North America

Go East, Young Canuck!

Atlantic Canada, where lives 30 percent of the Canadian population in five of the country’s ten provinces (Quebec*, Nova Scotia, New Brunswick, Newfoundland, and PEI), has had slower population and GDP growth than central or western Canada in recent times.

(*I’m including Quebec in “Atlantic Canada” here. This is for three reasons: first, Quebec is  geographically an Atlantic province; Quebec City is an Atlantic city. Second, Quebec has shared in the Atlantic trend of relatively low population and GDP growth. Third, the French-speaking area of Canada in a sense spills over into New Brunswick, where about a third of people speak French).

Population Growth .png

Canada province gdp per capita.png

Atlantic Canada’s slower growth has been the result, more or less, of four factors: climate (Quebec’s winters are cold, the Maritimes’ snowy), commodities (fossil fuels are mostly in western Canada); language (much of Atlantic Canada’s population does not speak English well), and location (Atlantic is relatively far from East Asia or the US).

Population and GDP Growth Ahead? 

I’m sorry, but I got real lazy here. So I’m just going to make pie-in-the-sky predictions, in point form:

  1. Migration and EnergyWith fossil fuel prices low today:

    — the Maritimes (apart from Newfoundland) benefit, as they tend to be the most dependent on fuel imports among Canadian provinces
    — Maritimers may move home from western Canada
    — Migrants from Romance-language developing economies and the Arab world, which depend heavily on energy and other commodity exports, may move to Quebec or to New Brunswick. This is particularly true given current politics in the US (where many do not want more immigration from Latin America), France (where many don’t want Muslim immigration), Veneuela (a country of 32 million people, in turmoil right now), Algeria, Libya, Angola, DRC, and Brazil
    — Migrants need affordable housing; Ontario and BC don’t have it, Atlantic Canada does
    — Migrants need employment; France, Spain, Italy, Portugal and Belgium don’t have it
    — Demographics: whereas today most of the world’s people of prime emigrating or studying-abroad age (20-40 years old) in the world are East or South Asian, over the next decade or two the biggest growth in this category by far will be in Sub-Saharan Africa. Much of this, in turn, will be in Atlantic countries (notably Nigeria), many of which speak English or French.
    — In the Americas, the biggest relative growth in 20-40 year olds will be in Haiti (pop. 11 million)
    — Even Romania, a Romance-language country with a population of 20 million, is an oil-exporting economy

2. Trade and Technology

— Brexit: England and/or Scotland and/or Ireland may look west to its ex-colonies in the Maritimes for new trade (or travel) relationships
— Trump: the Republicans have brought some uncertainty to NAFTA, and also seem poised to help keep energy prices low by allowing the US fossil fuel boom to continue. Atlantic Canada is less dependent on trade with the US than Ontario is, and less dependent on high fuel prices than western Canada is
— New Fur Trade: Europe is looking for commodities in order to wean itself off of Russia and the Arab world, and ports in Atlantic Canada may be able to provide it with the supplies to do so. In recent decades, most Canadian trade has been along north-south lines, a result of the significant barriers that are the Rockies (especially in winter), northern Appalachians (especially in winter), and the Canadian Shield’s lakes/rock formations/Great Lake Snow-belts. New technologies, however, notably autonomous trucks (or at least, “smarter” trucks) may help to overcome these barriers, allowing for more east-west trade
— Meanwhile, trade with Asia is unlikely to grow relatively quickly like it did in recent decades, given that Asian growth is shifting more from the northeast (Japan, South Korea, coastal China), which is relatively near western Canada, to the south and west (India, Southeast Asia, inland China) which is not so easily accessible from western Canada. Western India, in fact, is several thousand km closer to Halifax by sea than eastern India is to Vancouver
— Autonomous ships, aircraft: small autonomous ships, combined with climate change, might open up new North Atlantic sea lanes (Northwest Passage, Northeast Passage). Autonomous aircraft, similarly, might help open up the aerial Northwest Passage (by air, St. John’s-to-Beijing is only 20-25 percent further from than Victoria-to-Beijing). Autonomous cargo planes, when combined with modern precision airdrop technology, may also allow the Maritimes to benefit from being located along the aerial routes between North America and Europe — not entirely unlike how, in the pre-jet age, cities like Gander benefited from these routes
— If North America is to move in a direction away from fossil fuels, it will need abundant energy alternatives, as well as abundant energy storage to support intermittent sources like solar and wind. Quebec’s hydro industry is one of the world leaders in electricity production and storage
— If robots/autonomous vehicles become common, then the amount of energy that is in demand in the wee hours of the night will skyrocket, since robots don’t need sleep. This will benefit energy production that today cannot be turned off at night, such as nuclear and (in many cases) hydropower, in contrast to gas plants or, especially, solar. Outside of China and Russia, which produce prodigous amounts of nuclear and hydro but an even more enormous amount of fossil fuels, the leaders in hydro and nuclear are Atlantic economies: Brazil, France, Scandinavia, and the eastern half of Canada
— E-commerce: in a world of globalizing digital interaction, a region bilingual in both English and a Romance language might be in a good position
— Robotic factory workers: the Maritime provinces have excellent, abundant natural harbours to use as ports, but relatively small populations and, thus, small labour forces. Robots could, pehaps, change this equation, making ports (and energy) a more decisive asset


