Parkinson's Law, in its original form, states that "work expands so as to fill the time available for its completion." This was a humorous attempt at mathematically describing the rate at which bureaucracies expand over time -- the consequence of which is something that Washington is now dealing with. Hence the mania over the so-called "fiscal cliff" as the clock is ticking towards the January 1st and 2nd deadlines.
Today the UK chancellor announced that the head role at the Bank of England would go to none other than the current Bank of Canada Governor, Mark Carney. The bet is that Carney can wave the same magic wand for the UK, though it's going to take more than a doctorate from Oxford to overcome the relatively larger challenges facing that country versus Canada, with its proximity to a troubled Eurozone.
The upcoming U.S. Presidential election in November is already becoming regular water cooler content for Canadians starved for the return of hockey season, even though the outcome may not necessarily change the direction for Canada's economy. The similarities of both parties for Canada suggest that the attention to the election will be more for entertainment reasons on a night we don't want to watch hockey.
We had some not so friendly news hit the wires this week regarding China. The world's largest consumer of things from the ground and largest sibling in the Asian region recorded slower-than-expected GDP growth for the second quarter: 7.6 per cent. This is the sixth straight quarter in which growth has decelerated and represents a half a per cent decline from the growth seen in Q1.
The irony of Germany's loss to Italy in the Euro 2012 cup will not be lost on those who have been watching the Eurozone financial crisis play out in recent weeks. Germany's Chancellor Angela Merkel has been steadfast in her opposition to a plan for a common debt issuance program (so-called "euro bonds"), while her electorate have turned up their collective noses to calls for additional handouts to the problem centres like Greece.
In the wake of May's bond market rally from heaven, administered rates have seen additional downward pressure into June. GIC rates have extended their decline, while Canadian mortgage rates are downright juicy. Given this environment, it's no surprise that Canadians are uncertain as to whether they should be paying down debt instead of building investment nest eggs.
A lot of Canadians have no life insurance. Those who do often have excessive or expensive policies that they just don't need. In this economy, it's time Canadians go through their desk drawers and purge some of those useless, costly policies, and replace them with new ones.
From last weekend's elections in France and Germany, highlighting a shift in the populace away from fiscal austerity, to the gridlock in Greece's parliament (and more probable threat that the country will leave the euro), the region has created a conundrum for investors.
The seeds are already planted for bond yields to climb over the long-term as we lose the traditional investors in the U.S. debt market. One way out of this dilemma is to get deficits under control and put debt (and debt/GDP ratios) on a more sustainable trajectory. If preventing a return to double-digit bond yields (and mortgage rates) in North America isn't a big enough motivation to do this, I don't know what is.
While we debate economic momentum in the U.S., how much slower the Chinese economy will become and whether the downtrend in multiples has more to go, expect to see the stock market a little more shaky in the coming weeks and months. Yep, I said it -- more volatility.