# Canada's Place in the Global Economy



## GAP (3 Oct 2008)

I'm sure there will be many more impacts on Canadian businesses, but here's the first one I have seen.....

Banks seize Deripaska's 20 million Magna shares
GREG KEENAN and JACQUIE MCNISH AND JOHN PARTRIDGE From Saturday's Globe and Mail October 3, 2008 at 8:55 PM EDT
Article Link

Russian billionaire Oleg Deripaska has been forced to hand over his stake in Magna International Inc. to his banks, after taking a margin call on his $1.54-billion (U.S.) investment in the Canadian auto parts maker.

In a stunning turn of events, Paris-based bank BNP Paribas SA seized the Russian oligarch's 20 million shares in Magna, unwinding a deal that closed 13 months ago and making one of the world's richest men the latest casualty of the global credit crisis.

The move hands full control of the auto parts giant back to its founder, Frank Stronach.

According to people familiar with the transaction, BNP Paribas led a syndicate that financed an estimated $1-billion. 

That amounts to about two-thirds of the total purchase price.

It is understood that the lending agreement gave the banks the power to reclaim the Magna shares in the event they fell more than 40 per cent below the $76.83 a share Mr. Deripaska paid for the stock. That threshold appears to have been triggered on Thursday, when the shares slumped to a closing price of $45.59 on the New York Stock Exchange.

The aggressive move to force one of Russia's richest men to hand over assets casts a stark spotlight on the harsh new lending environment for businesses seeking to raise capital or hang on to acquisitions that were snapped up in headier times. 

It also highlights how quickly billionaires, even in growing economies such as Russia, are seeing their fortunes erode as the crisis cripples financial markets around the globe.

Sources said banks lined up to lend money to Mr. Deripaska in the spring of 2007, when he first announced he had struck the agreement with Mr. Stronach. Eighteen months later, a deal that was code-named Project Pearl is in tatters because of a crisis that could spiral into an “economic Pearl Harbour,” according to a warning issued this week by Omaha billionaire Warren Buffett.
More on link


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## retiredgrunt45 (4 Oct 2008)

unfortunately we are about to see much more of this in the next little while and not only to the big players, it will affect all of us. My mortgage comes due for renewal in four months and I'm already worried I won't be able to get the credit, let alone get a decent interest rate. I was watching the news last night and many small businesses are finding it hard to get any credit at all. The days of easy credit is dead and buried and Canada is not immune.


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## Edward Campbell (4 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is more on this topic:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081004.weconomy04/BNStory/Business/home


> The gloom spreads north
> 
> By KONRAD YAKABUSKI , VIRGINIA GALT and GREG KEENAN AND NORVAL SCOTT
> 
> ...




None of these symptoms are new. Back in the 1970s:

•	Oil prices spiked;

•	Canadians walked away from their mortgages – in the face of 20% rates;

•	Unemployment rates rose to unprecedented highs; and

•	Credit tightened. 

These factors – termed _stagflation_, a stagnant economy and high inflation – led to the severe recession of the early ‘80s which was, in turn, followed by a decade of strong economic growth, anther shorter, less severe recession in the early ‘90s and then another long burst of economic growth which is ending now.


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## GAP (4 Oct 2008)

To add to ER's post, here's another focus....

Cash makes kings
GORDON PITTS AND BOYD ERMAN  Globe and Mail October 3, 2008 at 8:56 PM EDT
Article Link

The global credit crisis of the past two weeks has blown up the established order of Canadian business, and created a new class system based on cash. In this emerging hierarchy, Sean Roosen must qualify as one of the lesser nobility. 

The president of Osisko Mining Corp. is sitting on $140-million in cash – enough funds to support the next round of work on his $760-million gold mine project in Malartic, Que.

Osisko is partly the beneficiary of pure dumb luck, but Mr. Roosen is boasting of a bit of foresight too. He saw the credit turbulence coming and he locked up financing late last year and early this year. 

“We anticipated there might be some rough water coming up,” says Mr. Roosen, the burly executive whose company is moving part of a community in northwestern Quebec to make room for its project. 



> Higher borrowing costs
> 
> Global forces will certainly buffet Canada, which is insulated but not immune. The benchmark rate for most corporate loans, the London interbank offered rate, better known as Libor, has jumped to 4.3 per cent for three-month loans in U.S. dollars from 2.8 per cent. On top of that, banks are charging wider premiums to protect their own bottom lines. That's going to mean dramatically higher borrowing costs, even in Canada.
> 
> ...


More on link


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## Edward Campbell (9 Oct 2008)

There is some ‘good news’ in this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Reuters_ web site:

http://www.reuters.com/article/ousiv/idUSTRE4981X220081009


> Canada rated world's soundest bank system: survey
> 
> Thu Oct 9, 2008 4:40am EDT
> 
> ...




And there’s more, also reproduced under the Fair Dealing provisions (§29) of the Copyright Act, his time from the _Financial Post_:

http://www.financialpost.com/story.html?id=868581


> Close, but no recession for Canada, forecasters agree
> 
> Eric Beauchesne, Canwest News Service
> 
> ...




Both of those stories may go some way to explaining this one, also reproduced under the Fair Dealing provisions (§29) of the Copyright Act from yesterday’s _National Post_:

http://www.financialpost.com/news/story.html?id=866377


> Fed trolls Canada to rescue U.S. banks
> 
> Karen Mazurkewich and Eoin Callan, Financial Post
> 
> ...




Canadian banks have fought long, hard and ultimately unsuccessful campaigns to grow – either by merging or by expanding into foreign markets. Canadians hate banks and bankers – they don’t know why, they just do – so politicians have steadfastly refused to allow mergers. The US is was highly protectionist in its attitude towards foreign entry into its banking system – although both TD and RBC managed to enter. Now a growth opportunity is there, *maybe without a requirement to buy up ‘distressed assets’ (‘toxic mortgages or just plain bad ebts).




*


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## Greymatters (9 Oct 2008)

E.R. Campbell said:
			
		

> There is some ‘good news’ in this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Reuters_ web site:`



Good articles, thanks for posting.

Any good ones on how the lending rates will be affected over the next year, or is everyone avoiding that topic?


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## Edward Campbell (9 Oct 2008)

My guess is that for the next few months central bankers’ main concern will be to inject _liquidity_ (money) into the banking systems. That means lower and lower rates but, as Canadian banks proved yesterday, central bank rate cuts may not always reach ‘Main Street’ in full.

So long as inflation remains within or not too far above the target ‘ranges’ (broadly 1.5 to 3.5% for most countries) there should be no need to raise rates, but constantly lowering rates might fuel inflation, so ...


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## GAP (9 Oct 2008)

Europe to Canada: Get your act together
DOUG SAUNDERS From Saturday's Globe and Mail October 4, 2008 at 8:19 AM EDT
Article Link

BRUSSELS — The two presidents of the European Union will arrive in Montreal on the Friday after Canada's Oct. 14 federal election for a meeting that Prime Minister Stephen Harper has studiously avoided mentioning.

Nicolas Sarkozy will be there not as the President of France but as the acting president of the European Council, the top political office of the European Union. He will be joined by Jose Manuel Barroso, the president of the European Commission, the EU's top executive office. Thus, the two men who can be described as "the president of Europe" will be joined by whoever happens to be the prime minister of Canada.

That night, the three of them will announce the economic and political engagement of the two federations. They still haven't agreed on the name of the thing, though they are leaning toward Economic Partnership Agreement.

It will just be the preliminaries, but many people hope it will result, after a period of talks, in the consummation of a complex and potent marriage between Europe and Canada.

Two weeks ago, when I revealed that there had been months of secret meetings, led by Quebec officials and involving serious engagement by Mr. Harper and Mr. Sarkozy, to arrange what some European officials call "deep integration" talks, the idea proved to be enormously popular with Canadians.

Prominent European leaders, such as Trade Commissioner Peter Mandelson (who stepped down yesterday to join Gordon Brown's British government) and Mr. Barroso, tell me, through their senior aides, that they are willing to give the idea a shot, albeit while also courting other developed nations, such as Japan. Mr. Sarkozy, for his part, wants a Canadian deal to be one of the major accomplishments of his six-month turn in the European presidency.

Yet there is a very good chance it will not happen. If the talks collapse, as they did after a 2005 attempt at a much more modest investment deal, it won't be the result of Europe's failings. There is something very dysfunctional about Canada, many Europeans believe, that makes it hard to fit into the wider world. Any failure will be the direct result of the Canada that Stephen Harper has created.

"The problem with Canada," senior EU official involved in the talks told me, echoing a view that is heard in many of the EU member governments today, "is that it's not really one place. You think you're talking to Canada, and you make a deal, and then it turns out that someone else, in one of the provinces, has gone the other way. There's no unity."

The problem with Europe, Henry Kissinger once famously said in the seventies, is that it doesn't have a phone number. That's not true any more. Now, Brussels happily answers the phone for guys like Henry, but when Mr. Barroso tries to get on the horn with Canada, his secretary doesn't know whether to dial 613 or 450 or 403 or 604. Each line gives a different answer.

While the premiers of Quebec and Ontario both gave this deal their outspoken assent this week, the Europeans can't help noticing a major barrier to a deal that would harmonize European and Canadian standards and allow companies to do business with governments as if they were at home: Canada's provinces have never been able to get that kind of co-operation between each other. Note the tragic irony: Canada, a sovereign nation with 10 provinces and three territories, is considered fractious and lacking in unity by an organization that contains 27 independent nations and employs 3,000 full-time translators, including a woman who spends her days rendering Estonian into Maltese. But in many ways it's true: Bulgaria and Ireland play together better than Alberta and Newfoundland.

More then half the laws in any European country are EU laws; there's a near-total harmonization of standards, measures, government activities; there's complete freedom of movement, allowing companies to do business in any other member country as if it were their own. If the mayor of Lisbon wants to buy some new city buses and a company in Slovakia has the right stuff, then he has to treat it as if it was a Portuguese company. If a Polish plumber wants to set up shop in Bologna, the Italians have to give him a licence and recognize his qualifications.
More on link


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## rw4th (9 Oct 2008)

> Yet there is a very good chance it will not happen. If the talks collapse, as they did after a 2005 attempt at a much more modest investment deal, it won't be the result of Europe's failings. There is something very dysfunctional about Canada, many Europeans believe, that makes it hard to fit into the wider world. Any failure will be the direct result of the Canada that Stephen Harper has created.



I believe this is the crux of that particular article and a blatant attempt to influence the outcome of the coming election. Some of what's in the article does ring true but the blame does not lie on Harper's shoulders.


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## chanman (10 Oct 2008)

E.R. Campbell said:
			
		

> There is some ‘good news’ in this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Reuters_ web site:
> 
> http://www.reuters.com/article/ousiv/idUSTRE4981X220081009
> 
> ...


*

That looks about right.  The need of some institutions for capital right now means that they may be compelled to sell off their most valuable parts, either as a condition of a government bailout or in an attempt to keep themselves afloat.  The inability for these firms to troll around for the best offer means that they can't afford to be picky about who they sell to and that means that there will be bargains to be had.

Cash-flush Japanese banks have been venturing out to buy again, and it's probably a given that sovereign wealth funds will be looking to add to their assets on the cheap.

Do you think there may be a chance that such buyers may be percieved by the public as profiteering from the misfortunes of others?*


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## GAP (10 Oct 2008)

10 things the credit crisis taught me about investing
JOHN HEINZL Globe and Mail Update October 9, 2008 at 6:00 AM EDT
Article Link

Based on the dictionary definition of wealth, I'm considerably poorer today than I was just a few weeks ago. Many of my dreams have been, if not shattered, then at least put off for a decade or two.

I will not be retiring early, for example, or splurging on the 12-inch sandwich at Subway when the six-inch will suffice.

But getting a one-way ticket to the poor house courtesy of Mr. Market is not as terrible as one might expect, for what I have lost in financial assets and hope for my children's future, I have gained back many times over in wisdom.

Indeed, watching my life savings get sucked into the credit vortex this week, I have never felt so wise. In the interest of giving back some of the priceless knowledge I have gleaned, allow me to share what I consider to be the most valuable lessons of the credit crisis thus far.

1. All stocks are risky, even the safe ones. You can buy the most conservative stocks, focus on the most recession-proof industries and diversify until the cows come home, but guess what? You'll still get crushed when the market decides to roll over. Why? Because the stock market hates you.

2. Buy and hold, buy and schmold. If you were a good little investor and diversified your portfolio by putting $10,000 (Canadian) into the S&P 500 index 10 years ago, your money would have “grown” to $7,800 today. But don't feel too badly. Including dividends, you'd have a whole $9,200.

3. Nobody is immune. There was a time when commodity super-bull Eric Sprott was considered a genius. That was last spring, when his fund company went public at $10 a share. Yesterday, the stock closed at $3.05. You do the math.

4. Money isn't the root of all evil, debt is. Whether you're talking about 1929, 1987 or 2008, most financial calamities are variations on the same theme: too much debt. Debt is intoxicating on the way up, and horrifying on the way down.

5. A lot of brilliant people are actually quite stupid. The math and physics geeks who brought us this horror show are great at making short-term profits for themselves. What they're not so great at is anticipating the destruction their arcane financial contraptions inflict on the world, largely because their models never anticipate any of the “rare” events that always seem to happen.

6. Just because a stock is cheap doesn't mean it won't get cheaper. Example: Less than two weeks ago, mutual fund company IGM Financial looked like a steal at $40, or 12 times estimated 2008 earnings. But the stock has since tumbled 12 per cent, pushing the P/E down to 10.7. Now that's a steal!

7. Grandpa was right after all. My grandfather, a shoemaker who lived through the Great Depression, was forever telling us to “save every nickel.” We always thought that was a bit extreme. But now that the world may be hurtling toward a replay of the dirty 30s, it's rather sound advice.

8. We've had it too good for too long. Decades of outsized stock market returns, fuelled by the greatest debt bubble in history, have given investors unrealistic hopes. Instead of counting on double-digit gains, we need to lower our expectations. Breaking even, for example, would be nice.

9. Cash is king. When was the last time you were holding a $10 bill and it suddenly turned into a $8 bill, or a $4 bill? At times like these, I'll take the silent march of inflation over a 30-per-cent thrashing, thanks.

10. Some things matter more than money. After the horror of 9/11, people came together like never before. It is my hope that, united in our anguish over the stock market's brutal collapse, we can all discover deeper meaning in our lives. So give your kids an extra hug today and take a moment to feel the sun on your face, because it's not like you can afford a trip down south this winter.
More on link


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## Edward Campbell (10 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and mail_ is more news about the crisis:

http://www.theglobeandmail.com/servlet/story/RTGAM.20081009.wbankpolitics10/BNStory/Business


> Ottawa admits it must act on the economy
> 
> BRIAN LAGHI , HEATHER SCOFFIELD and STEVE CHASE AND TARA PERKINS
> 
> ...




This is a prudent measure. It is, above all, important to remember that Canadian Banks are in pretty fair shape -  they do not need to be nationalized or “bailed out” but they do need some temporary, _interim_ help (in the form of _*repayable* loans_) because their costs of borrowing, that LIBOR thing again, are going up and up. Despite the best efforts of central banks, like the Bank of Canada and the US Federal Reserve, banks mostly borrow from one another and the LIBOR is high for dollar transactions, higher than central banks’ prime rates, (in fact it’s high for all transactions) so banks cannot pass the full of Bank of Canada rate cuts on to consumers because they have to pay a higher rate on most of the cash they use (loan or pay out) day by day.


--------------------

*Mods*: I’m pretty sure this ‘page’ (International Situation & World News) is not the best place for his thread – except that it keeps this thread adjacent to the _US Economy_ thread.

*Maybe* we could use a whole new ‘page’ in one of the _domestic_ areas – _Canadian Politics_ or even _Military Current Affairs & News_ for _”The Economics of Defence”_.

Just a thought ... and, at my age, I don’t have all that many in one day.


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## Edward Campbell (10 Oct 2008)

Here, reproduced under the fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, is some ‘meat’ on the previous announcement’s bones:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081010.wflaherty1010/BNStory/Business/home


> Ottawa buying $25-billion in mortgage pools
> 
> SHAWN MCCARTHY
> 
> ...



This is a mix of good politics and _damage control_. The latter aimed at stopping the panic being spread by the frightened, ignorant ‘investors’ who _drive_ the markets, and the Liberal Party of Canada campaign office.


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## YZT580 (10 Oct 2008)

Doug Saunders has obviously NOT spend much time in Europe if he believes that the multiple government levels are any more fractious than those in Europe.  In Brussels, the so-called capital of the EU, the flemish and the french won't even talk to one another and there is no such thing as education in two languages in the public school system.  Ireland turned down the last attempt at a constitution and ever since has been under pressure to deny the democratic princple, hold their collective noses and vote yes regardless of the public's opinion.  France only votes yes when their palms have been greased and Germany demands their cut as well. 

Besides, it is our banks, financial institutions, and investment framework that is holding firm right now and not the EU.  After the past weeks events, I do hope that Doug prints a retraction.


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## Edward Campbell (10 Oct 2008)

This news, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is neither good nor bad:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081010.wloonie1010/BNStory/Business/home


> Loonie continues its decline
> 
> JOHN PARTRIDGE
> 
> ...




There are just about as many views on the dollar’s *proper* value as there are Canadians. It is a _commodity_ – rather like oil – its price reflects _demand_. When, for whatever reason, people want Canadian dollars the price (exchange rate) goes up; when people want some other currency or just don’t want Canadian dollars the price (exchange rate) goes down. The _law of supply and demand_ is immutable and applies, alays and everywhere, to everything.

In part, the dollar’s value reflects the views of others on the state of our economy. Despite being one of the world’s premier industrialized nations we still have a resource based economy and when resource _demand_ falls then our economy _appears_ (to currency traders) to be falling, too, so the dollar falls. As I say so often, ‘investors’ and, especially, ‘traders’ are not famous for being broadly and well informed or for being rational.


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## Edward Campbell (10 Oct 2008)

YZT580 said:
			
		

> Doug Saunders has obviously NOT spend much time in Europe if he believes that the multiple government levels are any more fractious than those in Europe.  In Brussels, the so-called capital of the EU, the flemish and the french won't even talk to one another and there is no such thing as education in two languages in the public school system.  Ireland turned down the last attempt at a constitution and ever since has been under pressure to deny the democratic princple, hold their collective noses and vote yes regardless of the public's opinion.  France only votes yes when their palms have been greased and Germany demands their cut as well.
> 
> Besides, it is our banks, financial institutions, and investment framework that is holding firm right now and not the EU.  After the past weeks events, I do hope that Doug prints a retraction.