Source: United States Geological Survey


3. Climate and Tourism

— driving in snow or rain, both of which Atlantic Canada gets a lot of, may become much safer and more comfortable than in the past (good, among other things, for the 35 km drive between Halifax and the Airport)
— Atlantic Canada has an enormous amount of waterfront land. With people perhaps being able to spend more time in the countryside, as a result of automation (doing jobs for people), the Internet (e-commuting), and demographics (Baby Boomers cutting down their work hours), this waterfront land could help in tourism
— with more flexibility (because of technology), people from Canada, the US, and Latin America can become snowbirds: summering in Atlantic Canada and wintering down south
— cross-country skiing boom will continue over the next ten years, as Baby Boomers enter their 60’s and 70s
—Much of Atlantic Canada is islands and peninsulas. Airplane travel, particularly with small airplanes, may become cheaper if autonomous planes really do become a reality — or if it becomes easier to become a pilot because of high-tech modern flight simulators. Traveling by boat may become easier if people get more time on their hands, if technology increases safety, and if technology can address sea-sickness

Atlantic Canada.png


The Liberals swept the Maritimes; the Conservatives fared most poorly in the Maritimes and Quebec

North America

Should Hockey Fans Be Keynesians?

One of the most common things NHL players tell the media during the playoffs is that, when on the road, they want to play well during the first period in order to “take the fans out of the game early”.

If we assume that the players are correct in thinking that the fans can have strong influence over the game — even though, notably, home-team advantage has been quite a bit less significant in the NHL than in the NBA, and is arguably more to do with biases in officiating than anything else  — it begs the question of whether some teams’ fans are better at cheering than others.

Usually most of the focus here gets put on sheer loudness: the louder the fans, the better.  In this year’s playoffs, for example, sportscasters have been talking a lot about how the Rangers’ struggles at home may be due in part to renovations that have made Madison Square Gardens a quieter arena to play in than it used to be.

But what might, perhaps, be lacking in these discussions is a focus on the timing of fans’ cheering. In the NHL, most cheering tends to occur when the home team is already playing well. When a team is doing poorly, however, it is more likely to hear only a brief, classless “Refs You Suck” chant, rather than the more sustained, energizing, and joyous “Go Leafs Go!”

It is not, or at least it appears not to be, the fans as a whole who tend to shift the momentum in the game. Rather it seems more often to be individual achievements that do so: a timely goal to get the home team back in the game, a big hit being landed or power play started, or a super-determined (and probably drunk) fan who just wont give up cheering until everybody sitting around him — and then, ultimately, the entire arena — joins in too.

The way fans cheer may be the worst nightmare of the honest, god-fearing Keynesian. Rather than provide stimulus during teams’ recessions, and restraint during their boom times, fans cheer when teams are already playing well, and are often quiet when things look grim.

This raises questions that are usually more associated with economics and politics than hockey. Can stimulus lead to mistakes borne of overconfidence? Is stimulus always equally good, or does it succumb to diminishing returns — and if so, how soon after it begins? And how much better are some governments (or fans) than others at doling out stimulus at the ideal time?

Obviously, these are contested, and more or less unsolved, or even insoluble, questions in economics. In sports, though, we cannot even begin to approach the question, since nobody (as far as I know) has gathered the data that would be necessary to make a start of it. If we want to know more — and yes,  I admit it: this is obviously not really an issue of burning importance — we’re going to need a hockey-loving economist who possesses the skill and resources to do so.

Malcolm Gladwell, if you’re out there somewhere, get to work.

North America

Captain Compromise: An All-Star Weekend Mini-Tournament in South Korea

Like many who heard the hockey news last week, I feel the decision not to have NHL players attend next year’s Olympics is bittersweet.

On the one hand, the Olympics should, of course, almost by definition, feature the best athletes in the world.

As a Leaf fan in particular, I can’t help but lament the storylines that may go untold. Matthews and Van Riemsdyk getting even with the Russians for hacking John Podesta’s e-mails. Frederik Andersen standing on his head so much that the Danes end up acheiving their first-ever trip to the podium, beating their historic rival Sweden in a 1-0 octuple-overtime bronze medal game. Or even Zach Hyman, leading an Israeli team manned almost entirely by North American Jews, teaching them how to scour the boards, kill off penalties, and desperately try to help Matthews convert.

