back sharply. And after an unexpected jump in October’s inflation rate to a 2.7% five-months’ high, he also revised the outlook for inflation, expecting it to hit 3% in the near term & not fall back much until the latter half of 2013, much later than expected earlier, the prime reason, he said, why at its last meeting the Bank had refrained from expanding its QE program in November. The Brits, like all First World denizens may have to get used to, & accept, lower GDP growth. NEW IRA FACTION CLAIMS GUARD KILLING (AP, Shawn Pogatchnik) • David Black, age 52, was Protestant, a member of the Orange Order & near retirement. For three decades he was a guard at Northern Ireland’s top-security Maghaberry Prison, home to 40 members of various IRA factions who for over a year have complained about strip searches for weapons, drugs & cell phones. On November 1st he was shot & killed while driving to work, the first prison officer assassinated in almost 20 years. • While the Provisional IRA renounced violence in 2005, the group claiming responsibility for Black’s killing was formed last July by three anti-British splinter group, incl. the ‘Real IRA’ that in 1998 caused a car bomb explosion in the town of Omagh that killed 29, mostly women & children. It claims “a responsibility to protect and defend” those imprisoned in Maghaberry Prison & called Black’s killing a response to the “degradation” of strip searches. While relative calm has prevailed in Northern Ireland for some time & the majority of people seem OK with the status quo, there are still a few outliers who are deeply committed to union with Ireland. And their number may grow in the years to come if Britain’s economic struggles were to spill over into Northern Ireland & the Republic were to start to recovers from the financial crisis, possibly faster than most (although the latest economic data are tempering earlier expectations that its outlook was improving, even though it is still doing better than many other EU economies.