Doug Saunders is just being a typical journalist: a stenographer.

He is simply repeating a press release or, more likely, a _’private’_ briefing from the EU negotiating team. His report is EU propaganda – aimed at ‘driving’ their agenda (position) through the media.

Everyone does it; we do it, too. In fact, back in the 1950s Louis St Laurent successfully _’bluffed’_ Dwight Eisenhower by having US newspapers and US diplomats repeat the Canadian ‘line’ (which was false) that we could afford to and would build the St Laurence Seaway all on our own. Eisenhower wanted a bi-national deal, but a ‘better’ one than he got, and he ‘caved’ on almost all of St Laurent’s demands – based on a disinformation campaign.

The secret to St Laurent’s success as a _’bluffer’_ lay in the fact that he was very trusted – by US politicians and by journalists. Everyone knew that all politicians lie, but St Laurent so rarely did (himself, he let others (e.g. Paul Martin Sr) do the lying for him) that people instinctively suspended their own good sense and printed what he said, without fact checking. Ditto Saunders and the EU bureaucrats he trusts – mainly because they are not Americans. Our national mythology includes Sam Slick and we do not trust the sly _Yankee_ trader but, for unfathomable reasons, we are willing to trust those ‘nice Europeans’ who are so much like us.


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## a_majoor (10 Oct 2008)

A rather alarming post, if this set of calculations are close to correct, we are in for a tough time all around. I would suggest following the advice near the end of the piece; get your personal house in order, reduce debts and live within your means. The next step is to become politically active and work on getting governments at all levels to do the same (Overtaxation AKA "running a surplus" is not an option, unless the excess is applied to the debt. Even then, a far more powerful economic lever is to reduce government spending and taxation, putting resources back in the productive economy).

http://corner.nationalreview.com/post/?q=MzVmYzJiODc3M2E0OGM2YjRjYTU2ODQwZDk4OGY5NzY



> Friday, October 03, 2008
> 
> *Handicapping the Impact of the Bailout*   [Jim Manzi]
> 
> ...


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## DBA (10 Oct 2008)

For complex systems any given statistic gives an indication of underlying conditions not a direct reading of them. There is also no guarantee that the stats your looking at will be dominant in the short, medium or long term if ever. Part of the current problem is investors looking at basic stats past when they have any real relation to the underlying risk and probabilities. An example is looking at the the low default rate on American mortgages while changing lending practices and an inflationary housing bubble added mountains of risk. The default rate didn't reflect the true risk of American mortgages. 

I would urge caution in putting too much faith in any statistic, rosy or doom ladden.


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## Edward Campbell (11 Oct 2008)

Although this story, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is, mainly, about US banks I am putting in the Canadian thread because it reinforces the ‘good news’ reported here:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081010.wpaulson1011/BNStory/Business/home


> U.S. ups ante with plan to buy stake in ailing banks
> 
> PAUL KORING
> 
> ...




It is, perhaps, prudent for the Americans to follow the British model – their banking system were rated (link above) 40th and 44th in _’soundness’_ by the World Economic Forum. Canada, rated as having the soundest banking system in the world, *should* not have to do the same – kudos to successive Canadian governments, including Paul Martin’s and Stephen Harper’s, for rolling back some high risk policies and rules and maintaining a stable, prudent, well regulated system.


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## tomahawk6 (11 Oct 2008)

I dont want to see the government owning banks - smacks too much of socialism.


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## Old Sweat (11 Oct 2008)

Government-owned banks are also apt to make decisions based on the short term political factors of the time, and not on sound business practice. Okay, so a lot of the bankers seemed to have been off sick the day the part about sound business practice was taught in banker school. That doesn't mean it isn't a good principle to follow. Much of the cause of the fiscal perfect storm was the rush by many of the left to 'make' the banks and the duo of Fanny and Freddy to give mortgages to the unqualified. Given a boom in housing starts, a sharp climb in house prices and some creative financial instruments that would make the proverbial Nigerian widow blush, the whole thing was inevitable. 

To the credit of the Canadian financial class, and our stodgy old hard-nosed Scottish banking tradition, we were prevented from following our baser instincts. If anyone is looking for a primer on this sort of thing, look for a book called something like Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay LLD. It was published in 1841 and recounts some of the boom and busts involved with the mercantile class and the everybody is going to get rich syndrome, along with discussions of 'fads' such as alchemy, witchcraft trials, haunted houses and the popular admiration of criminals like Robin Hood and Dick Turpin.

Back to government ownership of banks, would you want the folks that brought you the gun registry handling your finances?


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## Edward Campbell (11 Oct 2008)

I found this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, a good read:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081010.wrcover11/BNStory/Business/


> The Depression's history lessons
> 
> DEREK DeCLOET
> 
> ...



There is a lot of good advice in this article for incoming Prime Ministers (even re-elected ones) and incoming Presidents, too. It is also useful for we mere mortals who try to understand what is going on.

I am reasonably sure, based on everything I have read, that not even the US is going to slip into a depression; Canada *should* be able to get by with, at worst only one, maybe two quarters of zero or negative growth. BUT: it pays to understand what a prolonged, severe recession or even a mild depression might look lke.


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## a_majoor (11 Oct 2008)

> A number of academics who've studied the era — including Ben Bernanke, the world's most important central banker — have said the severity of the downturn was made worse by the Fed's foot-dragging and its blunders. Certainly, the lesson has stuck with Mr. Bernanke. In 2002, at economist Milton Friedman's 90th birthday, he gave a speech in which he joked: "I would like to say to Milton … regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."



What made the Great Depression "great" was the ham handed interventions of the "New Dealers", who's interventions in the US economy continually distorted market signals and diverted capital and labour from wher the market would have made use of them to areas where politicans and bureaucrats would benefit. I suspect that without the "New Deal", the "Great Recession" of 1929 might have been far shorter and had far lesser impact on the global economy.

I can already see the ham handed interventions of 2008 are having the opposite effects that the interventionists are expecting (notice how each wave of announcements are followed by market sell-offs?); and conspiracy theorists are already suggesting this is an orchestrated action designed to discredit free markets and create the climate for far greater State intervention in the economy.


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## GAP (11 Oct 2008)

> suggesting this is an orchestrated action designed to discredit free markets and create the climate for far greater State intervention in the economy.



Well, if it is a conspiracy, they are succeeding.....It seems somebody(ies) is/are doing whatever to keep the government going one step further, then another, then another....


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## tomahawk6 (12 Oct 2008)

I think there are market forces at work that the financial guru's dont have a clue about. They seem to be forced to take steps or else be accused of doing nothing. I think if we dont do anything further and let the markets correct we will be alot better off. My real fear is that the steps now being taken will be the death of our free market system. We have seen how government managed economies have fared in the past.


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## Brad Sallows (12 Oct 2008)

>Don't demonize government deficits

I disagree; we must continue to demonize government deficits.  I haven't looked at the pros and cons of government deficit spending during recessions enough to know whether it is truly as useful as some economists claim.  (I have my doubts, because there is a sensible hypothesis that government spending results in significant misallocation of capital which prolongs rececessions.)  But, I will stipulate to it being useful and then add this: it doesn't matter, because in the real world governments are unable to adequately adhere to the partner principle of "spend in a recession" which is "pay down your deficit recession spending when the recession ends".  The resulting long-term damage is greater than simply working through the recession without adding to public debt.


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## Edward Campbell (12 Oct 2008)

Deficits, in and of themselves, are not inherently bad - they are never good.

There are some good reasons to run a deficit: a major war, for example, or some other equally _threatening_ crisis. Sometime the national government must borrow money to fund _programmes_ that are considered *essential*.

Deficit spending *might* be useful to, for example, build infrastructure during a depression - thereby creating real jobs. But the same deficit spending would not be acceptable to provide EI to the people who might, otherwise, be employed on those infrastructure construction jobs.


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## Bane (12 Oct 2008)

Thucydides said:
			
		

> What made the Great Depression "great" was the ham handed interventions of the "New Dealers", who's interventions in the US economy continually distorted market signals and diverted capital and labour from wher the market would have made use of them to areas where politicans and bureaucrats would benefit. I suspect that without the "New Deal", the "Great Recession" of 1929 might have been far shorter and had far lesser impact on the global economy.



I'm not an expert on pre WWII American economics, but as far as I understood it 1932-33 saw the lowest levels of GDP and it was in 1933 that the first portions of the New Deal were brought in.  From that point on US GDP was in a pretty consistant climb, surpassing the 1929 GDP high sometime in around 1936.


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## a_majoor (13 Oct 2008)

Some economists and historians beg to differ:

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409



> *FDR's policies prolonged Depression by 7 years, UCLA economists calculate*
> By
> Meg Sullivan
> | 8/10/2004 12:23:12 PM
> ...



Think about that when you listen to politicians (anywhere in the world) tell us how they will intervene to "fix" the economy.


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## Edward Campbell (13 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today's _Globe and Mail_, is a report on worrisome trends in China, including some that bode (even more) ill for Canada:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081012.wrchina13/BNStory/Business/home





> Big red machine hits speed bump
> 
> GEOFFREY YORK AND ANDY HOFFMAN
> 
> ...



_Traditionally_ the Chinese 'consumer' has displayed a mix of extraordinary conservatism – hence the high savings rate, even during a boom, and a spirited capacity for risk taking – just what we might expect from a nation of equally spirited gamblers.

A certain 'slowdown' will, at least should be good for the Chinese economy – it is _overheated_ and could use some discipline.


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## tomahawk6 (13 Oct 2008)

The global markets are up today so thats a good sign.The US markets are closed so we shall see what happens tomorrow. I suspect that the panic sellers are done and the bargain hunters are back in the market.


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## GAP (14 Oct 2008)

Daimler to Close Sterling Trucks Unit, Cut 3,500 Jobs (Update2) 
By Chris Reiter
Article Link

 Oct. 14 (Bloomberg) -- Daimler AG, the world's largest maker of heavy vehicles, will close its Sterling Trucks division in North America and cut 3,500 jobs as it reins in production and shifts manufacturing to Mexico. 

The reorganization involves the closure of plants in the U.S. and Canada at a cost of $600 million and is aimed at saving $900 million a year by 2011, Daimler said in a statement today. The Stuttgart, Germany-based company will retain the Freightliner and Western Star brands in the region. 

Daimler and competitors Volvo AB and Paccar Inc. have seen truck sales dive as growth slows and credit markets seize up. The German company, whose U.S. deliveries fell 30 percent in the first half, will shut Sterling's St. Thomas, Ontario, factory in March and one in Portland, Oregon, in 2010, when labor deals expire. A new Freightliner plant in Mexico will open as planned. 
More on link


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## Edward Campbell (14 Oct 2008)

GAP said:
			
		

> Daimler to Close Sterling Trucks Unit, Cut 3,500 Jobs (Update2)
> By Chris Reiter
> Article Link
> 
> ...



Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Business News Network_ web site, is more, his time with a Canadian twist, on the rumoured GM/Chrysler merger:

http://www.bnn.ca/news/4079.html


> CAW sees 'massive' job losses in GM, Chrysler deal
> 
> Reuters
> 
> ...




Earlier today it was reported that the Daimler closing of a truck plant in Ontario will cost 1,400 Canadian jobs.


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## Edward Campbell (15 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, is more ‘good news’ about the Canadian economy:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081015.wconfboard1015/BNStory/Business/home


> No recession for Canada: Conference Board
> 
> DAVID FRIEND
> The Canadian Press
> ...



If you have a spare $1,000.00 hanging around you can ‘subscribe’ to the Conference Board’s _Canadian Outlook_ series.


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## Edward Campbell (15 Oct 2008)

tomahawk6 said:
			
		

> The global markets are up today so thats a good sign.The US markets are closed so we shall see what happens tomorrow. I suspect that the panic sellers are done and the bargain hunters are back in the market.




Not so fast, according to is report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081015.wmarkets1015/BNStory/Business/home


> Stocks plummet again
> 
> STEVE LADURANTAYE
> 
> ...




Some observers think we have found the elusive ‘bottom.’ That may be true, but being at ‘bottom’ does not mean things are, suddenly, going to get better. The market may decide to stay at ‘bottom’ – even _testing_ lower levels – until it is satisfied that all the big problems are’wrung out’ of the market and it is safe to reinvest.


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## GAP (16 Oct 2008)

BMO projects Canadian recession
HEATHER SCOFFIELD,  Globe and Mail Update
Article Link 

OTTAWA — A second big Canadian bank is now forecasting a recession.

Bank of Montreal said Thursday Canada's economy will contract in the final quarter of 2008, and the first quarter of 2009, meeting the popular definition of recession.

“Canada cannot escape the knock-on damage of not only the U.S. recession, but also the wealth destruction arising from the plunge in our stock market and the slowdown in our housing markets,” chief economist Sherry Cooper said in a commentary.

Since commodity prices are being pulled down by a drop in global demand, Canada's energy sector can no longer be counted on to support the Canadian economy, she said.

“The boom has turned to bust. Canada, too, is headed for recession and our government will awaken to the need for deficit spending.”

BMO joins the Bank of Nova Scotia in forecasting an imminent recession, as well as economists at the University of Toronto, among others. 

Still, the Conference Board of Canada, Royal Bank of Canada, forecasting firm Global Insight, and Toronto-Dominion Bank have all recently updated their expectations for Canada's growth, and figure the country should narrowly avoid a recession.

They're all in the same ballpark, however. The recession forecasters are not expecting a deep downturn, while the growth forecasters aren't expecting much growth.

For its part, BMO Nesbitt Burns forecasts a 1.7 per cent annual pace of growth in the third quarter for Canada, but a 0.7 per cent contraction in the fourth quarter, followed by a 0.5 per cent contraction. Growth should resume, but barely, in the second quarter, with a 0.6 per cent pace of expansion.
More on link


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## Edward Campbell (17 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is more about how problems on Wall Street/Bay Street impact the good people on _Main Street_:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081017.wpensions1017/BNStory/Business/home


> Pension plans show worst quarterly drop in decade
> 
> JOHN PARTRIDGE
> 
> ...



While military pensions are a government *obligation* the money allocated (voted) to pay them is invested in the markets. That asset base has shrunk, too.


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## George Wallace (17 Oct 2008)

Time to increase the base of contributors......More recruiting necessary.     ;D


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## Edward Campbell (18 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is an interesting and troubling article:

http://www.theglobeandmail.com/servlet/story/RTGAM.20081017.wbretton1017/BNStory/International/home/?pageRequested=1


> Wanted: a new financial order
> 
> DOUG SAUNDERS
> 
> ...



My opinion:

•	_Bretton Woods_ still works, or it would if it was just left alone to effect “the de-politicization of money” making “government and finance ... separate spheres” and allowing “banking [to] became a self-contained ... world of its own.” The only question is: to what degree can we and do we need to regulate the global, self-contained banking system?

•	Effective regulation aims to ensure honesty (transparency and, in banking, adherence to generally accepted standards for accounting and reporting) and equality of opportunity by preventing monopolistic behaviour.* Whenever regulation tries to control _outcomes_ – which is what most people want – it is wrong. Only the market can determine outcomes and any and all attempts to interfere will do harm – never, ever ‘good’ for anyone.

•	Brown, Merkel, Sarkozy _et al_ claim the current system is “broken.” I doubt that; in fact, it may be that the system is working quite well – just balancing itself without care (because ‘systems’ cannot care) about the impact on _Main Street_  where all the voters live.

•	A meeting is, at least, harmless – provided enough dissenting voices are heard.

The Brown/Merkel/Sarkozy proposal smacks of _’world government’_ by the backdoor. The closest we have to a world government is the WTO – because, unlike the UN, it has a rules based system for sanctions. Any proposal. 

Many banking systems are in trouble because, as Saunders says, ‘leaders’ like Brown, Merkel, Sarkozy and Reagan, Bush, Clinton and Bush participated in _”deregulation and neglect of the financial system that had allowed the complex network of mortgage-backed debt instruments to spiral out of control and destroy the debt-burdened banking system.”_ Canada’s banking system (like a few others) is not in trouble. Perhaps the problem is not that the global ‘system’ is broken but, rather, that individual, national systems are inadequately regulated. Perhaps well regulated national banking systems will interact quite well, without further ‘supervision’ within the existing global system.


--------------------
* I always remember an economics lecture several decades back in which we were told that_ ”there is nothing wrong with a monopoly so long as it is achieved and maintained in a fair and honest manner.”_ Such things do happen in small, relatively primitive economies – it might be easy to _monopolize_ the milling business in an isolated community – or when new technology emerges – _Intel_ had something close to a monopoly for a brief period but it’s efforts to maintain it were neiher fair nor honest.


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## Edward Campbell (18 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_ is a good critique of the ‘Sarkozy Plan:’

http://www.financialpost.com/story.html?id=889454


> Dangerous ideas
> *Canadian authorities should shun ideas at both ends of the ideological spectrum and remain pragmatic*
> 
> David Laidler,  Financial Post
> ...


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## Kirkhill (18 Oct 2008)

E.R. Campbell said:
			
		

> ...The first modern financial bubble started in Paris in around 1719 and spread to London before bursting in 1721....



And this maybe a contributing factor to the antipathy of the French Elite towards Anglo-Saxon banking.

Louis XIV had just died and his Great-Grandson Louis XV was on the throne as a child.  He had a regent, Phillip of Orleans - his uncle, ruling in his place.  The Brits had just quashed the latest Bourbon-Stewart attempt to reclaim the British Crowns at Sheriffmuir. The Masons had openly united as the United Grand Lodge of England and declared themselves to be not at odds with the crown or the state.  Gold, which had been a monopoly of the Crown was being freely traded in the London markets.  Lloyds and the London Stock Exchange were finding their feet.  Britain was wealthy.  And at the back of it all was the Bank of England, founded by Huguenots and other Calvinists and sold to the English by a Scotsman, William Paterson, who died in that year of 1719.


France, as a combined result of Louis XIV's wars and Colbert's dirigisme was broke and with no prospects of recouping their losses except the old fashioned way.  Go forth and conquer.  Except that the French weren't up for it.  They were ill, dead-tired or just plain dead after Louis' wars.

Into this fray marches another Scot peddling his wares.  This time promising to do for France what Paterson had done for England and Britain.  John Law of Lauriston promised to create a Bank of France on Dirigiste lines.  And on to Wikipedia,



> ....He had the idea of abolishing minor monopolies and private farming of taxes and creating a bank for national finance and a state company for commerce and ultimately exclude all private revenue. This would create a huge monopoly of finance and trade run by the state, and its profits would pay off the national debt. The French Conseil des Finances, merchants, and financiers objected to this plan.
> 
> The wars waged by Louis XIV left the country completely wasted, both economically and financially. And the resultant shortage of precious metals led to a shortage of coins in circulation, which in turn limited the production of new coins. It was in this context that the regent, Philippe d'Orléans, appointed John Law, as Controller General of Finances.
> 
> ...