Who knows what wild Olympic action we will miss!

On the other hand, one must also respect the owners’ inclination to spend tons of their own money to earn tons more money within a free society. Why should they risk their stars being injured? And anyway, it will be exciting to see more amateur players—and Datsyuk—compete instead.

Also, it’s just sports, so who cares?

Well, alright, I do care. And so do plenty of other sports-crazed hockey lovers, who would also prefer the best players to play. Really, apart from the owners, and Gary Bettman, and some of the stars in the KHL, SEL, and OHL, and their families, and perhaps Kim Jong Un, there isn’t anybody who stands to benefit from players like Kane, Karlsson, Crosby and Ovechkin staying home.

Luckily, there may be a compromise available that would please both owners and fans, which could be used if the NHL does end up going through with the prohibition it announced earlier this week.

The compromise is this: All-Star Weekend in Daegwallyeong-myeon.

It’s pretty simple actually. Instead of only having one hockey category in the Olympics, in 2018 you have two: European Hockey and American Hockey. The European Hockey event will work the same way Olympic hockey tournaments always do, only without any active NHL players in it.

The American Hockey event, however, will be a much shorter, 2-day tournament, involving just 8 teams and playing by NHL rules (smaller ice, hybrid icing, etc. ). The teams will be Canada, the US, Russia, Sweden, Finland, Czech Republic, Slovakia, and World. (The World team might in fact have the fewest NHL players on its roster…though solid goaltending). The twin Hockey events will not be held on the same week, so non-NHL star players will be able to compete in both.

The 2-day, 8-team American Hockey event will work as follows. On Day 1, two rounds will be held, each round consisting of one 20-minute hockey game, plus sudden death overtime if needed. The first overtime will be 5-on-5 for 20 minutes, the second overtime 4-on-4 for 5 minutes, and all subsequent overtimes 3-on-3 for 5 minutes at a time. There will be no friggin’ shootouts.

It is likely that, at the end of Day 1, the four advancing teams in the tournament will each have played around 40-90 minutes of hockey; probably closer to 40 minutes. The four losing teams could easily wind up playing only 20 minutes of hockey. Matchups for Day 1 will be selected by lottery.

On Day 2 of the event, the final round will be held: the Bronze Medal Game and Championship Game. Both games will be played by playoff rules: 60 minute regulations and 20-minute 5-on-5 OT’s.

There you have it. The whole thing is over in one action-packed weekend. Canada’s stars grab gold, then head back home to celebrate before the jet-lag even has time to kick in. The players are not so likely to get injured, since, barring a wild series of sudden death overtimes, teams in the event will only play 20-200 minutes of hockey. And fans will not be forced to watch some poor athlete from Latvia or Slovenia try to defend Connor McDavid—or catch a last, peripheral glimpse of Brent Burns’ beard flying at them if they finally do succeed in carrying the puck over the blue line.

So, nu, what do you think? Nothing like a good compromise, eh?

North America

The Father, the Son, and the Holy Mackinaw-what-a-comeback-for-the-Liberals!


Let’s talk, very quickly, about Pierre Elliott Trudeau, Justin Trudeau, and the resurrection  the Liberal Party in Canada underwent during the country’s most recent election, 20 months ago.

Before Justin Trudeau became Prime Minister at the end of 2015, the Liberals controlled only 34 of the 308 seats in Parliament, and had become the third party for the first time in their history. They had not won a majority of seats in Quebec in nine consecutive elections–not since Pierre Elliott Trudeau won big in Quebec in 1980. Today, on the other hand, the Liberals have the largest majority in parliament that any party has won since the election of 1984 (the same year that Pierre left office), and they control a majority of Quebec’s to boot.

If you look at the electoral map from Justin Trudeau’s first victory in 2015, and the map of Pierre Elliott Trudeau’s final victory in 1980, the similarities may or may not stand out more than the differences.


canada 1980 election

In both elections there was a clear East-West divide: the Liberals fared far better to the east of the Ontario-Manitoba border than they did to its west, regardless of which Trudeau was on the ticket. Both won flat-out majorities in Ontario, Quebec, New Brunswick, and Newfoundland, and both won a significant majority of seats throughout the country as a whole.

Justin Trudeau, however, fared far better than his father in the Maritime provinces (he swept all 32 ridings, whereas his father lost in Nova Scotia), worse in Quebec (he won 51 percent of Quebec’s seats; Pierre won 99 percent), and better in Ontario (66% vs 55%), Manitoba (50% vs 14%), Saskatchewan (8% vs 0), Alberta (12% vs 0), and British Columbia (40% vs 0). Further north, Justin swept the Territories’ three ridings; his father lost all three in (pre-Nunavut) 1980.

