September 2, 2014 Patrick Oliver-Kelley

US Economy

The economy in the U.S. expanded more than previously forecast in the second quarter, propelled by the biggest gain in business investment in more than two years that bodes well for the rest of 2014. GDP rose at a 4.2 percent annualized rate, up from an initial estimate of 4 percent and following a first-quarter contraction. Corporate profits climbed by the most in almost four years.

7 in 10 say the problems in the economy mostly reflect “the inability of elected officials in Washington to get things done. Only 23 percent of those polled, agreed with the view that the economy has “deep and longstanding problems” that policymakers can’t do much about. Americans are not rolling over and saying a difficult economy is inevitable. They want the problems fixed and they think that policies can make a difference. Polarization creates a big hurdle when public consensus – and the consensus among economists – does not align with an all-liberal or all-conservative agenda.

Joseph Stiglitz, US Nobel Prize winning economist says that evidence supports his claim that the US has less economic mobility than Canada and much of Western Europe. Seven in ten Americans that start out in the bottom fifth of family income, stay in the lower class as adults.

Wage Inequality

Eurozone

The Eurozone’s recovery unexpectedly stalled in the second quarter as its three biggest economies failed to grow, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine. GDP in the three months through June was unchanged from the first quarter, when it increased 0.2 percent. Economic stagnation, consumer-price growth at less than a quarter of the ECB’s goal and escalating international sanctions against Russia over its support for rebels in Ukraine highlight the challenges policy makers face. The outlook continues to deteriorate.

Asiazone

China’s Rising is brewing a political storm that threatens the peace in one of the world’s most strategic flashpoints. China has set itself on a collision course with its Southeast Asian neighbors. Vietnam, and Philippines have openly voiced their alarm. Other Asian neighbors are looking though quieter, alarmed as well. Their disquiet has drawn in the United States. China pledged peaceful development, amity, sincerity, mutual benefit and inclusiveness. Its neighbors are looking for some clarity surrounding Beijing’s goals, assuming China knows them, itself. Without more clarity, China risks finding itself strategically isolated and facing off with the US. Its tactic of intimidating neighbors into submission, China may believe is effective: It has demanded and gotten, anyone fishing, in waters claimed, nearly 90% of the South China Sea, to seek prior permission; A Chinese dredging vessel has created an artificial reef on an island claimed, too, by the Philippines; it positioned a drilling rig onto disputed waters near the Paracel Islands which is claimed by Vietnam.

All the deeds appear to violate agreements China signed with ASEAN many years back. China seems to be taking the salami approach of taking small ‘slices’ to see what they can get away with, without provoking the U.S. So far, so good.

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