Law's Bank turned on its head everything that the Bank of England was.  It was different in every detail except that it was a Central Bank promoted by a Scot.  But I am inclined to think that Law had the same impact on the French consideration of banking that Stalin had on the American consideration of communism or Yeltsin had on the Russian consideration of democracy.  A cautionary tale never to be repeated despite the fact that execution failed to match theory.


And Edward, I disagree that Bretton Woods works.  Between 1694 and 1944 there was a solid golden wire running through the world's economy that instilled market discipline.  The Bank of England and the Gold Standard backed by HMG and the RN.  Recessions and depressions happened and wars were financed but the market always seemed to right itself.  

With Bretton Woods that discipline was shredded until it finally broke in 1971 under Nixon.  At that point the Western Governments took themselves off of the Gold Standard and started issuing Scrip - worth whatever the market deems it to be worth.  But the market never went off the Gold Standard, nor did most third world dictatorships.  All that happened was that Governments believed themselves to be beyond the discipline of the Market.

The Market is now reminding Governments that they are not beyond the Market.  

And that is the most frightening thought of all to the Dirigistes.  

Britain succeeded for so long  because it figured out how to work within the constraints of the rules imposed by the market while at the same time allowing some room for movement within the system.  

Degrees of freedom:

Bear on a chain;
Bear in a cage; 
Bear in a zoo compound;
Bear in a park;
Bear in a preserve.

In all cases, no matter how much freedom the Bear perceives, the consequences of breaking the containment are the same - death.

Likewise, even in the most destitute, socialist, command economy people survive through capitalism - through individuals trading toilet paper for shoes.  

Capitalism and the Market set the rules.  Governments have to learn to abide by the rules.

They can no more control the Market than Louis XIV could make Europe an extension of his well manicured gardens at Versailles.

Bretton Woods was an American swing of the pendulum to the opposite extreme.

Bretton Woods was an attempt to free the market of constraints, with the Americans thinking that Britain had been setting the rules to its advantage for 250 years.  If only the market were allowed to work freely then everything would level out over time.  I don't believe that the current "crisis" (behind us in 24 months) is the result of laisser faire economics but neither do I believe that the Market is a self regulating and thus benevolent environment.  

I don't think the Market is any different to the Weather, the Sea or one of the McGarrigle Sisters "white waters where the log drivers learn to step lightly".  They are environment and can't be controlled.   They have to be accomodated.  It doesn't do any good to look for root causes in the hope that you can control the environment.  You are best put to husband your resources to deal with the symptoms, the effects.

I believe the Brits didn't set the rules.  They just accepted and exploited the rules.

Perhaps Canada with its pragmatism is the true inheritor of that philosophy.

In today's National Post George Jonas finished with this quote from Ecclesiastes: "The race is not to the swift, nor the battle to the strong, neither yet bread to the wise. Time and chance happens to them all.”  Or as Burns would hae "the best laid schemes o' mice and men gang aft agley".


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## tomahawk6 (21 Oct 2008)

Read this at one of my fav blogs this AM. 
http://www.redstate.com/diaries/blackhedd/2008/oct/21/unraveling-the-threads-of-a-currency-hedging/

Unraveling the Threads of a Currency-Hedging Failure in Hong Kong 

This story caught my eye because, ever since the acute financial crisis began around Labor Day, news about how China is handling it has been very sparse.

And that matters a great deal, because China’s reactions to the crisis are key to understanding whether the global financial system has fundamentally changed in recent years. The question, of course, being this: has the economic dynamism of the world shifted away from the United States? Or does distress here still cause major problems elsewhere?

Citic Pacific Ltd. makes steel and does some real estate development. Its shares are listed on the Hong Kong stock market, and its billionaire board chairman is one of China’s richest people.

Citic Pacific is 29% owned by Citic Hong Kong, which is a wholly-owned subsidiary of CITIC Beijing, which in turn is owned by the Chinese government.

You probably remember these guys. CITIC Beijing almost invested $1 billion in Bear Stearns, but Bear collapsed before the deal could close. And they invested $3 billion in Blackstone Group shortly before the latter went public and started falling in value. In short, and greatly to the annoyance of the Chinese authorities, CITIC have earned a reputation as "dumb money."

So what’s the news item? Citic Pacific has lost about $2 billion, trading currency derivatives. (All money figures in this post are US dollars, not HK dollars. 2 billion USD is about 15 billion HKD.)

What are they going to do? That’s easy. They go to their sugar daddy, the Chinese state, and recapitalize around $1.5 billion. In return, some senior managers of Citic Pacific will be dismissed, and some will probably be shot. (For once, I’m not using a metaphor when I speak of death in managers.)

Of course, this being Asia, the company won’t go out of business, although the amount of the trading loss was considerably larger than the current total value of the company’s stock.

What’s interesting about this is that it points out some of the less visible aspects of the global credit crisis.

Citic Pacific isn’t the only relatively small trading company that has created an awful lot of pain in Asia with currency derivatives. In this case, they appear to have speculated on a continued rise in the value of the Australian dollar, which has been one of the world’s star currencies.

Citic Pacific apparently has major iron ore operations in Australia, so they wanted to hedge their exposure to the Australian currency. This makes sense if you want to smooth out your native-currency cash flow, and every major trading company in the world does it.

But Citic Pacific appears to have screwed this up, not managing their risk properly. And they got caught in the downdraft that has caused the Australian dollar to plunge in value over the last several weeks. All of a sudden, their currency hedges appear to have become exposed to nearly unlimited risk.

This isn’t a unique story about bad decision-making in one relatively small firm in Hong Kong. Similar things have been happening in South Korea, Brazil, and elsewhere. Even in Iceland, where the collapse of the entire country’s banking system broke above the media radar and got fifteen minutes of fame.

Why is this typical? Well, there’s a big contrast between what happens to the US dollar in times of financial stress, and what happens to every other currency. The dollar goes up as everyone seeks the safety of the world’s highest-quality money. And money flows out of high-growth emerging economies like air out of a balloon, which drops their currencies like a rock.

Further evidence that this is the dynamic at work: the value of the Japanese yen. Because yen is the lowest-yielding major currency, it’s a favorite source of funds for “carry trades,” in which you get paid for holding a high-yielding currency. Like the Aussie dollar, the New Zealand dollar, the Brazilian real, or the Icelandic krona.

As high-yielding currencies deflate in the global crisis, money flows out of carry trades and back home to Japan. Right on cue, the yen has joined the US dollar as the only major currencies to appreciate sharply during the current phase of the crisis.

One thing that the Chinese try very, very hard to avoid, is for foreign speculators to deposit money into Chinese banks. Since their interest rates have been incredibly high (in order to damp out the powerful inflation they’ve been suffering for two years or so), they’re theoretically vulnerable to inflows of “hot money” (including carry-trade money), which can exit the country on a moment’s notice and crash the banking system.

So unlike South Korea and even Brazil, which now face extreme financial disruptions from adverse currency movements, Citic Pacific and companies like it ought to be fine.

Still, what the whole episode appears to be telling us, is that the global economy still depends on final demand from the United States.

That, in fact, will be the most interesting thing to watch for as the aftermath of the crisis plays out over the next three years or more. The countries that respond to the crisis with increased regulation and control (which axiomatically includes Europe and Asia), will return to growth much more slowly than the countries that quickly shift back to free markets and light regulation.

At this point, however, political risk enters the calculus. We may elect a President who has already promised higher trade barriers, taxes, and regulations. It’s not a forgone conclusion that America will be a country that returns quickly to free markets and light regulation.

If we do, we’ll emerge from this crisis in a very strongly enhanced position vis-à-vis our economic competitors. We’ll have by far the strongest and most commanding economy on earth, a position that will be unchallengeable for years or even decades.

But if we go down the Democrat path of protectionism, high taxes, and regulation, that won’t happen. And who knows? Given the way the Democrats talk about wanting the rest of the world to love us for our charm, rather than respect us for our strength, the weaker outcome might actually be what they want.

-Francis Cianfrocca


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## a_majoor (22 Oct 2008)

The news gets worse. An "unwinding" of debt will take several years, and taxing away people's income and wealth will prolong the process as they have fewer resources to deal with private debt or recapitalize debt ridden companies through investments or purchases:





> *Do our rulers know enough to avoid a 1930s replay?*
> Events are moving with lightning speed as the global credit freeze evolves into something awfully like a classic trade-depression.
> 
> By Ambrose Evans-Pritchard
> ...


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## Edward Campbell (23 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is the Bank of Canada’s assessment of the impact of the global credit crisis on Canada:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081023.wboc1023/BNStory/Business/home


> Economy on edge of recession: Bank of Canada
> 
> HEATHER SCOFFIELD
> 
> ...



So, two quarters (4th of ‘08 and 1st of ‘09) of essentially zero growth, followed by slow but steady growth through 2009 and recovery in 2010 ... they hope.


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## GAP (23 Oct 2008)

With our dollar below 80 cents US, this should help manufacturing keep getting orders through this tough period. 

The US businesses know as well as we do that a 20% savings by ordering from Canada is going to help their bottom line. Why else would they order their stuff manufactured in the far east?


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## GAP (26 Oct 2008)

Heed the advice of The Smartest Man
DEREK DeCLOET Globe and Mail Update October 25, 2008 at 6:00 AM EDT
Article Link

Crackpot. Crank. Scaremonger. Alarmist.

The Smartest Man We Know has heard the slurs. When you make your living on Wall Street, yet hold the opinion that Wall Street is populated by incompetent fools, you're not going to win a lot of friends at dinner parties, are you?

And when you bet millions that the American financial system is going to fall apart, that its economy will be seized with fear – and when you were doing this and saying this before there was any hint of real trouble – well, you couldn't really expect other people to welcome the message, could you?

The Smartest Man, when delivering his prophesies, did not sugar-coat them. “This could potentially make Long-Term Capital [the financial crisis of 1998] look like some kind of walk in the park,” he predicted. “The reckoning has started.” No soft landing this time: It could even be “like the Great Depression of this century.” He said these things not last week, not last month, but on July 26, 2007. That day, the Dow Jones industrial average closed at 13,473.

But The Smartest Man was just getting warmed up. Checking in with him again this January, he was every bit as gloomy. By that point, credit fires were burning all over the place; the Dow was at 12,500; the world's biggest banks had been forced to turn, cap in hand, to Singapore, China, the Middle East and elsewhere for billions of dollars. It won't be enough, he said. “There's a whole bunch of companies that just have to hit the wall. They can't survive.”

What kind of companies? U.S. financial institutions, mostly. Wachovia looks bad. The major investment banks are shaky. It's about to get a lot uglier, warned The Smartest Man. “The implications of what's going on for the U.S. economy, credit, for lending over all, are not that pleasant to think of.” Two months and two days later, Bear Stearns was gone. 

So you can imagine our surprise when the Smartest Man – his real name is Krishnamurthy Narayanan, and he goes by Nandu – showed up in town this week and was bullish.

“I think we're ending the financial crisis now,” he said. “There will be countries, like the U.S., that will go into recession. But this need not be a global recession. And there are some encouraging signs on that front.”

In a different era, The Smartest Man might have been a rocket scientist, or an engineer, or a medical researcher, or maybe a university professor. The academic résumé says: MBA, PhD in finance and economics from the Massachusetts Institute of Technology, studied under Paul Krugman, who just won the Nobel prize for economics. But this is – or at least was – the age of finance, and The Smartest Man became a hedge-fund manager, placing money on his views rather than just writing them.

Lately, that has worked out rather well. His CI Global Opportunities Fund has returned 57 per cent in the past year, 19 per cent (compounded) over the past five. Nice numbers, but once you've made your money calling the credit crisis and short selling Washington Mutual, what do you do then? 

You buy Canada, says Mr. Narayanan, who can't believe the way the loonie has been savaged. “The currency is ridiculously undervalued. I can't think of any country in the world that has no fiscal deficit, no trade deficit and no inflation – except Canada. I think the Canadian dollar should go through parity.

“I like the whole Canadian market. I don't particularly dig the banks because I just don't know what's in there [on the balance sheet]. But I'd say virtually everything else is fine.”

You buy some emerging markets, even though they, too, have collapsed in the meltdown. “You can't play the emerging markets by listening to the market action. If the Indian market's down 50 or 60 per cent from its peak, I can assure you nothing's really changed in India. Nothing's changed. The vast majority of people in India don't believe in the stock market,” said Mr. Narayanan, who was born in Chennai, India. 

You look to the currencies of Asian countries that are growing and still financially healthy. Singapore, Malaysia and Thailand all have trade surpluses and single-digit inflation. “Most of the Asian emerging markets and emerging currencies are ridiculously priced right now.”

You buy uranium stocks: “Ridiculously cheap.” Gold miners: “Ridiculously cheap.” Pipelines, too: “How bad a business is that? It's a fantastic business. You're just shipping gas. Why are people selling those?” Energy: “Unless there's an absolute collapse in oil demand, you really can't see oil plunge all that much [more].”

There are, however, some things The Smartest Man wouldn't touch. They happen to be the assets the investing masses have flocked to in this crisis: U.S. Treasuries and the greenback. “I don't think it can hold for that much longer.” Once the world has to absorb trillions of dollars in new U.S. debt – watch out. In fact, he thinks the odds of the U.S. having its own currency crisis are “at least 30 per cent.”

Would you want to bet against him?
More on link


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## JackD (27 Oct 2008)

implications in my side of the pond: 
http://www.nytimes.com/2008/10/27/business/worldbusiness/27poland.html?th&emc=th
October 27, 2008
Credit Crisis Slows Economy in Once-Hot Poland 
By NICHOLAS KULISH
WARSAW — Poles were jolted last week by the sudden discovery that they were not immune to the financial crisis contagion rippling across the globe. The plunging stock market here and the drastic weakening of the Polish currency proved, as in so many corners of the fast-growing developing world, how wrong they were.

The go-go atmosphere in Poland has abruptly stilled to a cautious wait-and-see. Developers across the country have halted building projects for thousands of apartments as banks have grown stingy with lending. The boomtown energy here has been replaced by nervous eyeing of the once powerful zloty, as it retreats in value against the dollar and the euro. 

The daily newspaper Dziennik summed up the mood on Friday with a front-page headline, “Welcome to the Tough Times.” In a country that seemed to be on the fast track to full membership in the Western club, the question on everyone’s lips is, “Why us?”

Emerging markets that seemed healthy, even thriving, barely a month ago are beginning to find themselves caught in the worldwide panic. This sharp turn has caught even the local financial guardians and experts by surprise, as they have clung to their indicators of fundamental economic soundness while forgetting that capital stampedes rarely tarry for fine distinctions. 

From Europe’s former Communist bloc to South America, fear and disbelief mingled with frustration that a breakdown in the United States mortgage market — one that most investors and institutions in emerging markets had avoided — was beginning to lead once again to their punishment at the indiscriminate hands of the capital markets. 

“Everything is going down,” said Lukasz Tync, 28, an information technology consultant in Warsaw, who said he owned shares in 10 companies and several mutual funds and had been hit hard by five consecutive days of falling stocks at the Warsaw Stock Exchange. The country’s leading index was down 12.6 percent for the week and more than 50 percent for the year. 

“The thing is that there is no fundamental basis for such moves,” Mr. Tync said. “It’s just panic.”

Adding to the pain, the zloty has fallen around 17 percent against the dollar over the past week, and more than 10 percent against the euro. The currency has fallen roughly 30 percent against the dollar in October. Economic experts are cutting growth forecasts. 

Poland is still considered relatively healthy compared with Hungary and Ukraine, which have been among the hardest hit. On Sunday, the two reached tentative agreements with the International Monetary Fund for loans and other assistance aimed at preventing their financial systems from collapsing. Ukraine will get a loan of at least $16.5 billion. The value of Hungary’s rescue package has not been specified. Still, alarm about Hungary and Ukraine has infected Poland. 

“A week ago, people would have told you that this is an oasis of calm and stability,” said Marek Matraszek, founding partner and managing director at CEC Government Relations in Warsaw, a political consulting firm for foreign investors. “They didn’t expect that the lack of confidence in Central Europe would bleed over from Hungary and Ukraine.”

The bleeding has extended much farther. In South Africa, the price of platinum, a major earner of foreign exchange, has cratered, from more than $2,000 an ounce in June to less than $800 now, contributing to a sharp depreciation in that country’s currency. Brazil’s currency has fallen by more than 40 percent against the dollar since August. The Turkish lira has fallen by more than 30 percent against the dollar in recent weeks and almost 20 percent against the euro. 

Fuat Karatas, 41, a dental technician in Istanbul, buys some imported materials priced in euros but cannot pass on the rising price to customers, who pay in lira, he said. “Now with the euro going crazy, I have no idea how things are going to work out for me,” he said. “I just want to be able to keep my lab open, nothing more.”

During more prosperous times the risks in emerging market countries were strongly underestimated, said Marek Dabrowski, president of the Center for Social and Economic Research in Warsaw. “Naturally, the global credit crunch and economic slowdown caused overshooting in the opposite direction,” he said.

Emerging-market countries are hardly a homogenous group, but they face similar challenges. The outflows of investor capital driving down their stock markets and pressuring their currencies have occurred just as the demand abroad for their products, whether commodities like oil or manufactured goods like automobiles, has begun to weaken. 

But the crisis has not hit the streets right away, buttressing the confidence of many in affected countries that the problems are temporary and can be weathered. Some argue that the declining value of local currencies is even a plus, because it will help these countries sell more goods abroad by making them more affordable. 

“When the zloty was so strong, my import was profitable. Just now, I hope my exports will be improving,” said Krzysztof Izydorczyk, 52, owner of Comexpol, an importer and exporter of stainless steel products based in Katowice. 

In South Africa, Finance Minister Trevor A. Manuel gave a budget speech to Parliament last week, saying he had seen the warning signs of trouble and had taken appropriate action.

But South Africa is not just facing unpredictable economic pressures. It is also at a perilous political moment, with a likely split in the governing African National Congress and a strong possibility that the unemployment rate will worsen. The economy had been weakening before the global crisis, according to Pieter Laubscher, chief economist at the Bureau for Economic Research at South Africa’s Stellenbosch University.

The commodities boom had drawn investment into the country and had helped drive economic growth, Mr. Laubscher said, but that boom has now fallen victim to the worldwide slowdown. 