Another important difference between 2015 and 1980 was the price of fossil fuels and the strength of the North American economy. In 1980 the price of oil was over 100$ per barrel when adjusted for inflation; during Justin Trudeau’s victory in 2015 oil was only at 40$ a barrel, having dropped by 60$ in the fifteen months leading up to election day. And while the economy of the United States was in relatively decent health in 2015, in 1980 it was still in the midst of “stagflation“, with negative GDP growth and an unemployment rate around 6-7%.

Canada oil and gas production

Source: RBC, predictions from March 2015

With decent US economic growth decent and oil prices falling substantially, Ontario and British Columbia appear to have grown the most among provincial economies in 2015; Alberta’s and Newfoundland’s may barely have grown at all.

can-us 50 land:water

For more about the graph above, see Ontario: the Borderland Economy






I’ll close here by showing a graph I made which I think is interesting, but which probably (definitely) should be taken with a very large grain of salt. The graph shows a relationship between four variables: the price of crude oil (in West Texas Intermediate prices, adjusted for inflation); the employment rate in the United States (which we are using as a proxy for American economic health in general); the success of Conservative parties* and the NDP in Canadian federal elections; and the success of the Liberals and Bloc Quebecois in elections. The basic idea is that because western Canada benefits from expensive oil whereas eastern Canada depends more on a strong American economy, and because Conservatives and the NDP are generally more associated with western Canada whereas the Liberals and Bloc are associated with the eastern half of Canada, there should, maybebe some links between these variables:

Canada Politics Graph

Conservative parties include the Progressive Conservative, Canadian Alliance, Reform, or, since 2003, the Conservative Party. The Bloc Quebecois, meanwhile, was founded in 1991

This graph covers the same time period, from Pierre Trudeau’s final election in 1980 to Justin Trudeau’s first election in 2015. It shows that in the elections immediately following Pierre’s departure and immediately preceding Justin’s arrival – namely, in the elections of 1984 and 2011 – the Conservatives and/or NDP did extremely well relative to the Liberals and/or Bloc Quebecois. In 2011 Harper won his only majority government and the NDP become the official opposition for the first time ever, while in 1984 Pierre Trudeau resigned prior to the election and Mulroney’s Progressive Conservatives won by the largest margin in Canadian history.

Every year shown on the graph above corresponds with a Canadian federal election, with the exception of 1998. 1998, however, was the year in which oil prices fell to their lowest point in nearly a century, even as the American economy was not in a recession, as it usually is when oil prices fall. With US employment high and oil prices low, the blue line on the graph above is far higher than in any other year. In the subsequent election, in 2000, Jean Chretien would go on to win a large majority for the Liberals, and the BQ a majority of ridings in Quebec. 2000 was the last time that any party won a majority government until 2011, and the last time the Liberals won a majority until 2015.

For more on this subject, check out Trudeau Walks A Tightrope, published on MacroGeo earlier this week.

East Asia

Oil and the Ouroboros

Today, at $45-50 a barrel, the price of crude oil has risen significantly from the $30 lows it reached around the start of 2016. Still, it remains quite far below the $80-110 range in which it resided during most of the past decade, prior to its crash in mid-2014. Gas and coal prices, meanwhile, have in most areas of the world fallen even more than those of oil has. China, because it is the world’s largest net importer of oil and of fossil fuels in general, has often been viewed as a country that is likely to benefit from these cheaper prices.

This view may be incorrect. Not only do China’s energy imports not equal a large share of its GDP, but the growth of China’s energy imports going forward may be slower than many predict. Moreover, there is an enormous discrepancy in the amount of fossil fuels produced by various regions and provinces within China. As such, the crash in energy prices may excacerbate, or at least influence, some of China’s preexisting geo-political divisions.

Energy Imports

China may be the world’s largest energy importer, but it is has also become its second largest energy producer, and as such only relies on energy imports for an estimated 15% of its total energy consumption, in contrast to 94% in Japan, 83% in South Korea, 33% in India, 40% in Thailand, and 43% in the Philippines. In 2014 imports of oil were equal in value to just around 2.4 % of China’s GDP, according to the Wall Street Journal, compared to 3.6% in Japan, 6.9% in Korea, 5.3% in India, 5.4% in Thailand, 4% in the Philippines, and 3.3% in Indonesia.

South Korea and Japan also imported more than two and four times more liquified natural gas, respectively – the prices of which tend to track oil prices more closely than conventional natural gas prices do – than China did. China’s LNG imports barely even surpassed India’s or Taiwan’s. China’s imports of natural gas in general, meanwhile, were less than half as large as Japan’s and only around 20% percent greater than South Korea’s.