In Brazil, leaders took pains to save wisely during the commodity boom, reform the country’s banking sector after a financial crisis in the late 1990s and diversify its trade partners. “This country has never been so prepared to face up to adversity as it is now, economically, politically and, I’d say, ideologically,” President Luiz Inácio Lula da Silva said early last week.

But on Wednesday the government empowered state-controlled banks to buy stakes in private financial institutions. Although officials denied any private banks were in danger, the announcement fueled jitters that some could fail, helping send Brazil’s stock market down more than 10 percent that day.

Poles had good reason to believe that they had avoided the stigma that causes investors in emerging markets to flee at the first hint of financial panic. Poland had joined the European Union and NATO, it was a close ally of the United States, it was growing robustly and enjoying swiftly rising living standards unimaginable under Communism. 

Experts say there was a consensus locally that Poland would not be affected by the crisis, and that membership in the European Union would buffer it from the worst of the shocks. That consensus has begun to break down.

When the Central Bank of Hungary surprised markets last week by raising interest rates three percentage points to defend its currency, the vulnerability of Central and Eastern Europe received harsher scrutiny.

Poland illustrates the illogic but also the relentless pressure this crisis has exerted, because in many ways it was in good shape. Compared with Hungary, Poland has higher growth, lower inflation, lower interest rates, less public debt relative to the size of its economy and a smaller share of foreign loans. Poland has stronger domestic demand than Hungary to prop up the economy as consumers among its Western trading partners cut spending.

But Poland has not adopted the euro, which might have helped insulate it somewhat. Now the prime minister, Donald Tusk, says Poland hopes to by 2012.

Government officials in Warsaw, including the prime minister, the central banker and the finance minister, have been saying that the Polish economy remains strong and that they expect markets to stabilize. 

Indeed, the latest economic news out of Poland has been largely positive. Retail sales rose 11.6 percent in September, compared with the previous year, and the unemployment rate, which exceeded 20 percent just five years ago, fell 0.2 percentage points last month, to 8.9 percent.

At Miedzy Nami, a restaurant in downtown Warsaw, the owner, Ewa Moisan, said she had not seen a slowdown. Yet some customers said they were beginning to feel the pinch. The monthly payment for the apartment mortgage of one customer, Jarek Wiewiorski, has gone up by a fifth, to 1,800 zloty, about $600. “It’s not catastrophic, but it’s painful,” Mr. Wiewiorski, 40, said. “One minute it’s America, the next it’s Hungary, and then suddenly, it’s here.”


Reporting was contributed by Sabrina Tavernise and Sebnem Arsu from Istanbul, Celia W. Dugger from Johannesburg, Alexei Barrionuevo from Rio de Janeiro, Andrew Downie from São Paulo, Brazil, and Michal Piotrowski from Warsaw.


To put things in perspective, my salary (net) per month for my main job is 980 zloties  (after 9 years teaching at college level).... Poland is becoming a two class society - rich and poor....


----------



## a_majoor (27 Oct 2008)

The sad fact of the matter is so long as people  are in the grip of irratiional panic, the "good" will be pulled down with the "bad". Canada and Poland are relatively small economies on the global scale (as I recall, the Canadian stock market is all of 2% of the global investment community), so no matter how hard we pull on the oars, we will still be sucked along by the ebb tide. Picture us on a nice sound rowing boat with a picknik basket and well rested crew on the Bay of Fundy and you get the idea.

We will see Poland and other nations with sound economies struggling with the tide in the distance (in this analogy), but the best thing to do is place yourselves in the best position to run out with the tide and be prepared to pull on the oars as the tide slackens. Get your cash ready to invest, as lots of good bargins will be in front of us. On the other hand, many politicians intend to use this crisis (caused by malformed regulatory regimes and regulatory failure) as an excuse to intervene further in the market economy and erode our freedoms further. Can Fascism be far behind?

http://pajamasmedia.com/rogerkimball/2008/10/26/europe-on-the-brink/



> *Europe on the brink? (And Russia close behind?)*
> 
> In September, when the financial crisis in the U.S. really started heating up, we were treated to good deal of unattractive crowing from our European and Russian friends. Nicolas Sarkozy, the President of France, announced that the time of “laissez-faire” capitalism, “not . . . constrained by any rules,” was over. Why, I wondered, had he not noticed that capitalism unconstrained by any rules had never been the order of the day and that for the last 150 years or so, capitalism, especially in Europe, had been hemmed in by thousands–actually, tens of thousands–of pages of rules and regulations? Dmitry Medvedev, the puppet president of Russia, told us that the age of U.S. economic dominance was at an end and that the world required a “more just” economic system. But that was before the price of oil had plunged from $145 to $65 a barrel over the course of a few weeks and the tsunami of credit woes that originated in the U.S. had made its way East to Europe and Asia.
> 
> ...


----------



## Kirkhill (28 Oct 2008)

And here Diane Francis declares Warren Buffet to be wrong.  Apparently this is because he has cash to invest and she doesn't.  Ergo he lives in some weird parallel universe.  

My self, I'm inclined to think he might have the rights of the thing.  After all, he has cash to invest and apparently she doesn't.

Regardless of that it was actually this comment that really got my interest (okay poor choice of words these days, my attention):

"The problem with stock markets right now, and for an indefinite time, is that they cannot fulfil their function which is to properly determine price for equities and debt."

I thought that stock markets were merely fora where willing buyers and sellers could engage in commercial transactions at whatever value they deemed mutually acceptable.  The exchanges, I thought, were merely required to ensure that certain rules on information were followed so that buyers and sellers could make informed decisions.  

Apparently Diane Francis is another individual relying on public institutions to give her the "right" answer.


----------



## a_majoor (28 Oct 2008)

More from Arthur Laffer:

http://online.wsj.com/article/SB122506830024970697.html?mod=rss_opinion_main



> *The Age of Prosperity Is Over *
> This administration and Congress will be remembered like Herbert Hoover.By ARTHUR B. LAFFERArticle
> 
> About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.
> ...



Of course the worst case scenario is the "forward looking" expectations of the market is a tax and spend Obama Administration, Democratic supermajority in the Congress or both; causing the market to tank entirely and the economy slide into a depression. The bumper sticker advocating canned goods (Doomed '08) may well become a symbol of good forward planning.


----------



## Edward Campbell (29 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is another report that shows the impact of the credit crisis on _Main Street_:

 http://www.reportonbusiness.com/servlet/story/RTGAM.20081029.wpension29/BNStory/Business/home


> 'Disaster' unless Ottawa offers pension relief
> *Companies launch behind-the-scenes lobbying effort for temporary reprieve from pension funding obligations*
> 
> JANET MCFARLAND AND TARA PERKINS
> ...



While I have no doubt that some companies are, indeed, “facing possible financial devastation if they are required to immediately make enormous contributions to their pension plans to fund shortfalls,” I also have no doubt that some other companies just see a ‘pool’ of *free* money being created and they want a bit of it, too.

The current regulations regarding pension fund solvency have served Canadians – workers and investors alike – well. We have avoided most of the nightmares that plagued America and Europe in the ‘80s and ‘90s. Some companies may need some temporary (repayable) help; some *very temporary* relaxation of rules may be part of that relief but, essentially, despite the corporate whinging, the system is not in need of a major overhaul because the “worst case scenario” can and does occur every now and again.


----------



## Kirkhill (29 Oct 2008)

> In 1917, with the Income War Tax Act, the Government of Canada introduced *a temporary general tax on income*. The tax applied to both personal and corporate income.


    Government of Canada


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## Edward Campbell (29 Oct 2008)

Former Prime Minister Paul Martin is out flogging his new book. I have not yet read it nor will I get to it until, maybe, late winter, unless my _"read soon"_ stack shrinks a lot, even sooner.

He has been making one important (albeit self serving) point: the G20 *Heads of Government* (HoG) (president and prime ministers)  need to meet to discuss things like the credit crisis.

Martin claims – and I believe him – that the biggest impediment to a G20 HoG meeting has been US disapproval. The US was enthusiastic about the G20 finance ministers/central bankers meetings but feels/felt that 20 is/was too big for a productive HoG level meeting. I say felt/was because soon, of course,  President Bush will host a G20 HoG Meeting in Washington.

In my opinion: There are too many Groups. The G20 is too big but the G8 is both to small and poorly structured.

I think we need a G_n_ in two parts:

1.	The G_n_ (_n_=13± but no more than 15) proper consisting of something like: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the United Kingdom and the United States – a mix of the *responsible* rich and developing countries, large and medium countries and so on; and

2.	The G_n_ steering group consisting of: APEC, the European Union, Mercosur (maybe) and NAFTA.

But the key point Martin makes, and it is a good one, is that the EU and the USA cannot ask China and India to come and help solve the crisis and then shut them out of the world’s most exclusive *leaders’* forum.


----------



## GAP (29 Oct 2008)

first question....why Italy....represents the Mediterranean area, but it's economy does not dominate it

second question: what is Mercosur (maybe)

Nothing from Africa.....



> But the key point Martin makes, and it is a good one, is that the EU and the USA cannot ask China and India to come and help solve the crisis and then shut them out of the world's most exclusive leader's forum.


I think what annoyed me most about Martin, while stating this was that the world should have listened to him and him alone....this Christ on a Cross approach sucks for credibility...but at least he's not lacking in modesty....


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## Edward Campbell (29 Oct 2008)

GAP said:
			
		

> first question....why Italy....represents the Mediterranean area, but it's economy does not dominate it
> 
> second question: what is Mercosur (maybe)
> 
> ...




Italy, like Australia and Canada, is a *responsible* medium economy - but it could be Spain.  )
                                                                                                                           ) I'm not hung up on who, exactly, just 12 to 15 *responsible* members, large and small, from various regions.
Maybe South Africa and/or Morocco could be added - replacing someone?                         )

Mercosur is the South American free trade group.


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## Edward Campbell (30 Oct 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_, is a report on a potentially useful outcome of the credit crisis:

http://www.financialpost.com/news/story.html?id=917627


> Crisis used to push for single regulator
> *Breakthrough in Ottawa's bid for watchdog: advisor*
> 
> Eoin Callan and Barbara Shecter, National Post; with files from Paul Vieira in Ottawa
> ...



This is dull but vitally important stuff. Québec has been a major stumbling block and, in the process, Québec’s ‘leaders’ have done real harm to Canada. The government of Canada ought to have Québec over a barrel right now: a _national_ (less Québec) agency is, probably, all but a reality – if created it would cause all investors everywhere to abandon Québec's banks and major companies; the Montreal Stock exchange would become a bad joke and would soon shrivel and die. Québec has no choice but to hold its nose and join – but the separatists will have a field day making Charest out to be a weak-kneed sell out and making Harper into an anti-Québec bully.


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## Edward Campbell (1 Nov 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Ottawa Citizen_, is a gloom and doom report from TD Canada rust:

 http://www.canada.com/ottawacitizen/news/bustech/story.html?id=efac367f-1b2f-4988-afe4-454e54d40ff1


> Major recession threatens G7: TD Bank
> *It 'could be the worst since the Great Depression': forecast*
> 
> Eric Beauchesne, Canwest News Service
> ...



The US and much of Europe is already in recession so demand for our goods and services is declining, sharply. It is prudent to forecast that we will follow.

But, Prime Minister Harper was being honest during the election campaign: Canada is in much, much better shape than the US or Europe and our recession should be a wee bit shorter but considerably _shallower_ than those in the USA and Europe.


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## Kirkhill (1 Nov 2008)

E.R. Campbell said:
			
		

> .....
> But, Prime Minister Harper was being honest during the election campaign: Canada is in much, much better shape than the US or Europe and our recession should be a wee bit shorter but considerably _shallower_ than those in the USA and Europe.



I think that this can be simply explained by Canada having a massive chest of resources, a very diversified industrial sector and an well educated population.  Even if the rest of the world stopped buying and selling Canada could continue to function as a self-contained economy.  It can supply homes. It can supply cars, trucks, roads and planes.  It can build electronic equipment.  It can feed its population.  Most importantly it has the Energy Supplies to be able to do all of those things.  

It does not HAVE to trade to meet its needs.  

It trades to meet its wants. 

And given that there are other national economies the MUST trade to meet their needs it is both morally desirable that Canada trade to allow other countries to meet their needs from our surplus capacity and it is materially beneficial to us. 

In the paradigm of MacKenzie-King "Trade if necessary, but not necessarily trade."

As long as Canadians don't succumb to believing that American news is Canadian news and instead accept the evidence of their own day to day existence (food in the stores, cars being bought, credit being available.......) and don't succumb to the irrational then there is little reason that Canada shiouldn't broadly continue with "Business as usual".

(Self-serving note here:  It is in my interest for people not to panic - I am currently trying to sell my house.  ;D )


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## muskrat89 (1 Nov 2008)

I'm not sure if this has anything to do with anything, but thought I would add it....

http://www.azcentral.com/news/articles/2008/11/01/20081101hardcredit1101.html



> *In Mexico, credit is available - at a 70% interest rate*
> 
> Nov. 1, 2008 12:00 AM
> Republic Mexico City Bureau
> ...


----------



## Edward Campbell (3 Nov 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, is a report on the impact of decades of neglect of the _productivity_ issue:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081103.wflaherty1103/BNStory/Business/home


> Ontario to receive equalization payments
> 
> KEVIN CARMICHAEL
> 
> ...




Ontario is the *victim* of decades of political irresponsibility at the national and provincial levels. The Conservatives, Liberals, Progressive Conservatives, NDP and, indeed BQ must all share the blame.

The federal government has, since at least the 1940s, played favourites – usually often, but not always, to Québec’s advantage – and trying to “pick winners.” (I once heard a very senior civil servant opine that the government’s record at picking winners was worse than random chance; we would have done _better_ he, suggested, had cabinet (or the PM or the Clerk or whoever) simply picked the first (or second, or last) item on any list (a list, by definition, must have two or more items).)

Provincial governments have done much the same – consistently favouring or, at least, forgiving weak, even dying, ill managed companies and sectors in an effort to buy votes.

R&D spending has been grossly misapplied since the 1940s: government should directly fund *R*esearch – on a large scale - and only indirectly, through the tax system, support *D*evelopment (except in a few _’in house’_ cases like DND that do both *R* and *D*. But *effective* R&D is one of the real keys to competitiveness and productivity.

Similarly, both national and provincial governments have applied ill-considered corporate/business taxes and regulations especially those related to improving productivity by buying capital equipment. Canadians, people like you and I, have, consistently, demanded that governments ‘tax the rich’ – especially the _impersonal_ rich corporations. We can excuse Canadians for their ignorance but politicians leaders ought to have been just a wee tiny bit more responsible than those they led – that was not, and still is not the case.

Don’t even get me started on the ‘compensation’ for _celebrity CEOs_ or the undue attention paid to unelected, unaccountable _celebrity_ ‘busybodies’ like Maude Barlow and Buzz Hargrove.

Anyway Diefenbaker and Pearson, Trudeau, Mulroney, Chrétien, Martin and Harper, Frost, Davis and Petersen, Rae, Harris and McGuinty and Lesage, Levesque, Bourassa, Bouchard and Charest, too, can all share the blame – but so can we, _ordinary Canadians_, for ignoring important issues like competitiveness and productivity and whinging for more, *more* and *MORE*.


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## GAP (3 Nov 2008)

Find me a politician with enough gonads to do what you suggest, and you will have to look far and wide for one NOT in office. There is not one politician out there with enough pizazz and gonads to put the system right without buckling down to the almighty vote count....They don't even realize that if they had enough charisma and a well thought out plan the people would back them. (well some anyway.....)


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## Rifleman62 (4 Nov 2008)

Am I correct here or wrong? The manufacturing sector is always for an undervalued Cdn $ as it helps sell Cdn mfg goods to the "world" (approx 85% of everything we produce goes to the USA). Same goes for good old Buzz. It's productivity stupid. Right now, due to the CAW, Canada is the most expensive place in the world to manufacture an automobile. It is either $67 or $69 per hour* in a CAW auto plant* according to several reports I have read. I don't know if its Cdn or US $ (if it's US $, the situation is worse). With North American auto companies in a mess, what NA auto CEO in their right mind would build a car in Canada? To heck with NAFTA or the 1965 Canada–United States Auto Pact. This is 2008, a new US government, and America in financial difficulty.
A dollar should be a dollar(or darn close to it) for a country to be sovereign. In Canada we keep subsiding low productivity. *It's like rewarding failure to get votes/elected.[/bHere are some   of the results of this policy:

Federal equalization payments:

Quebec - $8.35 billion    
Manitoba - $2.1 billion 
New Brunswick - $1.69 billion 
Nova Scotia - $1.57 billion 
Ontario - $247 million
P.E.I. - $340 million 

In the last election, did not the people of Quebec vote to march to the beat of their own drum, AGAIN?*


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## a_majoor (4 Nov 2008)

One reaction to a putative Obama administration might be a John Galtian "strike" (read Atlas Shrugged). If this happens, the economic slowdown will have serious reprecussions, especially for us, since 85% of our exports go to the US. A permanent recession will make life tough for us (and the US recession will hurt all world economies, so there will be no one to take up the slack):

http://pajamasmedia.com/instapundit/



> AN ARMY OF JOHN GALTS?
> 
> I really do not want to be that "greedy" guy whom Obama so hates. "Greedy," loosely defined in Obamanomics, is 49 percent of voters. For the record, if you make $249,000 per year or less you are fine; somewhere around $250,000 and above, you are officially evil and he is coming after you.
> 
> ...


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## Redeye (4 Nov 2008)

I find my odds of winning the lottery to be significantly higher than the likelihood of something like this happening.



			
				Thucydides said:
			
		

> One reaction to a putative Obama administration might be a John Galtian "strike" (read Atlas Shrugged). If this happens, the economic slowdown will have serious reprecussions, especially for us, since 85% of our exports go to the US. A permanent recession will make life tough for us (and the US recession will hurt all world economies, so there will be no one to take up the slack):
> 
> http://pajamasmedia.com/instapundit/


----------



## a_majoor (4 Nov 2008)

Redeye said:
			
		

> I find my odds of winning the lottery to be significantly higher than the likelihood of something like this happening.



While I am delighted at your ability to win lotteries, the "strike" is driven by a combination of the immutable laws of economics (incentives and rewards as motivators to human action) and human nature. The only real question is how many people will take strike action under a putative Obama administration (or even in 2010 under a McCain administration as a Democrat Congress allows the tax cuts to expire), and what sort of action the administration and the Congress will take as tax revenues and economic activities erode?

We *will* live in interesting times.


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## Redeye (5 Nov 2008)

Well, given that Obama's tax plans really aren't that drastic, you are not going to see masses of high-income professionals suddenly decide that they no longer have any incentive to work.  To suggest so is utterly preposterous.

In any case, I'm glad it's over and done with - and with what I view to be the best possible result.



			
				Thucydides said:
			
		

> While I am delighted at your ability to win lotteries, the "strike" is driven by a combination of the immutable laws of economics (incentives and rewards as motivators to human action) and human nature. The only real question is how many people will take strike action under a putative Obama administration (or even in 2010 under a McCain administration as a Democrat Congress allows the tax cuts to expire), and what sort of action the administration and the Congress will take as tax revenues and economic activities erode?
> 
> We *will* live in interesting times.


----------



## a_majoor (7 Nov 2008)

> Well, given that Obama's tax plans really aren't that drastic, you are not going to see masses of high-income professionals suddenly decide that they no longer have any incentive to work.  To suggest so is utterly preposterous.



Raising marginal tax rates, removing caps on FICA and other levies and undermining welfare reform by introducing tax credits to people who do not pay tax *is* pretty radical. The stock market is already speaking (as it reacts to the prospects of future earnings) by dropping 500 points, and continuing down.

We not only need to be ready to react to counterproductive tax policy and protectionist legislation and regulation coming from the Congress and the Administration, but also potential collateral damage as other US trading partners react to protectionism and weakening US markets. 

http://www.pajamasmedia.com/instapundit/



> *Well, the stock market is certainly tanking:*
> 
> 
> Major indexes have lost about 10 percent since Barack Obama was elected president -- a vote preceded by a steep rally -- and the losses represent the Dow's worst two-day percentage decline since the October 1987 crash.
> ...


----------



## Redeye (7 Nov 2008)

Are the tax credits refundable or non-refundable - I got the impression in a quick read that they are non-refundable so really they just make sure more people at the lower end of the income spectrum come off the tax rolls.

The stock market is finding footing again - and its reactions to the election of Obama being president are difficult to isolate from the various factors impacting market movements.  Historically speaking, markets have done better under Democratic presidents, interestingly.

My biggest concern would be if Obama actually persues protectionist strategies, because you do not have to be a genius in the field of economics to know that protectionism is a bad policy decision.  I'm confident, however, that he will not take too many drastically protectionist steps.  He is not going to abrogate NAFTA, nor would I suspect that he would walk out on any other trade agreements.  I do like the idea of putting some emphasis on labour and environmental standards in future trade negotiations, but I don't see any real scope for renegotiation of existing deals on those grounds.

When it comes to taxes and budgets, clearly there has to be drastic measures and the work ahead is going to be very difficult.  The US Social Security system is unsustainable, the cost of the Iraq war is causing massive deficits, and that cannot continue.  What benefit has the invasion of Iraq created for the United States?  None that I can think of - certainly none that justifies the cost.  Perhaps if the supposed justifications for the invasion had been true (that Saddam Hussein had been in league with Al Qaeda, something anyone with a basic understanding of either would know is unlikely, or that Iraq had an active WMD program), then some benefit could be shown, but that is simply not the case.  As for other policy matters - FICA and such levies have to increase - or the benefits have to shrink.  Otherwise all that's happening is a massive debt is being accumulated that will simply have to be reckoned with by the next generation.  That's why I don't understand why Republicans claim moral high ground on fiscal conservatism, because it was Bill Clinton that balanced budgets and ran surpluses. George Bush doled out tax cuts while allowing spending to get completely out of control, and that has to be reconciled.  At some point the US will have to pay the piper, after all.



			
				Thucydides said:
			
		

> Raising marginal tax rates, removing caps on FICA and other levies and undermining welfare reform by introducing tax credits to people who do not pay tax *is* pretty radical. The stock market is already speaking (as it reacts to the prospects of future earnings) by dropping 500 points, and continuing down.
> 
> We not only need to be ready to react to counterproductive tax policy and protectionist legislation and regulation coming from the Congress and the Administration, but also potential collateral damage as other US trading partners react to protectionism and weakening US markets.
> 
> http://www.pajamasmedia.com/instapundit/


----------



## tomahawk6 (8 Nov 2008)

The the most common  tax credit is the Earned Income Tax Credit. You dont even have to have a kid to qualify just less than $12500 in income.



> The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
> 
> To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.
> 
> The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.


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## a_majoor (8 Nov 2008)

Redeye said:
			
		

> When it comes to taxes and budgets, clearly there has to be drastic measures and the work ahead is going to be very difficult.  The US Social Security system is unsustainable. As for other policy matters - FICA and such levies have to increase - or the benefits have to shrink.  Otherwise all that's happening is a massive debt is being accumulated that will simply have to be reckoned with by the next generation.  That's why I don't understand why Republicans claim moral high ground on fiscal conservatism, because it was Bill Clinton that balanced budgets and ran surpluses. George Bush doled out tax cuts while allowing spending to get completely out of control, and that has to be reconciled.  At some point the US will have to pay the piper, after all.



The only problem with this analysis is the proposed tax increases are large enough to provide disincentives to work and earn more income, but are not enough to generate the revenue required for the trillion or so in new spending promised by the President elect. The Speaker of the House is now weighing in with more stimulus packages as well. No cuts to benefits seem to be contemplated. By this point, with everyone holding a tin cup out to the new Administration and Congress, deficits and debt will either go totally out of control, dramatic spending cuts will have to be made or wealth will be confiscated in order to pay for it all (the rumblings about seizing 401K accounts might not be wishful thinking by the Left).

All these approaches entail problems, either dragging the US economy down further (and thus the trading partners like ourselves), igniting inflation or creating social chaos. (worst case, we can see all three). Of course the economic disincentives will create a John Galt "strike", even if it isn't a coordinated action; just millions of taxpayers fed up and adjusting their earnings downwards. I would expect the definition of "rich" to constantly be adjusted downwards, and the IRS deploying armies of accountants and police to try and find the money.

While we can all "hope" the Obama administration will "change" into a pragmatic, centrist administration, history would seem to suggest that will not be the case. The Democratic majority in the Congress will be emboldened to push hard, and there is nothing in the President elect's resume to suggest he will push back. President Clinton also tried to lurch left in his first term (and many of his proposals like Hillarycare are suspiciously like what is being proposed now), but his Presidency's record of fiscal responsibility and growth can be traced to Newt Gingritch and the "Contract with America", which provided a Republican majority in the Congress and essentially forced President Clinton's administration to govern as a (real) Republican administration. Too bad those lessons were lost after 2001....


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## a_majoor (9 Nov 2008)

The Wall Street Journal provides some sound historical perspective on the "Great Depression". The new administration and Congress seem determined to repeat the mistakes of the past, so we, as Canadians, need to start thinking about how we will deal with a large economic downturn and how we can "insulate" our economy from the external shocks that will soon be coming our way:

http://online.wsj.com/article/SB122576077569495545.html



> OPINIONNOVEMBER 4, 2008
> *Five Myths About the Great Depression*
> Herbert Hoover was no proponent of laissez-faire.
> 
> ...


----------



## Edward Campbell (12 Nov 2008)

Here is more, on the Canadian front, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site:

http://www.reportonbusiness.com/servlet/story/RTGAM.20081112.wflaherty1112/BNStory/Business/home


> Ottawa pushes to get credit markets working
> 
> RICHARD BLACKWELL and HEATHER SCOFFIELD AND JOHN PARTRIDGE
> 
> ...




While I am, philosophically, inclined towards a _”hands off, let the market solve itself”_ view, we are caught in a _subsidize everything_ spiral – approaching the point where well regulated, well managed Canadian banks are being subjected to unfair competition by the high level of US and European subsidies that, _de facto_, reward incompetent and dishonest management and poorly regulated systems. American and European banks that ought to be in the garbage dump - would be on the garbage dump if the national governments had been even modestly competent – are being given money that will allow them to grow and prosper in markets that would be, in some cases are, improperly, ‘closed’ to Canadian banks by virtue of too much 'easy money' in US and European markets.


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## a_majoor (13 Nov 2008)

Ayn Rand was right all along.....

http://corner.nationalreview.com/post/?q=YmEzNzFjOTVlM2I2ZmFiYjhjN2U0NzFmYThjY2FkYjU=



> *At What Point Does Atlas Shrug? *   [Peter Kirsanow]
> 
> During the presidential election campaign many were dumbfounded upon hearing for the first time that at least a third of Americans pay no income taxes whatsoever. The Tax Foundation notes that in 2006, 45.6 million filers (33%) paid no income tax whatsoever. Under current law, in 2009 47 million filers—representing approximately 96 million individuals— will pay no income tax.
> 
> ...


----------



## chanman (16 Nov 2008)

Thucydides said:
			
		

> One reaction to a putative Obama administration might be a John Galtian "strike" (read Atlas Shrugged). If this happens, the economic slowdown will have serious reprecussions, especially for us, since 85% of our exports go to the US. A permanent recession will make life tough for us (and the US recession will hurt all world economies, so there will be no one to take up the slack):
> 
> http://pajamasmedia.com/instapundit/



No strike.  Expect a boom in the underground economy though as the rewards for participating 'off the books' will be higher than before.


----------



## a_majoor (22 Nov 2008)

chanman said:
			
		

> No strike.  Expect a boom in the underground economy though as the rewards for participating 'off the books' will be higher than before.



Chanman, that is the practical unfolding of the strike.

If US political culture is changed because of the Obama Administration, then our and the world's long term prospects are much bleaker. Without the creative drive of the US economy to power the rest of the world, the global economy will stagnate (and us along with it)

http://www.usnews.com/blogs/capital-commerce/2008/11/21/how-tom-daschle-might-kill-conservatism.html



> Money & Business
> 
> *How Tom Daschle Might Kill Conservatism*
> November 21, 2008 02:00 AM ET | James Pethokoukis | Permanent Link | Print
> ...


----------



## chanman (22 Nov 2008)

Thucydides said:
			
		

> Chanman, that is the practical unfolding of the strike.
> 
> If US political culture is changed because of the Obama Administration, then our and the world's long term prospects are much bleaker. Without the creative drive of the US economy to power the rest of the world, the global economy will stagnate (and us along with it)
> 
> http://www.usnews.com/blogs/capital-commerce/2008/11/21/how-tom-daschle-might-kill-conservatism.html



Isn't it only a strike if you stop working?  Seems to be an unusual way of saying 'widespread tax fraud'


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## a_majoor (25 Nov 2008)

chanman said:
			
		

> Isn't it only a strike if you stop working?  Seems to be an unusual way of saying 'widespread tax fraud'



The John Galt strike is people stopping working or refusing to put forth all or even most of their energies to create wealth (downsizing companies, laying off staff, refusing to take on new clients or new contracts etc.) If you are not *making* wealth, then there is nothing for the State to tax or seize from you except your accumulated savings, and there are ways to convert those to forms which are illiquid or otherwise not usable for the State. Widespread tax evasion is a simple form of the Strike, and the growth of the underground economy is an attempt to escape from taxation and regulation. If you had the abilities of the hero's in "Atlas Shrugged", then living undetected in a hidden valley in Colorado might be just the thing for you. Lesser mortals like myself will have to be content with our abilities.

Even the most vicious police state or the most aggressive IRS tax auditors with sweeping powers cannot tax or seize that which does not exist, and certainly there is no known way to force people to work at their full potential (how do you know what a person's full potential is anyway?). A crackdown against the underground economy will simply displace money with barter or other forms of non monetary trade.


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## a_majoor (30 Nov 2008)

The "New" New Deal will be as effective as the old New Deal (i.e. not at all). This will have pretty predictable effects on us as well:

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/28/AR2008112802370.html



> *Same Old New Deal?*
> 
> By George F. Will
> Sunday, November 30, 2008; Page B07
> ...


----------



## tomahawk6 (1 Dec 2008)

China devalued the yuan by 70 basis points and is expecting growth next year of 7-9%.


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## a_majoor (9 Dec 2008)

This effect will have more fall out for Canada as the US economy has to digest this mess, but should also serve as a warning to the "Coalition of the Inept" and their supporters about the dangers of "stimulating" the economy:

http://www.rep-am.com/articles/2008/12/07/opinion/384217.txt



> *Government bubble bursting*
> 
> Remember in the 1990s when speculators irrationally bid up Internet companies' stock prices? They created the dot-com bubble, which burst in 2000 triggering the Dick Blumenthal Bear Market and 2001-02 recession.
> 
> ...


----------



## Edward Campbell (9 Dec 2008)

tomahawk6 said:
			
		

> China devalued the yuan by 70 basis points and is expecting growth next year of 7-9%.




Continued Chinese growth is good for Canada - China needs resources to grow and we remain a resource based heavy economy.

Our dollar has fallen a whole helluva lot more than 70 basis points (about 2,000 basis points actually!) so Chinese products have, effectively gone up in price here - making them somewhat less attractive relative to whatever homemade alternatives exist.


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## Edward Campbell (9 Dec 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is a report on a conference at Carleton University that may have some good advice for PM Harper – or whoever is PM in the coming months:

--------------------​http://www.theglobeandmail.com/servlet/story/RTGAM.20081209.wconference09n/BNStory/politics/home
Get close to Obama on economy and security, paper says

GLORIA GALLOWAY

From Tuesday's Globe and Mail
December 9, 2008 at 5:19 AM EST

OTTAWA — A group of influential foreign-affairs experts wants Prime Minister Stephen Harper to develop a close friendship with president-elect Barack Obama and forge deeper ties between Canada and the United States.

The belief that Canada should not get too close to its giant neighbour is the "mantra of elites," and most Canadians do not share such fears, says a blueprint for engagement between the two countries that was released yesterday by the Canada-U.S. Project.

"Stephen Harper and Barack Obama should work quickly to develop a strong personal relationship," it says, quoting a paper contributed to the project by Robin Sears, who was a member of Bob Rae's staff when Mr. Rae was leader of the Ontario NDP.

"For Mr. Harper, becoming the first Canadian prime minister to have a real friendship with an American president since Brian Mulroney, the risks are smaller than they may appear. Barack Obama is widely popular among Canadians, even Conservatives."

After the terrorist attacks of 2001 and amid the economic meltdown of 2008, the concerns on this side of the border should be that "the United States, battered and bitter, humbled and apprehensive, may retreat into Fortress America," the document says.

Time should not be squandered trying to find trilateral solutions to North American problems if they can more easily be resolved without the input of Mexico, it says.

"The addition of Mexico as a partner could, on some issues, muddy the waters," the blueprint says. "This is especially true on matters of defence, border security, the environment, Arctic development and regulation - issues which are either of limited concern to Mexico or where our own national interests are arguably more closely aligned with those of the United States ... "

The group is chaired by Derek Burney, a former Canadian ambassador to the United States who was part of Mr. Harper's transition team, and Fen Osler Hampson, director of the school of international affairs at Carleton University.

It began last spring to request papers from people such as Mr. Sears, who have a deep interest in Canada-U.S. relations. Those 16 papers and the resulting blueprint were presented at a conference in Ottawa yesterday. The document will be vetted to reflect yesterday's discussions and presented to Mr. Harper before Mr. Obama's January inauguration.

Canada must be ready, early in 2009, to deploy a strategy aimed at persuading U.S. political leaders of the need to pursue mutual homeland security and domestic economic objectives, the blueprint says.

"We think it's a unique opportunity when you have a change of administration of this kind," Mr. Burney said in an interview with The Globe and Mail. "We think it's a great time to be recalibrating the relationship on a whole host of issues."

Gordon Giffin, a former U.S. ambassador to Canada who participated in yesterday's conference, said of the blueprint: "Put that on the table; that will get the attention of the next United States government."
-----------------​
Two items certainly reflect my views:

•	"The United States, battered and bitter, humbled and apprehensive, may retreat into Fortress America" – this could be disastrous for Canada. For a generation and more we have put almost all our trade eggs in America’s basket. No matter what happens (almost) that market remains close, big, vibrant and _friendly_. We need to keep it that way; and

•	"The addition of Mexico as a partner could, on some issues, muddy the waters ... This is especially true on matters of defence, border security, the environment, Arctic development and regulation - issues which are either of limited concern to Mexico or where our own national interests are arguably more closely aligned with those of the United States" – NAFTA is not terribly important to Canada, nor, even, is the much discussed but still remote Free Trade Agreement of the Americas. Our *vital* interest is trade (and security) with the USA. We must focus on that. Mexico is a sideshow.


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## Edward Campbell (9 Dec 2008)

Here is a link to the Centre for Trade Policy and Law/Norman Patterson School of International Affairs' _Canad-USA Project_ referred to just above.


----------



## Kirkhill (9 Dec 2008)

E.R. Campbell said:
			
		

> Our dollar has fallen a whole helluva lot more than 70 basis points (about 2,000 basis points actually!) so Chinese products have, effectively gone up in price here - making them somewhat less attractive relative to whatever homemade alternatives exist.



That's a fact.

I got a quote for some equipment manufactured in Europe but sold via the US four monthe ago: $239,000  Cdn

It was approved 2 weeks ago.

Just got the udated price prior to submitting the final PO: $289,000  Cdn

Project Status?  Uncertain.


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## a_majoor (10 Dec 2008)

Not all Americans are protectionist or isolationist; Canada's unlikely champion is (none other than) the Governor of Alaska!

http://thesecretsofvancouver.com/wordpress/who-can-canada-count-on/environment



> *Who Can Canada Count On?*
> December 9th, 2008 Posted in environment
> 
> CTV:
> ...


----------



## Edward Campbell (10 Dec 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Ottawa Citizen_, is a report on the likely Canadian and world situations:

--------------------
http://www.ottawacitizen.com/Synchronized+global+recession+hard/1058543/story.html

 'Synchronized global recession' to hit hard

BY ERIC BEAUCHESNE

DECEMBER 10, 2008 5:04 PM

OTTAWA - Canada's economy will continue to contract until mid-2009, pushing the jobless rate above eight per cent and robbing Canadians of more than $50 billion in income, TD Bank projected Wednesday, abandoning a previously favoured more optimistic scenario.

"We are witnessing a rare instance in history of a synchronized global recession," it said in its grim forecast, issued in the wake of the Bank of Canada's acknowledgement this week that Canada is entering a recession. "At the heart of the global recession is the ongoing difficulties in credit markets, which know no borders."

The pessimistic forecast sees the U.S. economy suffering its severest recession since the the 1980s, shrinking by nearly two per cent next year, and the global economy expanding only 0.5 per cent, its weakest performance on records going back nearly half a century, it noted.