China, furthermore, tends to import energy from the most commercially uncompetitive, politically fragile, or American-hated oil-exporting states, such as Iran, Russia, Iraq, Angola, and other African states like Congo and South Sudan. In contrast, Japan and South Korea get their crude from places that will, perhaps, be better at weathering today’s low prices, namely from Kuwait, Qatar, the UAE, and Saudi Arabia. (Granted, China gets an enormous amount of oil from Saudi Arabia too; however, Saudi oil does not count for nearly as large as share of China’s oil imports as it does for Japanese or South Korean oil imports). Similarly, China gets much of its natural gas from Turkmenistan, Uzbekistan, and Myanmar, whereas Japan imports gas from Australia and Qatar and South Korea imports gas from Qatar and Indonesia. China’s top source for imports of high-grade anthracite coal, and its third largest source for coal in general, is North Korea.

China has, in addition, invested capital all over the world in areas hurt by falling energy and other commodity prices, both in developed countries like Australia and developing economic regions like Africa. With energy prices cheap, it may get low returns on these expenditures.

Energy, History, and Politics

Another mistake the financial media makes is looking at China as if it were a country, rather than what it really is: both a country and a continent. Continents contain deeply-rooted divisions along regional, linguistic, and ethnic lines. China is no exception. China’s main division, roughly speaking, is between  areas south of the Yangtze River, which tend to be mountainous, sub-tropical, and dependent upon importing fossil fuels, and areas north of the Yangtze, which tend to be flat, more temperate, and rich in fossil fuels.

China’s Physical Topography                     China’s Population Density

Northern China, stretching over 1000 km from Beijing southward to Shanghai on the Yangtze, is the country’s political heartland. It is densely populated and home to most of China’s natively Mandarin-speaking, ethnically Han citizens. When compared to southern China, the north has historically been somewhat insulated from foreigners like the Europeans, Americans, and even Japanese. Beijing’s nearest port is roughly 5000 km away from Singapore and the Strait of Malacca; Hong Kong, in contrast, is only around 2500 km from Singapore and Malacca. Beijing is rougly 2600 km from Tokyo by ship, whereas Shanghai is 1900 km from Tokyo and Taipei (in Taiwan) is 2100 km from Tokyo.

Japan’s Ryukyu island chain and the Kuroshio ocean currents historically allowed for direct transport from Japan to Taiwan and the rest of China’s southeastern coast; the Japanese controlled Taiwan for more than three and a half decades before they first ventured into other areas of China in a serious way during the 1930s. Even today, Japan accounts for a larger share of goods exports to Taiwan than do either China or the US.

Southern China has often depended on foreign trade, since much of its population lives in areas that are sandwiched narrowly between Pacific harbours on one side and coastal subtropical mountain ranges on the other. In northern and central China, in contrast, most people live in interior areas rather than directly alongside the Pacific coast.

People in the northern interior often did not engage in as much foreign trade as those on the coast, as, in the past, transportation in the interior was often limited by the fact that northern China’s chief river, the Huang-he, is generally unnavigable and prone to flooding northern China’s flat river plains, destroying or damaging roads and bridges in the process. In southern or central China, by comparison, even people living far inland could engage with the coast by way of the commercially navigable Yangtze and Pearl Rivers, which meet the Pacific where cities like Shanghai, Guangzhou, and Hong Kong are located.

Northern China, however, was most directly exposed to the land-based Mongol and Manchu invaders who ruled over the Chinese for most of the past half-millenium or so, prior to the overthrow of the Manchu-led Qing Emperor in 1912. Today, of course, the north continues to retain China’s political capital, Beijing, and a disproportionally large majority of Chinese leaders were born in northern China — including Beijing-born Xi Jinping and Shandong-born Wang Qishan, a former mayor of Beijing). This is in spite of the fact that most of China’s leading political revolutionaries in the twentieth century, including Mao Zedong, Deng Xiaoping, Sun Yat Sen, Chang Kai-Shek, Zhu De, Ye Jianying, Hong Xiuquan, and the writer Lu Xun, hailed from southern or south-central China.

At present, out of China’s seven Standing Comittee top leaders, only seventh-ranked Zhang Gaoli was born in southern China; whereas five of the seven were born in northern China and one, Premier Li Keqiang, was born in central China. Zhang Gaoli may in fact be the first person born outside of northern or central China in thirty years to have made it to the Standing Committee. He is also the only person currently in the 25-member Politburo born outside of northern or central China. Meanwhile, among the 11-man Central Military Commission, seven were born in northern China, while two were born in north-central China and two in south-central China. By my count, out of the 205 active members of the Party Central Committee, fewer than 15 seem to have been born south of central China.

Indeed, the southern half of China, stretching from islands in Taiwan, Hainan, Hong Kong, Xiamen, and Macau in the east to the plateaus of Yunnan, Sichuan, and Tibet in the west, seems to be politically peripheral. It is home to a majority of China’s 120 million or so non-Han citizens (most of whom are not Tibetan or Uyghur, though those two groups recieve almost all of the West’s attention), as well as home to China’s 200-400 million speakers of languages other than Mandarin, and to China’s tens of millions of speakers of dialects of Mandarin that are relatively dissimilar to the Beijing-based standardized version of Mandarin, and to most of China’s 50-100 million recent adopters of Christianity, and, finally, to most of China’s millions of family members of the enormous worldwide Chinese diaspora.

Southern China is closer to Southeast Asia, a region with an enormous, economically active Chinese population (many of whom speak southern Chinese languages like Cantonese), than is northern China. Southern China’s Fujian province, in particular, is both linguistically and economically close to Taiwan, and southern China’s Guangdong province—the largest province in China—to Hong Kong. A large share of China’s GDP comes from the coastal areas of China from around Shanghai south to Guangdong, particularly if you include Taiwan as part of the country. Guangdong alone accounts for an estimated 10% of mainland China’s GDP and over 25% of its exports. This creates, arguably, an unbalanced dynamic: China’s political periphery is also its main economic engine.

Fossil Fuels

As it happens, northern China produces almost all of China’s fossil fuels. Most Chinese energy is, in fact, produced in and around the province of Shanxi, 300 km or so west of Beijing, where a tremendous share of China’s (and, indeed, the world’s) coal is mined. Shanxi has also seen the biggest political shakeup of any province from Xi Jinping’s anti-corruption campaign thus far. When combined with the northern “Autonomous Regions” of Inner Mongolia and Xinjiang, as well as China’s north-easternmost province Heilongjiang, Shanxi produces a gigantic of China’s fossil fuels in general. Other northern areas, such as Shandong, Liaoning, and Tianjin, are also significant oil producers.

Southern and central China, in contrast, account for most of China’s imports of fossil fuels—especially if you include the economy of Taiwan as being part of southern China. Taiwan, in fact, may be more dependent on oil imports than any other significant economy in the world, according to data from the Wall Street Journal. Falling energy prices may weaken the historical political heartland of China relative to its periphery, in that case. Whether or not this will generate political instability going forward remains to be seen.

Looking Ahead

If (a big if) energy prices remain low for a sustained period, then the question of China’s future dependence on imported energy also becomes relevant, as does the question of the future dependence on imported energy of China’s most important neighbours. In that case, how dependent on energy imports will countries like China, Japan, and India be in a decade or two from now?

While it is impossible to know what the future will be like, it is not difficult to imagine that China will remain less dependent on energy imports than India and/or Japan during the years or decades ahead, as a result of India’s still-emerging economy and Japan’s still-roboticizing economy.

China is not likely to be a major adopter of energy-intensive robots, in per capita terms, because China has a far larger cheap labour force than any country in the world apart from India. Japan, in contrast, will likely help lead the robot revolution, as its labour force is expensive and aging rapidly. This could make Japan even more dependent on importing energy, as machines that are both highly mobile and capable of sophisticated computation require an enormous amount of energy to run — and indeed, one of their main advantages over human labour is that they can and frequently will be tasked to run 24-7, without even taking any time off for holidays or sick days.

China is not certain to increase its energy imports nearly as much as less-developed economies like India, meanwhile, as the Chinese inudstrial sector is facing challenges as a result of its past generation of energy-intensive growth. China faces rising labour costs in many of its cities; a pollution problem; a US that is concerned with Chinese industrial power; and countries throughout the world afraid of China’s world-leading carbon emissions.

In addition, China is located much further away from the Persian Gulf and Caspian Sea oil and gas fields than the Indians and other South Asians are, and so might have difficulty accessing them in a pinch.

China may also, for the first time, have to face industrial competition from resource-rich economies such as Australia, Norway, Canada, Texas, or even the Gulf Arab states,which may be able to use energy-intensive robots of various kinds to build up their manufacturing sectors in spite of their small, expensive domestic labour forces.

All this could make China’s industrial growth rate slip, which in turn might reduce China’s resource imports and thus prevent China from becoming the leading beneficiary of low energy and commodity prices.

Such a shift will be especially likely if the United States or European economies decide to enact tariffs on goods coming from places that generate power by using coal in inefficient ways, a prospect that has become increasingly likely as a result of America’s triple-alliance between environmentalists opposed to coal consumption, shale gas producers competing with coal miners, and energy companies trying to pioneer more expensive but cleaner ways of consuming coal and other fossil fuels. China may then have to focus on growing its service sectors instead of its energy-intensive industrial sectors.