"Tumbling commodity prices will have a unique impact on the real Canadian economy . . . the equivalent of shaving $51 billion from domestic income," noted the forecast, which projects a 1.4 per cent contraction here.

According to a separate survey, the loss in income will be especially steep for a growing number of workers who will lose their jobs.

The survey by international consulting firm Watson Wyatt found that 44 per cent of employers have made or are planning layoffs or staff reductions, a finding that suggests last month's loss of 71,000 jobs, the worst in more than a quarter-century, was merely tip of the iceberg.

The November survey of 138 Canadian-based companies from various industry sectors also found that four in 10 will also freeze new hires, while nearly one-third have already made or will be going through organizational restructuring, though less than 20 per cent of those consider the staff changes significant.

"Although there is a high level of uncertainty in the market, employers are cautiously moving forward to deal with the challenges of the economic downturn," said Liz Wright, a compensation expert at Watson Wyatt Worldwide.

And according to the TD forecast, it's a downturn that will continue to deepen through this and the first two quarters of next year, pushing the national jobless rate, now at 6.3 per cent, to 8.2 per cent by the end of 2009. That's a rate that, despite the start of a recovery, will rise further to a peak of 8.4 per cent by mid-2010.

The fall in commodity prices, meanwhile, will continue to weigh heavily on investment income as well as employment earnings, it said. It projected that Canada's benchmark S&P/TSX composite index, which had already fallen 46 per cent by late last month, will sink another 20 per cent as the global recession deepens.

OPTIONAL END

That concern, however, was not evident on Bay Street Wednesday, as investors bid up the TSX to a triple-digit gain of 236.44 points to 8,634, and where one analyst projected a 20 per cent gain in the index to 11,000 by the end of next year. The gain here overshadowed a more modest 70.09 point rise in Wall Street's blue-chip Dow Jones industrial average.

However, the projection for the TSX by CIBC World Markets economist Jeff Rubin was far from a vote of confidence, and was couched in uncertainties.

"An increasingly challenging economic environment compels us to trim our market target for the TSX by 1,000 points to 11,000 next year," Rubin said. "While the implied 20-per-cent plus return warrants a full weighting in stocks, the near-term risks to the market from a contracting North American economy stand in the way of overweighting stocks at this point.

"We continue to expect the North American economy to contract over the first half of the year, with near-term punitive consequences for earnings," he said.

Still, Rubin projects that world oil prices, which closed at $43.52 US a barrel on Wednesday - less than a third of the $147 US peak reached last summer - will rebound to the $100 US level by the end of next year once the global recovery begins to take hold.

CNS 12/10/08 16:50:58

© Copyright (c) Canwest News Service
--------------------



The forecast that the TSX will hit 11,000 by the end of next year is cold comfort when one remembers that it hit 15,000 in the summer just past. There’s a _loooooong_ way to go on the road to recovery.


----------



## Edward Campbell (22 Dec 2008)

This report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, gives us some indications of what’s happening in the rest of the world:
--------------------
http://www.theglobeandmail.com/servlet/story/RTGAM.20081222.wglobalfin1222/BNStory/Front/home

 Japan recession deepens, China cuts rates

TOMASZ JANOWSKI AND RALPH BOULTON

Reuters

December 22, 2008 at 7:15 AM EST

SINGAPORE/LONDON — China cut its benchmark lending and deposit rates on Monday and Japan warned it was sliding deeper into a recession that is encroaching on the global economy, closing factories and throttling trade.

British central bankers said interest rate cuts alone would not cure growing global economic ills that began with a crisis in the U.S. housing market.

But figures showing the deepest plunge on record in euro zone industrial new orders were sure to fire expectation of more rate cuts in Europe.

The People's Bank of China announced its fifth cut in lending rates since mid-September, underlining the scale of problems facing the world's fourth-largest economy and the only major one that is still growing

The cost of one-year bank loans would fall to 5.31 per cent from 5.58 per cent, while the benchmark one-year deposit rate falls to 2.25 per cent from 2.52 per cent.

The world's second biggest economy Japan, which slashed interest rates to a rock-bottom 0.1 percent last week, reported the biggest ever drop in exports in November.

Compounding Japanese gloom, the world's top carmaker, Toyota Motor Co forecast its first ever group operating loss — of 150 billion yen ($1.7 billion) — due to a collapse in global demand and a crippling rise in the yen.

Interest rates were lowered almost to zero in the United States and Japan last week, but British central bankers — who have cut rates by three percentage points since October — warned that policy alone would not solve the financial crisis.

Bank of England Deputy Governor Sir John Gieve said Britain needed some form of new policy tool beyond the “blunt instrument” of interest rates and his colleague, Tim Besley, said monetary policy was not enough to bring Britain's flagging economy back to life.

“We need to develop some new instruments, which sit somewhere between interest rates, which affect the whole economy ... and individual supervision and regulation of individual banks,” Mr. Gieve told the BBC, without elaborating.

Traders and analysts polled by Reuters believe the Bank of Japan will early next year return to a policy, which it abandoned only in 2006, of flooding banks with cash to inflate the economy.

The U.S. Federal Reserve already ventured into that territory last week, slashing its benchmark funds rate to a range from zero to 0.25 per cent and promising to supply banks with unlimited cash and keep rates low over an extended period.

In Ireland, shares in the three main banks soared following a 5.5 billion euros ($7.7 billion) government injection that leaves one of them under state control.

The government announced late on Sunday it would make an initial investment of 1.5 billion euros in Anglo Irish Bank, giving it 75 per cent control of the lender.

Dublin will also invest 2 billion euros each in market leaders Bank of Ireland and Allied Irish Banks.

Pessimism about the global auto market, as well as banks and oils, prompted a 1.3 per cent fall in European shares.

European Union statistics office Eurostat said October euro zone orders fell by 4.7 per cent from September for an annual fall of 15.1 per cent — the deepest year-on-year fall on record.

The main reason was a 9.4 per cent monthly and a 33.3 per cent annual fall in orders for transport equipment.

Adding to the malaise, a Reuters Tankan survey showed business sentiment at the lowest in its 10-year history and Bank of Japan Governor Masaaki Shirakawa said worse was to come.

“The Japanese economy is deteriorating and for the time being its conditions are likely to become more severe,” he told business leaders.

The government's monthly economic report summed it up in a similar vein. “Economic conditions are worsening,” it said, the first time it used such an expression since February 2002.

Japan's November exports plunged 26.7 per cent from a year earlier, hit by a strong yen and sagging demand for its goods in key U.S. and Asian markets, including China.

(For a graphic on Japan's exports, click on https://customers.reuters.com/d/graphics/JP_EXP1208.gif ) 

Nonetheless, Tokyo stocks bucked the downward trend, rising 1.6 per cent, encouraged by the government's spending plans and Friday's $17.4 billion bail out of U.S. car makers.

A source said China's mammoth $1.9 trillion reserve stockpile shrank in October, which some economists say may mark a potentially worrying reversal to capital outflows.

Frantic global efforts may still fall short of what was needed to stave off the worst economic downturn since the 1930s, International Monetary Fund chief Dominique Strauss-Kahn warned.

“Our forecast, already very dark ... will be even darker if not enough fiscal stimulus is implemented,” he said in an interview with BBC radio on Sunday.
--------------------

Flooding the economy with cash, as this report suggests the Japanese intend to do, might help in countries (especially Japan but also, to a much lesser extent, Canada) where the savings rates are very high but it would be the worst thing to do in the USA where far too many people are already badly, dangerously overextended on their various and sundry credit lines. But Canada needs people, especially the nearby Americans, to buy our resources to build and buy new _stuff_ – roads and bridges and houses and cars. And buying Canadian _stuff_ requires cash.


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## GAP (22 Dec 2008)

But according to many reports I read, Canadian Banks are going to put this country in a world of hurt, unless they stop hoarding all the $$ made available to them and start lending big time. Yeah, they'll lose some, but at the rate they are withdrawing back into themselves, we might as well have done what the US has done, because we're reaping the (NON)benefits......


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## a_majoor (22 Dec 2008)

GAP said:
			
		

> But according to many reports I read, Canadian Banks are going to put this country in a world of hurt, unless they stop hoarding all the $$ made available to them and start lending big time. Yeah, they'll lose some, but at the rate they are withdrawing back into themselves, we might as well have done what the US has done, because we're reaping the (NON)benefits......



But who are they supposed to lend to? 

The government's rushing around with "stimulus" and "bailout" packages means there is no way to know who will be a good credit risk unless you know who is politically connected: the State is picking winners and losers. Your company might get government money, or it might be forced out of business because the government gave money to your competitors. Your customers might benefit or suffer because of the flood of government monies, making your business planning moot.

Incidentally, this is what happened during the "New Deal" in the depression of the 1930's, US production essentially collapsed in 1937 due to the endless uncertainty the New Deal created and the vast amounts of capital being sucked up in taxes. The "New New Deal" looks set to replicate the uncertainty effect and destroy capital by pouring it into failing business.


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## GAP (22 Dec 2008)

Excellent point regarding businesses, but does that justify the massive cutback of overdraft, credit line access to normally credit worthy customers?


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## a_majoor (23 Dec 2008)

GAP said:
			
		

> Excellent point regarding businesses, but does that justify the massive cutback of overdraft, credit line access to normally credit worthy customers?



Maybe not (although since your employer and hence employment is potentially at undefinable risk, _the bank_ might say this is justified), but the other factor is the banks are limiting their exposure to risk by pulling  access to credit. Since the true cause of the financial crisis is the imbalance between debt and wealth, banks are prudently rebalancing in the only way then can. Unfortunately, this may be moot as politicians start increasing inflationary pressures on the economy through stimulus and bailouts while demagogues use State power to force the banks to start giving out loans again (even though political manipulation of the mortgage market through Freddy Mac and Fannie Mae is one of the triggers of the current crisis).

Other business entities are also taking rational action to the increasing politicizing of the US economy. There are opportunities if we Canadians play our cards right:

http://cjunk.blogspot.com/2008/12/has-flood-of-fleeing-capital-begun.html



> *Has the Flood of Fleeing Capital Begun*
> 
> Are we already seeing a flood of capital leave America? Are corporations reading the writing on the wall, and moving to more hospitable locations?
> 
> ...


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## a_majoor (27 Dec 2008)

Will Canada start seeing economic refugees from New York and California? (If we have the right mix of taxes and regulations, Canada might be considered a better safe haven for the next four years)

http://www.thedailybeast.com/blogs-and-stories/2008-12-22/what-if-new-york-go-bust/



> *What If New York Goes Bust?*
> 
> by John Avlon
> 
> ...


----------



## Edward Campbell (28 Dec 2008)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _CTV News_ web site, is a pretty broad, general assessment of what some economists think *might* be in store for us in 2009:
-------------------
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20081225/Economic_forecasts_081227/20081227?hub=TopStories

Economists grim in their forecasts for 2009

Updated Sat. Dec. 27 2008 7:37 AM ET

Josh Visser, CTV.ca News

Can 2009 be as bad, or even worse, than 2008 for the global economy? The bad news is that yes, it's going to be a very bad year, but the good news is that Canada is expected to be better off than most countries.

The World Bank was dour in its 2009 forecast, projecting that global GDP growth of 2.5 per cent in 2008 will drop to a mere 0.9 per cent in 2009.

Even worse for North Americans is that the World Bank expects most of the GDP growth to be in developing countries, with high-income countries likely to experience negative growth.

The Institute of International Finance, which represents 70 of the world's biggest banks, is even more grim. The institute says that it expects the world's economy will shrink next year, the first time that has happened in 50 years. The group says the global economy will shrink by 0.4 per cent.

Halfway through December, even the usually-optimistic Finance Minister Jim Flaherty finally admitted that Canada was headed for a deficit and a recession.

"2009 is going to be a difficult year for Canada and for Canadians," Flaherty said in Saskatoon on Dec. 17.

A report from RBC Economics says that it does not expect to see any growth in the Canadian economy at all in 2009 and that Canada will enter a technical recession.

"We expect the slowdown in Canada not to be as severe as in other countries since the imbalances plaguing other countries are more pronounced," Craig Wright, chief economist at the Royal Bank of Canada, said in the report.

*TSX to recover .. but when?*

On the Canadian stock exchange, CIBC forecaster Jeff Rubin, expects to see 20 per cent growth for the Toronto Stock exchange, but for most of those gains to take place in the latter half of 2009.

"While the implied 20-per-cent-plus return warrants a full weighting in stocks, the near-term risks to the market from a contracting North American economy stand in the way of overweighting stocks at this point," he said in a message to clients.

Falling oil prices particularly hurts the TSX in the short-term and the expected, though not guaranteed, positive response of a massive stimulus package from Washington may not be felt until summer 2009.

Wright said in the RBC report that Canadian economic recovery should begin in the latter half of 2009.

Ottawa's full response to the economic crisis is still an unknown, but the Prime Minister Stephen Harper has said his next budget will include a massive economic stimulus package and may go as far as $30 billion into deficit.

Obviously, the biggest unknown for Canadians is what will happen to the auto sector. Billions are being allotted to automakers by both Washington and Ottawa, but there are no guarantees that the Detroit 3 will survive in their current form.

Even with the massive amount of bailout cash from the U.S. government, Chrysler only has enough cash to make it through March, at which point its future veers into the unknown. Its parent company Cerberus has said that its wants to turn the company around, but it has also shopped Chrysler to General Motors.

A report prepared by the Ontario government suggested that Canada could lose almost 600,000 jobs if the Detroit 3 go out of business, although it's highly unlikely that all three could go under in 2009. Ford says it has enough cash to stay afloat for all of 2009, though not much more.

Retailers are also expected to be in a tough year, especially for shops in high-end electronics or those selling products seen as superfluous. However, budget friendly megastores like Wal-Mart are expected to thrive in the 2009 economy.

Even the videogame industry, which was widely considered recession-proof, appears to be limping into 2009, with gamemaker giant Electronic Arts announcing plans in December to lay off 10 per cent of its workforce.

2008 was all downhill and 2009 will no doubt continue that trend. It's merely of matter of when in 2009 does the economy finally hit rock bottom and how deep that will be.
--------------------

There appears to be an emerging consensus that America and Asia will find the “bottom” in 2009 and, therefore, will be ready and, hopefully, able to begin a turn around. Europe appears to be in deeper trouble and may not find “bottom” until later – 2010, even 2011. 

A prediction of a 20% growth in stock market values is weak but welcome news; markets have shed very nearly half of their value since the TSX hit 15,000 in Jul 2008. Twenty percent brings us to 10,000 – there’s still a long, long way to go before individual investors and big pension plans have regained anything like their mid '08 values. Look for two or three “lost years.”


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## a_majoor (31 Dec 2008)

If the Obama administration carries out their agenda, then they can look for this. Our economy will tank along with theirs (but if we can reverse course on our own excessive taxes and regulations, then we have a better chance.) This is in distinct contrast to what the Liberals, NDP and Bloc are calling for (along with the pundits and other talking heads):

http://online.wsj.com/article/SB123059756486341161.html



> *New Jersey Is the Perfect Bad Example*
> Obama should look here to see what high taxes do.
> 
> By WILLIAM MCGURN
> ...


----------



## Edward Campbell (31 Dec 2008)

There’s a flaw in the “let the people keep their money” argument: the people want, indeed demand social services and they believe – with considerable good evidence – that governments can provide “better” social services (than the private sector) at acceptable costs.

The particulars (e.g. government is a “better” social services provider) are arguable but the basic *fact* that people want publicly funded services is not. Public funding of social (and other) services requires taxes.

I have argued and still do that, generally:

•	Income taxes on businesses are counter-productive. The company is, simply, forced to perform – at some considerable cost – a bureaucratic function: collecting a consumption tax from consumers and then sending the tax revenues to the government;

•	All income taxes are counter-productive because they are, essentially, taxes on savings which means that they are taxes on investments which means that they are taxes on jobs;

•	If all income taxes are bad and corporate taxes are worse then all that’s left are poll taxes, property taxes and consumption taxes;

•	A poll tax has the advantage of being ‘fair.’ It says if you’re here, alive, in this political jurisdiction (city, province country) then you pay an equal share for the ‘common’ services all those in this jurisdiction enjoy: the national defence, for example, that is provided, equally, to all, rich and poor, citizen and visitor, alike;

•	Local property taxes are a useful way to pay for local services. The problem with most property tax regimes and most local services is that the former are poorly designed and even more poorly administered and the latter are, too often, most often poorly provided at far too high a cost due to uncompetitive practices – consider, just for example, ‘public transit’ in Japan which is cheap, efficient and, generally regarded as amongst the world’s best, and is provided by a mix of *competing* public and private corporations;

•	Consumption taxes are simple, easy and, when sensibly administered, fair, too. They have one great advantage: after a certain point (a “basket” of essential goods and services), they are *discretionary* – you can avoid paying taxes by saving (and investing and creating jobs) rather than by consuming above a sensible, comfortable level. Properly administered consumption taxes also ‘catch’ the rich as efficiently as the poor – something most other taxes fail to do.

As long as people want, nay demand public services and as long as they insist on having public services that are inefficiently, uncompetitively (often even corruptly) provided the there must be taxes – often substantial taxes. What we – and New Jersey - can do is:

•	Recognize that there is only one taxpayer – the individual. The only question is: how are taxes collected from individuals?

•	Collect taxes as efficiently and effectively as possible;

•	Design tax regimes that do not punish the poor and do not allow the rich to avoid their ‘fair’ share of taxes;

•	Design tax regimes that do not damage the economy by punishing those who create jobs – savers and investors; and

•	Provide public services in an efficient, effective (which usually means competitive) manner. 

In New Jersey, like e.g. Ontario, and in the USA, as in Canada, almost all tax regimes punish both the productive and the poor and waste the money that is collected on ineptly provided services. The people want services, they get waste and corruption.

Lowering taxes doesn’t help much; it addresses one symptom, not the real problem. Providing effective services efficiently helps, so does using a sensible tax regime. Do those two things and taxes will lower themselves.


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## foresterab (31 Dec 2008)

Not sure if this belongs here or in another topic but an interesting read.

NEWS FROM Globeandmail.com  

Comparative costs and the U.S. sinkhole, er, bailout
NEIL REYNOLDS
00:00 EST Wednesday, Dec 31, 2008
  

Ottawa -- What's a billion? What's a trillion? What's $8.7-trillion (U.S.)? What's $10.4-trillion? James Bianco, president of Chicago-based Bianco Research Inc., provides specific answers to each of these questions - helping, in the process, to make these numbers comprehensible.

Mr. Bianco calculated the contemporary cost of a number of historic U.S. events, adjusted these costs for inflation and compared them with the combined cost of the U.S. bailout of financial institutions - either spent or pledged in the autumn meltdown of 2008. 