China, Japan, and Siberia 

Japan, lastly, might benefit from Russia’s energy-related woes more than China will. This is not only because the Chinese have to a certain extent often looked to Russia as an ally against the West, but also because the areas of Russia that China is close to are mostly irrelevant to China: they are landlocked, Siberian, and for the most part located far from China’s population centres.

Pacific Russia, in contrast, which is located next to the Sea of Japan on the East Asian side of Russia’s Pacific mountain ranges, has a far more liveable climate than does most of the continental Siberian interior. It is home to several small or medium-sized port cities, such as Vladivostok and Petrapavlovsk-Kamchatsky, which are very, very far away from Moscow. This region accounts for much of the oil and nearly all of the Russian gas exports to Asia—especially energy-rich Sakhalin Island, which is just 40 km away from Japan and was half-owned and inhabited by the Japanese prior to the Second World War.

Russia may, in fact, be somewhat better prepared to fight another border war with China like it did in 1969—which might not be too different than the many other wars Russia has fought within or near its borders both prior to or since then—than it would be to face off against Japan again within the far-eastern, mountainous, archipelagic and peninsular Pacific Russian region, as it did in 1905 and then again during the 1930s and WW2. Of course this does not mean Japan will attack Russia — though it has certainly toyed with the idea of eventually making some bolder moves in the Southern Kuril Islands, which both countries claim as their own. Even the remote, unstated possibility of conflict, however, may help grant Japan leverage in any negotiations with Russia regarding commercial or political issues.


All of this is not to be bearish on China’s future. Energy-intensive industrial growth, after all, woud not necessarily mean an improved quality of life for Chinese citizens. Ideally Chinese standards of living will rise at a considerably faster pace than its energy usage. It does seem, though, that China’s economy may not turn out to be a major beneficiary of the fall in energy prices. The PRC’s neighbours on the other hand, such as Japan and Taiwan, which are less rich in fossil fuels or in labour, may benefit greatly. So too might the poorer countries that depend on energy imports, like India and the Philippines. Just as important, however, yet often overlooked, are China’s domestic geopolitics. Internal Chinese divisions—including along north-south and east-west lines—have been, and might remain, of paramount importance. Energy prices could impact them too.

Europe, North America



Politics obviously effects all our lives, sometimes for good and sometimes not. All of my grandparents were born in Poland and experienced hard times during WW2. One of my grandfathers wrote a memoir of his experience as a Jew during the war, which has just been republished for the first time in many years. You can read a free preview of the first chapters, or buy the book, on the link above.

My other grandfather, who was born on the exact day that WW1 ended in 1918, and who spent most of the war in northern Russia rather than in Nazi-occupied Poland, passed away a month ago. He suffered no less for spending the war in the Soviet Union rather than in Poland. Of the more than 100 members of his extended family, only he and two of his second cousins survived. Later, in Canada, he and his wife went on to start a new family that today has nearly 40 people in it. His obituary was published this morning:



North America

Toronto Real Estate Prices – 5 Factors To Consider

I do not know what will happen to Toronto housing prices. I do think, though, that if you look at five of the big things happening in Canada’s economy at large — namely, automation, digitalization, Baby Boomers nearing their 60s or 70s, rapidly rising home prices in some major cities, and the fall in fossil fuel and other commodity prices — all suggest that Toronto land values are likely to rise more slowly than other assets in the coming years.

1. Automation

— Many people are drawn to Toronto because of its strong employment market, so if automation causes employment rates or real wages to rise relatively slowly, some people may decide to move to other places where housing prices are more affordable

— If automation causes transportation to become more convenient because of self-driving vehicles, people may also find it easier than ever before to live further away from downtown Toronto

—The process of constructing homes or buildings might itself increasingly be carried out by machines, which might reduce the time and money involved in construction

— If automation makes it easier to live in lands that have rugged geographies — for example, if self-driving vehicles or autonomous snowplows make it easier to live in Lake Huron Snowbelt cities like Owen Sound, which gets three times more snow per year than Toronto on average — it could cause home values of those lands to rise more quickly than those of established cities like Toronto

        Great Lake Snowbelts                              Great Lake Cities
     great lake pop
average snow in canada


— The Internet might allow people to “e-commute” to work in some circumstances, thus making it easier to live outside of major employment centres like Toronto

— The Internet might put downward pressure on real estate in general by, in effect, using cyberspace as a substitute for real space. For example, if more people shop online, then there may be less of a demand for retail real estate, as more goods are taken direct from warehouses to consumers