This much becomes crystal clear: President Franklin Delano Roosevelt's New Deal was (in comparative terms) downright cheap.

Here's are some of the key calculations in Mr. Bianco's analysis.

In 1803, President Thomas Jefferson paid France $15-million for land that now forms 25 per cent of the United States. Adjusted for inflation, the Louisiana Purchase cost $217-billion in 2008 currency.

From 1932 through 1939, President Roosevelt's expenditures on the New Deal consumed $32-billion - or $500-billion in today's currency.

In the years following the Second World War, the U.S. spent $12.7-billion on the Marshall Plan reconstruction of war-torn Europe - or $115-billion in today's currency.

From early 1950 through 1953, the U.S. spent $54-billion to wage the Korean War - or $454-billion in today's currency.

From 1961 through July 16, 1969, the U.S. spent $36-billion on President John F. Kennedy's race to the moon - or $237-billion in today's currency. (President Kennedy had promised to put an American on the lunar surface "before the end of this decade.") 

From the late 1980s through the early 1990s, the U.S. spent $154-billion to compensate the clients of 747 bankrupt S&L (savings and loans) institutions - or $256-billion in today's currency.

In the Vietnam War (1955-1975), the U.S. spent $111-billion - or $698-billion in today's currency.

In the Persian Gulf war (1990-1991), the U.S. spent $550-billion to oust Iraqi dictator Saddam Hussein from Kuwait - or $597-billion in today's currency.

Add the costs of all these events together and you get a total - in today's currency - of precisely $3-trillion, which is close to the actual deployment of bailout money in the economic meltdown thus far: $2.8-trillion. But this $2.8-trillion is only a small part of the $8.7-trillion that various U.S. agencies and institutions have pledged. To accumulate enough historic spending to match this higher number, you would need to throw the most costly enterprises of the country onto Mr. Bianco's list. Arbitrarily, let's add the global cost of the First World War ($2.6-trillion in today's currency) and the U.S. costs in the Second World War ($3.6-trillion in today's currency). Total: $9.2-trillion. 

These expenditures now exceed U.S. bailout commitments by $500-billion - an amount, incidentally, that would cover the cost of putting a human colony on Mars and of meeting all of the UN's millennium goals (among other things, eradicating extreme poverty from the Earth) by 2015. But the $8.7-trillion, thus far, in meltdown commitments - such as liquidity directed to financial institutions - does not include the stimulus package already approved by Congress - known as the Troubled Asset Relief Program, or TARP - which exceeds $700-billion, or the expenditures that will be approved early in 2009 when president-elect Barack Obama takes over the White House. The Obama team has signalled its intention to enact a stimulus package worth $1-trillion. Combined with the stimulus package already enacted, the combined bailout costs rise to $10.4-trillion ($8.7-trillion in tranquilizers for Wall Street, $1.7-trillion in stimulants for Main Street).

There's yet another global expenditure that helps put the U.S. bailout program in perspective. In his celebrated warning on global warming, British economist Lord Nicholas Stern put the future cost of controlling climate change at $9-trillion - expressed in 2006 dollars, though expended over the next hundred years. In other words, the U.S. Federal Reserve could apparently finance the global-warming expenditures of the entire world, for the next hundred years, simply by printing precisely the same quantity of cash it has casually printed to thwart deflation in the last three months.

The U.S. response to a deflationary recession appears excessive. The size of the American domestic bailout now approaches U.S. GDP itself ($14-trillion). What happens when your bailout costs exceed your GDP? Mr. Bianco answers with the suggestion that economists "use the number infinity" in calculating final bailout costs. "No one understands these numbers," he says, "and I include the Treasury Secretary [Henry Paulson] and the chairman of the Federal Reserve [Ben Bernanke]."

As for Canada, we look thrifty - yet still modestly heroic - in comparison. Finance Minister Jim Flaherty talks up a stimulus package worth $30-billion (Canadian). This compares historically to the costs Canada incurred in the First World War ($1.6-billion in 1918 currency, $22-billion in today's currency). Yes, there were only nine million of us in 1918, and there are 30 million of us now. But it's wise, strategically, to hold something in reserve. We are probably in the first skirmish of a protracted war


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## Kirkhill (31 Dec 2008)

E.R. Campbell said:
			
		

> There’s a flaw in the “let the people keep their money” argument: the people want, indeed demand social services and they believe – with considerable good evidence – that governments can provide “better” social services (than the private sector) at acceptable costs......



Mean Tendency:

When companies conduct surveys to determine whether or not their product is acceptable they offer panelists choices rated on a scale of 0 to 10.  They seldom get 0s and they seldom get 10s.   People tend to recoil from extremes and cluster around the middle, or the mean.

In North America you usually hear the term Middle Class used in conjunction with those that work for a living.  And everyone considers themselves Middle Class.

Myself, I occassionally finding myself feeling sorry for myself as I am short, fat and ugly - but a walk through a mall quickly clears that misconception up because I rapidly determine that there are those that are shorter, fatter and uglier (although perhaps not in such exquisite combination).  I can convince myself that I am not far off the norm.

Everybody wants to believe that they are the norm. Everybody sees themselves as being Middle Class.

Governments survive by appealing to this Mean Tendency.



At the same time individuals, acting out of self interest, are always looking for the best bargain available - and yet they don't want to appear to be self-interested (a common cover is "I'm doing it for my kids.")


What the Government offers to the Majority of the population is a sweetheart deal that they can't refuse.  It is the promise of services that they can't afford on their own income.  At that point we are all only too happy to chip in a dime for a dollars worth of services secure in the knowledge that it won't be us that are covering the other 90 cents.  And most folks don't much care where that money comes from.

It can come concurrently from other subscribers that don't currently need the service (the basis of an insurance plan).
It can come from the historical contributions of yourself and other subscribers (a combination of savings and insurance)
It can come from future contributions of yourself and other subscribers (debt financing).

But ultimately, the expectation of the individual is that they will get out of the Government more than they put in.  The unacknowledged truth is that we expect those that have more than us to pay for our services.  This is pure self-interest at work.  Other folks would call it greed.

The problems arise when your dime doesn't get you a dollar return.  

As the demand for services goes up.  As the cost of the service goes up.  As the number of claimants goes up then your dime only buys you a half-dollar of services.  Pretty soon the government comes looking for a quarter  from you to cover the pot.

At that point your 10:1 return is reduced to a 2:1 return.

Soon enough you're sending the government a quarter and getting a dime's worth of services as your money is directed to the more deserving cases and the bureaucrats that administer the schemes - and then you discover the value of doing things for yourself.

In Canada that is the point we have acheived in Health Care.   The Americans have yet to learn their lesson.  They still think there are rich people to soak.  And that is even more true of the Third World.


The problem is not "letting the people keep their money".  It is "forcing people to keep their money".  Or, more commonly expressed, live within their means.


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## Edward Campbell (1 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from yesterday’s _Ottawa Citizen_, is an article reflecting the views of one of Canada’s premier financiers, Claude Lamoureaux:
--------------------
http://www.ottawacitizen.com/columnists/Claude+Lamoureaux+think+people+greedy/1129174/story.html

Claude Lamoureaux: 'I think people got greedy' 

BY BARBARA SHECTER

DECEMBER 31, 2008

Claude Lamoureux is former president and chief executive of the Ontario Teachers' Pension Plan Board. Before his retirement in 2007, assets in the Teachers' pension had grown to more than $100-billion. Previously, Mr. Lamoureux was a senior executive with Metropolitan Life in Canada and the United States, rising through his 25 years with the company to lead MetLife's Canadian operations.

In 2002, Mr. Lamoureux co-founded the Canadian Coalition for Good Governance to push for improved corporate governance practices at Canadian companies. After the dotcom meltdown, he was on a committee that studied analyst standards and proposed recommendations to avoid conflicts of interest. A fellow of the Canadian Institute of Actuaries and the Institute of Corporate Directors, Mr. Lamoureux is now an active board member on companies including Maple Leaf Foods, and is co-chair of a C.D. Howe Institute advisory panel on pensions. He spoke to Barbara Shecter, the Financial Post's securities industry reporter, about bailouts and personal responsibility in investing.

*Q*: Is this downturn the worst you've ever experienced?
*A*: Obviously the market is pretty bad. But when you look at the economy, at least in Canada, unemployment is still not at a record high. Clearly there will still be demand for oil and gas, and even though the prices are low, I've actually seen the price of oil below that. 

What we're all afraid of is what will happen today, what will happen tomorrow. To me, you have to stay positive and ask: How are we going to get out of this?

*Q*: How are we going to get out of this?
*A*: I'm not a big fan of the government bailout.

*Q*: What's the alternative? Should companies such as big banks and GM and Ford be left to fail?
*A*: There's CCAA, these laws worked 20 years ago. That's the beauty of the capitalist system. If a company doesn't have demand for its product, it has to go out of business. Bailouts remove discipline from the economy. This even [applies to the frozen market for] asset-backed commercial paper, if you look at it. People took high risk [and] there has to be a discipline. Why is the government responsible at the end when people lose money? These people took risks and didn't do their homework.

*Q*: What about the argument that the government and regulators failed to protect investors by making sure investment products were appropriate?
*A*: I think I blame people more than governments.

Products were over-complicated and people should have stayed out of it. Why should the country bail out people who tried to get slightly more interest than government paper. I have a cottage in the Eastern Townships. [Why should] people there who are doing honest, hard work have to bail out people who were taking risks and probably should have known what they were doing. When I look at investments, keeping it simple is probably the thing most people should do.

*Q*: It sounds like you're saying that failing to keep it simple got the markets and economy into the current predicament. Is that the case? How did we get here?
*A*: One word: Greed. And lots of it. I think people got greedy and we tended to believe stories that didn't make sense. When somebody comes in with something that can't be explained on one sheet that's 8 1/2" by 11" stay away from it. The problem with investments [tied to sub-prime mortgages and collateralized debt obligations] in the U.S. -- you could see it coming -- it didn't make sense but nobody wanted to stop it. A lot of it was driven by greed, the greed of management who wanted a huge payout. They were gambling with shareholders' money and we know what happened. They got paid out and the shareholders got nothing... and the board [of directors] didn't ask enough questions.

In the end, we are where we are. When Goldman Sachs sells a product to people that they themselves short, there's a problem.

The question in the financial services sector [should be]: Would I sell this to my parents? My brother? My sister? I don't mean to pick on Goldman Sachs, but there should be laws against that.

*Q*: But there were willing investors in these complex products because everybody was chasing yield, especially with interest rates so low for so long. Wasn't this inevitable?
*A*: There's nothing wrong with bonds and stocks. That's where most people should be. I'm [also] a big fan of i-shares and exchange- traded funds. But now they're selling products that pay double if the index goes up, or lose double if it goes down.

Why? Because the one in between makes more money. The intermediary is trying to extract more than their share.

*Q*: So how do we break these bad habits? What should people focus on?
*A*: We're all benefiting from low interest rates when we borrow mortgages. We all want to borrow at low rates but we want to invest at high rates. We have to go back to fundamentals. One, keep things simple and two, don't try to be too greedy when interest rates are low. I've lived through the 1980s when interest rates were 18% and that's not fun either. Inflation is also low, and a low inflation rate protects value.

So if you're a saver, you should be grateful of that.

And let's go to an area I know: pensions.

How many of them use realistic assumptions to value their liabilities? It's not popular [even among regulators and politicians].

When the markets are good, everybody wants to value at market. When they go against... people always want to change the rules. We all believe in the tooth fairy -- someone will come later to sort it out.

I think there was always some element of this, but it's pushed here to the extreme. I don't think, in the end, people worry about the future. The motto of the Canadian Institute of Actuaries is: We worry about the future. It's not a bad motto.

bshecter@nationalpost.com 

© Copyright (c) The Ottawa Citizen
--------------------


No matter what one thinks about the aborted takeover of Bell Canada Enterprises,* M. Lamoureaux is one of Canada’s most successful businessmen and his views should help us all to understand what went wrong – _”One word: Greed. And lots of it”_ -  and where we ought to be headed – _”We have to go back to fundamentals. One, keep things simple and two, don't try to be too greedy when interest rates are low.”_ 


---------------
*Organized, we’re told, by Lamoureaux’ protégé (and former CF officer) Jim Leech (son of the late Brig George Leech (Comd 2CIBG/Petawawa, _circa_ 1960 - when I was a young soldier) and younger brother of MGen (ret’d) John Leech (Signals)


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## a_majoor (1 Jan 2009)

Kirkhill said:
			
		

> At the same time individuals, acting out of self interest, are always looking for the best bargain available - and yet they don't want to appear to be self-interested (a common cover is "I'm doing it for my kids.")
> 
> 
> What the Government offers to the Majority of the population is a sweetheart deal that they can't refuse.  It is the promise of services that they can't afford on their own income.  At that point we are all only too happy to chip in a dime for a dollars worth of services secure in the knowledge that it won't be us that are covering the other 90 cents.  *And most folks don't much care where that money comes from*.



*But some people do*, and when they are demanding payment the entire house of cards is coming down. The imbalance between wealth and debt is the true cause of the financial crisis, so regardless of "demands" by the voter, things will have to be scaled back to something that can be afforded *one way or another*.

The smart choice would be a controlled drawdown of State expenditures, with a concurrent reduction of the tax burden (and ideally the restructuring of the tax system along the lines Edward has pointed out).

The bad choice is to try to sweep the problem under the rug or organize wealth destroying bailouts. The "invisible hand" can wrestle the "grasping hand" of government to the ground, and a string of collapsed programs and government bankruptcies (as is beginning to happen to American municipalities and may actually happen to the States of New York and California) will be messy and unpleasant to all. The ripple effects will be much greater than allowing private firms like General Motors to file Chapter 11, and if the chain reaction happens fast enough, the effects could be devastating and far beyond anything that we have seen to date.


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## Kirkhill (2 Jan 2009)

Thucydides said:
			
		

> *But some people do*, and when they are demanding payment the entire house of cards is coming down. The imbalance between wealth and debt is the true cause of the financial crisis, so regardless of "demands" by the voter, things will have to be scaled back to something that can be afforded *one way or another*.



That's a true story.

And, as you say, failed governments (national corporations) are not failed companies (private corporations).  If government fails then we can hope that the transition to another, acceptable regime is handled at the ballot box.  Otherwise you risk trading bullets for the last can of baked beans at WalMart.

So the question is how much pain can you inflict before the body politic cries "enough"?


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## Edward Campbell (2 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Financial Post_, is another _survey_ of what went wrong (“the worst betrayal of capitalist principles by people with economic power in the history of capitalism”) and what should we do (“[the Canadian] government will need to correlate their efforts with the U.S. government”):
--------------------
http://www.financialpost.com/news/story.html?id=1133059

 Donald Coxe: 'I Have Seen Economy Worse'

David Pett, Financial Post Published: Friday, January 02, 2009

_Donald Coxe is a 35-year veteran of the Canadian investment community with experience as an advisor, strategist and money manager.

Mr. Coxe announced this month that he will step down as global portfolio strategist of BMO Financial Group to establish his own independent firm, Coxe Advisors LLC. He maintains his role as portfolio consultant to BMO's Coxe Commodity Strategy Fund and will continue to publish his portfolio strategy journal,_ Basic Points_.

A true "renaissance man," Mr. Coxe is also an historian and lawyer, who has served as an associate editor of _National Review_ magazine in New York, and general counsel for the Canadian Federation of Agriculture.
He has been chief executive of a Canadian investment-counselling firm, a strategist on Wall Street and CEO of Harris Investment Management Inc.

Earlier this year, he received the National Post/StarMine lifetime achievement award for excellence in investment research. He spoke with _Financial Post_ reporter David Pett._

*Q Have you ever seen the global economy in worse shape?
A* Yes, I have seen the economy in worse shape. I got into this business in 1972 and I can tell you that the economy was in worse shape in 1974 and 1975. The early '80s, when [former U.S. Federal Reserve governor] Paul Volcker had to end the inflation spiral and interest rates got to 20%, was also a very bad time. Those were two scary times, and I am a survivor of both. These days I find myself spending a great deal of time dealing with people who, coming into the business much later than I did, think the only comparison now is with the Great Depression.

*Q How is this crisis different from other economic crises in the past?
A* One of the reasons it is different is demographics. Back in '74-'75, we had millions of young people coming out of high schools, colleges and universities in the OECD countries looking for jobs and there simply were none. The crisis today is partly because we don't have young people coming out now. Starting in 1971, the birth rate collapsed across the OECD countries and so now we are faced with our first downturn that resembles a Japanese-style situation. Japan had that idiot run-up of real-estate prices in the '80s, and it was bound to be a big collapse because by the mid-'80s they were producing more morticians than obstetricians. That is the state that the OECD finds itself in. Each new generation is 60% the size of the previous generation, so we are not going to get enough new young workers and enough family formations. The idea that real-estate prices will continue to go up is unmitigated idiocy.

*Q And the crisis in the early 1980s?
A* During the 1981-'82 cycle, interest rates were 20% compared to now where they are zero. Obviously that's a dramatic difference.

*Q How did we get here?
A* We got here through the worst betrayal of capitalist principles by people with economic power in the history of capitalism. It was a very few people, all men on Wall Street and in London, who stopped being bankers to become promoters of structured products, which were based on bad mathematics. They thought they could sell them to greater fools without an impact to the greater economy. In doing so, they created a financial crisis that was entirely unnecessary. I'm not saying they committed crimes, but as far as I'm concerned, people like Stanley O'Neal, [former CEO of Mer-rill Lynch] and Jimmy Cayne, [former CEO] of Bear Stearns, should not be allowed to have memberships in good clubs hereafter and society should indicate to them that they are pariahs.

*Q Is there any silver lining to the current crisis?
A* One positive is that it might get rid of the shadow banking system, which worked with these Wall Street malefactors to come up with unrealistic prices for these "Jurassic Park" products that have attacked the whole global financial system.

*Q Is the policy response to date the right one to get us back on track?
A* This has achieved the impossible. The governments and central banks of the OECD countries are implementing the strategies recommended by the two greatest economists of the 20th century, both of whom didn't agree on anything. What you have are the monetary policies of Milton Friedman blended with budget deficits and pump-priming strategies of John Maynard Keynes. Everything being offered by the great economists is being tried at the same time, therefore, you have to assume we are going to get out of this mess. However, the fact that these two economists disagreed with each other, largely because of the implication of their theories on inflation, leads me to believe that when we get out of this current mess, we are going to be faced with another severe inflation challenge two or three years from now. Of course, we have to get out of this mess first. If you are running away from a bear but potentially running into the path of tigers, you must keep running away from the bear. That said, we are probably going to see some tigers.