 — The Internet might lead some jobs to be outsourced to other countries with cheaper labour, which in turn could cause wages or employment rates in Canada to rise relatively slowly, causing employment to become less of a determinant in people’s housing preferences, and home affordability to become more of a determinant instead

— The Internet could make it easier than ever before for new immigrants to Canada to live outside of major immigrant clusters like Toronto

— The Internet might make it easier to live in geographically rugged areas like the Lake Huron Snowbelt, for example by allowing people to e-commute or buy their groceries online in the wake of a snowstorm

3. Demographics

—Canada’s demographic profile is quite different today than it was a decade or two ago. Not only is its biggest cohort, the Baby Boomers, made up of individuals who are now nearing or have already reached their 60s, but also there are now no longer very many Canadians younger than the ages of 15-20

—Baby Boomers may now be somewhat more likely to sell, and less likely to carry out a major renovation, of their homes than they were a decade ago

—Fewer children means that parents don’t need as large houses. It also means there may be fewer jobs available in day-care, child-care, or education. And it means that, in the decade or so ahead, there may be fewer first-time home buyers or home-renters entering the market

—While there are fewer kids and fewer people in their 40s than there were a decade ago, there are still plenty of people between the ages of 20-70; in other words, there is still a lot of competition for jobs and wages. Areas of Canada with fewer people in the labour force, and with more elderly people who need doctors or nurses, could do better at attracting immigrants or new residents

—Many bilingual, bicultural second- or third-generation immigrants have recently or will soon come of age. These populations can more easily move to areas of outside immigrant clusters like Toronto than could their first-generation parents or grandparents. In doing so, they  create new, smaller clusters which can in turn attract new first-generation immigrants. This has already occured to some extent with white immigrant groups that have been in Canada for several generations. When, for example, Soviet Jews came to Canada a few decades ago, they largely skipped the typical immigrant stage of moving to downtown Toronto (as European Jews had done after WW2) and instead linked up with second-generation and third-generation Jews who were living uptown or in Vaughn.

—A caveat here would be if Canada was to allow an immense increase in immigration, well above the 0.59 percent net annual migration (which is already high by global standards) it allows today. If that were to happen, then Canadian real estate prices could be expected to continue rising rapidly

4. Gravity 

— Given the extent to which cities like Vancouver and Toronto have seen their real estate markets increase, many people are being priced out, or are on the verge of being priced out, of those markets. This may make it less likely that these markets will continue increasing as rapidly as others going forward

— A graph from this week’s Economist magazine has Canada’s housing markets among the most overpriced when viewed in comparison to rent costs or income levels:

5. Commodities

— After a decade or so of very high energy and other commodity prices, in 2014 prices crashed, and they remain low today. Inexpensive commodity prices should put downward pressure on Canadian home prices in two ways

— First, by weakening the Canadian economy in general, as the Canadian economy is an enormous commodity exporter. Toronto, as the commercial capital of the country, may not be immune to this

— Second, by making suburban sprawl cheaper. Nearly every aspect of suburban living is much more energy-intensive and commodity-intensive than is urban living

— There is, not surprisingly, a historical correlation between commodity prices and Canadian real estate prices. When commodity prices reached their modern-day lows during the mid-1990’s, Canadian home prices declined by roughly 5% in spite of strong growth occurring in the general economy at the time. When, on the other hand, commodity prices reached their modern-day highs between 1979 – 1983 and between 2007 – 2014, Canadian home prices went up by roughly 10% and 35%, respectively, in spite of the fact that the country’s two most severe postwar recessions took place during the years 1982 and 2008-2009

So, What’s A Guy/Gal To Do? 

Well, you could rent. Or, you could buy in a different city or town. Or, if you are wealthy enough to afford it, you could rent an apartment in Toronto and buy a home somewhere else.

On the Other Hand…

Of course, that I could be entirely wrong about all this. The counter-theory to the one I have put forth is one that you might call “the Manhattan project”: namely, that Canada is bound to develop a city that is at least somewhat comparable to New York City at some point, and that city is likeliest to be Toronto. Today, the City of Toronto’s population density is 4,150 per square km; Manhattan’s is approximately 27,000, Brooklyn’s 14,200. The Greater Toronto Area’s total population, at 6.4 million, is only around a quarter the size of the New York Metropolitan Area’s. Viewed in that comparative manner — and Torontonians do have a reputation for seeing their city as a New York-in-waiting — Toronto has plenty of room to continue growing. (Though, on yet another hand, Canada’s population is only around a tenth of the US’s…). Indeed, as was mentioned above, a big wild card for the future of Canadian real estate is the future of Canadian immigration. There are 7.5 billion people in the world, but only 36 million in Canada. If we are willing to accept immigrants with open arms — far beyond the numbers we presently allow — the population of Canada could soar, and its home values too.