*Q If you were running the country what would you do?
A* I commend the Canadian government on holding back on doing anything drastic because Canada was for a time avoiding the worst of this. But now it appears the real-estate cycle has moved into Canada, bringing with it a meaningful risk to the market. Central Canada is also faced with the possible bankruptcy of the Big Three auto-makers, so government will need to correlate their efforts with the U.S. government. One thing I would not do is assume the commodity industries in Canada are going to be in a recessionary condition forever. They are still the national treasures and if bids are made to take out the oil sands companies while they are depressed on US$40 oil, the government should not let them go because of the knock-down price. There are only a limited number of large world-class assets left in Canada.

*Q What's been your leadership role as a well-respected member of the investment community?
A* I think it's important for me to help investors keep their perspective. At some point, we switched from saying this is a downturn to the belief that things are worse now than at anytime since the Great Depression. That's a great leap, and I reject the analogy. For example, we had 40% unemployment in the Great Depression. Now it's 7%. So it is neither reasonable, nor sensible to tell people during a downturn like this that it could be the worst thing since the Great Depression. I do believe that it is important to use history, not abuse it.

*Q Once the dust settles on the economic crisis, what other challenges lie ahead for us?
A* I believe the next big challenge we have to face is the global food crisis. I'm working with the University of Guelph right now and in the spring we are organizing a colloquium, where we bring together scientists and investors to talk about solutions to the food shortage.
-------------------


Mr. Coxe’s comments about the 20% inflation during the disastrous Trudeau/Chrétien turn at the economic wheel are well taken. I remember those days – when people with good credit and good jobs were walking away from their mortgages because inflation – fuelled in part by irresponsible government spending – was out of control.

It is interesting to note that he thinks Harper/Flaherty were, on balance, justified to be cautious and to move slowly in Oct/Nov 08.

It is equally interesting to note that he thinks our resource based economy may see us ‘out early’ from this recession.


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## Edward Campbell (6 Jan 2009)

Jeffery Simpson has long been a fan of, _inter alia_, a weak dollar, closer and closer economic, but not *political*, integration with the USA so, here, in a column reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, he gives us his views on what went wrong in the USA – a shallow analysis with which I, broadly, agree – and what it means for Canada:
--------------------
http://www.theglobeandmail.com/servlet/story/RTGAM.20090105.wcosimp06/BNStory/specialComment/home

 Forecast: Our economic fate remains entwined with that of U.S.

JEFFREY SIMPSON

From Tuesday's Globe and Mail
January 6, 2009 at 12:00 AM EST

No one precisely knows how bad the economy will be in Canada in 2009. The forecasters, predictably, do not agree, except that the economy will contract, unemployment will rise and fiscal deficits will again become the order of the day.

Canada's economy is joined at the hip with that of the United States. So consider this, when trying to figure out whether our recession will be short or mild: Since mid-2007, Americans have lost about a quarter of their net worth. That's one-quarter in 18 months!

The best intentions, most uplifting rhetoric, and huge stimulus package presented by Barack Obama after he takes office on Jan. 20 will not easily or quickly fill that loss of net income.

Where did the lost income go? Americans are homeowners. Their government encourages them to buy homes, with such policies as mortgage-interest and property-tax deductibility. And in the years of easy money, low interest rates and a glut of savings coming from offshore, housing ownership grew, as everyone assumed (wrongly) that prices would continue to soar.

So the biggest loss to Americans came in the value of their homes as the housing bubble collapsed - from $13-trillion in early 2007 to $8-trillion today. Retirement income fell. So did savings and investment income of almost all kinds. Pension funds dropped. The total household loss is in the range of $8-trillion.

That's the cost for households. On the government side, the Bush administration fought two wars while cutting taxes, let spending rip and, not surprisingly (the laws of arithmetic being what they are), ran eight consecutive years of deficits, thereby driving up U.S. government debt. And that was before the economic tsunami of 2008, the first stimulus package and the one now being crafted by Mr. Obama.

If that package is as large as reports suggest, it would drive the U.S. federal deficit well above $1-trillion, or into the range of about 7.5 per cent of GNP. And since the U.S. banking system is damaged, and consumers are highly indebted anyway, that deficit, like the previous ones, will have to be financed offshore, largely in Asia and specifically in China, which is already holding $2-trillion of foreign exchange reserves, the largest being U.S. dollars.

The downdraft in household net income is producing a consumer recession. For many years, other countries coasted to greater prosperity on the buoyant spending habits of U.S. consumers, who borrowed heavily, as did the federal government. Now that engine has gone into idle in some areas, and into reverse in others. And that means trouble for Canada, a country highly dependent on the U.S. market in most industries from commodities to manufacturing to services.

Americans, in general, won't be buying or travelling as much. When (if?) they get disposable income, many people with debt loads will try to reduce them. There has already been a pulling in of the horns by consumers, and by state governments that must balance their budgets but cannot with expenditures now running ahead of depressed revenues.

To put this another way, a massive, long-term and unbelievably costly recapitalization of the United States - its financing institutions, taxpayers, businesses and governments - will be required before the country's economic engine can fully restart. The debts are so large, the government's investment (read nationalization in another context) in the financial sector so huge, the deficits so great, and the lost household income so striking and painful, it will take years - how many must remain obviously unknown - for the recapitalization to be over and the country restored to some semblance of balance.

It was Canada's fate to be so closely tied to the U.S. economy that the country's economic space was North American while its political space remained Canada, a happy conjuncture with a buoyant U.S. economy. For much of that time, we covered weak productivity and competitiveness with a low dollar. But its rise, courtesy of oil and other commodities, exposed all the things we had not done.

As the U.S. economy got sicker, with debts rising and an unwillingness to face economic realities blinding consumers and the Bush administration - until the collapse occurred - Canada's fate was to be dragged along and, therefore, down by the American recession.
--------------------


There is some room for dispute within Simpson’s analysis. Some (many?) economists believe that Americans will spend when they get some disposable income, despite the fact that they *should* try to reduce their debt loads. The urge to spend and a concomitant reluctance to save seems, to some, ingrained in the 21st century American psyche.

Predictably Simpson gets in a bit of Bush bashing – despite the fact that several administrations and congresses and the _punditry_, going back 20+ years, must share the blame for the current crisis.

Simpson is right about one big thing: we, Canada – citizen, politicians and the _chattering classes_, ignored our woefully low productivity for too long. That has to change.


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## Rifleman62 (6 Jan 2009)

I agree with you. Canada's reported woefully low productivity has been acknowledged and ignored for far too long. And where is our low productivity centered? Name a type of association that contributes to that low productivity.  I believe, as I have stated before, that the 1965 Canada/US Auto Pact is in trouble with the Democrates controlling the USA. Possible even NATA, which the saving grace for Canada is the POL requirements. I am sure most people have seen yesterdays US auto sales reports. Low productivity, extremely high labour costs, and US (Democrate) protectionism will kill Canadian auto manufacturing. As a taxpayer, I do not want billions loaned/forgivable loan/incentive given to the Detroit Three (formally known as the Big Three) and a deficit racked up. I am not a Financier or a Economist. Just a taxpayer. Hopefully whoever is in charge will do the best for Canada even if it means a whole lot of pain for some, but somehow I doubt it. Waiting for Bombardier to wallow up as the government is passing out financing.
A sovereign nations currency should be close to face value. It really bugs me to hear calls to undervalue the Canadian dollar to support manufacturing and exports to the USA. Our exports to the USA are, I believe, sitting at 82%, down from 86%.


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## a_majoor (7 Jan 2009)

Contemplate this, and as yourself how Canada can survive the inflationary pressures that trillion dollar deficits will bring. (It also pays to remember how Paul Volcker crushed inflation in the early 1980s at the beginning of the Reagan Administration). Stagflation at the end of the 1970's and 20% interest rates in the early 1980's were no fun; 2012-2014 will be interesting years:

http://internetscofflaw.com/2009/01/07/obama-trillion-dollar-deficits-for-years-to-come/



> *Obama: trillion-dollar deficits for years to come*
> 
> Argh:
> 
> ...


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## Edward Campbell (8 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_ web site, is an article giving several of Canada’s top economists’ view on the state of the economy in 2009:
----------------------
http://www.financialpost.com/news/story.html?id=1152395

 How the top economists view the economy

Jacqueline Thorpe, Financial Post

Published: Wednesday, January 07, 2009

The Economic Club of Toronto held its annual outlook conference Wednesday with top economists of Canada's big five banks. Here are some of the highlights:

*Don Drummond, chief economist Toronto-Dominion Bank, on Canada*

_Forecast_: Sees 1.5% real GDP drop for 2009; a $12-billion to $14-billion federal fiscal stimulus package

_Looking through the wreckage_: "We have longer term infrastructure needs. We couldn't meaningfully dump $10-billion or $20-billion of additional infrastructure into an economy that was operating the way Canada was in 2006 or 2007. We saw Alberta tried to do that and it just created massive capital good price inflation, massive labour market shortages. You can actually do a fair bit of that into this economy in 2009 and 2010. That's an opportunity to advance some of these long term plans."

*Warren Jestin, chief economist Bank of Nova Scotia, on the international outlook*

_Forecast_: Sees all major economies declining in 2009 and emerging economies and asset markets weakening in a "remarkable synchronicity."

_Looking through the wreckage_: "The investments that are going to go into alternative technologies are simply going to be absolutely massive, trillions and trillions of dollars."

Also, "The global economy is ageing very rapidly and that suggests big changes in consumer preferences and big changes in how you offer services -- less high risk vacations and more longer term vacations... When you put those three things together, the new [emerging market] economy, the ageing of the economy and the greening of the economy you really have a set of profound opportunities for businesses to try and inject in those areas."

*Avery Shenfeld, senior economist at CIBC World Markets on the markets*

_Forecast_: Sees S&P/TSX at 11,000 by year-end, a tidy gain from Wednesday's level around 9,000 but well off the peak around 15,000.

_Looking through the wreckage_: Unless the United States is heading for another depression or Japan-like lost decade, history suggests the stock market will start to recover well ahead of the economy. If the U.S. economy is to recovering towards the end of 2009, the equity market should start to recover soon. "That said you don't get all your money back in a hurry." While the government bond market was top dog for investors last year, the "value is now in better [corporate] credits."

*Sherry Cooper, chief economist, BMO Capital Markets, on the United States*

_Forecast_: Sees 3% peak-to-trough GDP decline overall for the U.S. and the worst recession in the post-WWII period; four-million jobs lost; first decline in annual CPI since 1955; sub-1% core rate.

_Looking through the wreckage_: "Ultimately the growth drivers for the economy in the next decade will be the consumers in countries like China and India. That's a very positive thing but it means as well, that not only should the policies that encourage borrowing-led spending in the United States be changed but also that the development of a consumer borrowing market in China and India will be very important, as well as wage increases and improvements in their residential real estate markets."

*Craig Wright, chief economist, Royal Bank of Canada, on currencies*

_Forecast_: The loonie will continue be volatile, heading to a softer US80¢ level towards year-end as oil settles around US$50 a barrel before creeping up to US$60 next year. Ontario economy to contract 1.4% in 2009 after a 0.2% decline in 2008

_Hard to see through the wreckage for Ontario_: "We're looking at two back-to-back annual declines in the Ontario economy and that's something we haven't seen since the early 1990s."
--------------------


I agree with Don Drummond that now is the time to _invest_ in infrastructure project – but only those that are ready to go. Too much _long term_ ‘stimulus’ will come too late to aid a recovery and will, instead, just create an inflationary problem that will force the Bank of Canada to raise rates and, thereby, tighten credit again. 

I agree with Sherry Cooper that we have to look to Asia for our financial future and that Americans may be our 'saviors' by driving themselves (dangerously) even further into debt to raise up the Chinese/Indian middle classes.


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## GAP (8 Jan 2009)

> I agree with Sherry Cooper that we have to look to Asia for our financial future and that Americans may be our 'saviors' by driving themselves (dangerously) even further into debt to raise up the Chinese/Indian middle classes.



I don't see how this helps......is it a larger potential consumer market they are trying to create?


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## Edward Campbell (8 Jan 2009)

There is a huge trade imbalance right now: the USA, especially, and Europe, Australia, Canada, Japan, etc send cash to China and China send _stuff_ to them. The Chinese need to keep sending _stuff_ but not just to Europe and America. The Chinese need their own, growing middle class to save less and buy more, more Chinese made goods.

When, rather than if, China and India buy more it will be, mainly of their own _stuff_ made, in many cases, with Canadian resources.

I'm not sure how this helps the USA and, to the extent that it does not spur US growth, it does not help us, either. But I suspect the gains made by sending Canadian resources to Asia will offset losses (or stagnation) in the American market - which, also, still needs our resources. But it is, broadly, not good news, for Ontario's manufacturing base which must get a lot more productive - and that's *NOT* a trade union problem - a lot faster. Management and politicians, not workers, hold the keys to productivity; for the last 60+ years both have been to frightened and lazy to use those keys to unlock our productivity.


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## Edward Campbell (8 Jan 2009)

Further to How top economists view the economy,  here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is more on the “top economists’” prognostications:
--------------------
http://business.theglobeandmail.com/servlet/story/RTGAM.20090107.weconomists0107/BNStory/Business/home

 Economists' advice to Flaherty: cut taxes now

DAVID PARKINSON

From Thursday's Globe and Mail
January 7, 2009 at 12:15 PM EST

TORONTO — Canada's top private-sector economists have a message for Jim Flaherty as the federal Finance Minister prepares his critical recession-fighting budget: Cut taxes now, rein in spending later.

At the Economic Club of Canada's annual outlook roundtable, economists from the country's five biggest banks called on Mr. Flaherty to make tax cuts and well-focused infrastructure spending the centerpieces of his Jan. 27 budget, and to resist futile bailouts for dying industries.

They also called on the Bank of Canada to continue cutting its interest rates to lend further stimulus to the struggling economy and credit markets.

And they stressed that any personal tax cut - something Mr. Flaherty has already hinted could be in the budget - needs to be permanent if it's going to be effective, and needs to be offset in future years by reining in government spending.

"I would hope that if we do get a tax cut, it's not just temporary," said Don Drummond, chief economist at Toronto-Dominion Bank.

He argued that temporary tax cuts only serve to move forward consumers' purchases that they would have eventually made anyway, without fuelling any lasting increase in spending habits.

"It just shifts around the timing of purchases, and doesn't accomplish anything."

He also noted that in last year's temporary personal tax cut in the United States, consumers only spent about 20 per cent of their tax-cut cheques, and about half of that was spent on imported goods. "So, they got 10 cents on the dollar" from the fiscal stimulus.

Mr. Drummond and others added that tax cuts now would have to be balanced in 2010 and beyond by a tightening of program spending, which throughout this decade has consistently grown faster than inflation and the economy.

"We do have to see these permanent tax cuts - that's really the only thing that will influence behaviour in the economy," agreed Craig Wright, chief economist at Royal Bank of Canada. "But in the out years, when we hope and think the economy will be in a recovery mode, then you can rein in program spending, because that's something that has been running quite rapidly."

The economists also said infrastructure stimulus should be aimed at projects that could be instituted rapidly, rather than large new initiatives that would be unlikely to get off the ground this year. And they said the spending should focus on projects that would serve the long-term interests of the Canadian economy, such as long-overdue upgrades of existing structures and expansion of public transit.

"Obviously, we don't want to have a program of digging holes and filling them in again," said Avery Shenfeld, senior economist at CIBC World Markets Inc. "We want to make sure that the assets that are left behind are ones that Canadians need."

Sherry Cooper, chief economist at BMO Nesbitt Burns Inc., warned the government against throwing good money after bad at specific struggling industries.

"The thing I would least like to see is subsidization of declining industries. We've gone down that road before; it doesn't work."

The economists also believe the Bank of Canada's benchmark policy rate will have to decline further from its current level of 1.50 per cent over the next few months. Mr. Shenfeld predicted the Bank of Canada won't go to essentially zero, as the U.S. Federal Reserve has done, but could cut as low as 0.50 per cent before it is done.

BMO Nesbitt Burns issued a forecast update yesterday in which it, too, lowered its Bank of Canada rate forecast to a floor of 0.50 per cent by March. Bank of Nova Scotia also expects the rate to bottom at 0.50 per cent, while TD and Royal Bank are still calling for the central bank to only cut as low as 1.00 per cent.
--------------------

This is, in my opinion all good advice – lower taxes, permanently; spend on *immediate* infrastructure projects; don’t prop up failing industries; and reduce programme spending later. But, we must remember, that when Canadians look at programme spending to reign in the defence budget is always in their sights; it’s a big, slow moving, easy target. The government, however, ought not to contain spending on the backs of the military again. We did that in the ‘70s, ‘80s, ‘90s and into this decade; now is the time for the defence budget to grow.


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## Jed (8 Jan 2009)

So would it not be wise for the government to invest heavily in all sorts of infrastructure and equipment assets for the Canadian Forces and to concentrate on Dom Ops and recriuting Engrs in a very big way for sustainable long term value?


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## Edward Campbell (8 Jan 2009)

Jed said:
			
		

> So would it not be wise for the government to invest heavily in all sorts of infrastructure and equipment assets for the Canadian Forces and to concentrate on Dom Ops and recriuting Engrs in a very big way for sustainable long term value?




Only partially; DND's infrastructure (Airfields, Armouries, Bases/Training Areas, Dockyards, etc) all have been neglected - some as badly as bridges and overpasses in some provinces. Upgrading that infrastructure, where projects are approved and just awaiting funding, makes good sense.

The defence capital budget needs to grow and grow and grow some more, year-after-year and, indeed, decade-after-decade. Many military experts contend that 'capital' (new/replacement ships, tanks, guns, aircraft, etc) should account for 20-25% of a nation's defence budget - leaving 75% to 80% to be split between personnel (salaries, personnel support services, payments to wounded soldiers, etc) and operations and maintenance (bullets and beans and spare parts and training and 'routine' (domestic) operations. I'm too lazy to go look right now but I recall that, not too long ago, 50% of the budget went to personnel costs leaving capital and O&M to contend for the other half. Capital was nowhere near 20% just a few months ago.

Domestic operations do not require any focus; they are, always done as well as possible and immediately, whenever necessary. The resources required for a well rounded combat force will, always, produce whatever is needed for any domestic operation.


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## Edward Campbell (9 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is a column in which Jeffrey Simpson indulges in some quite unjustified nationalistic back slapping:
--------------------
http://www.theglobeandmail.com/servlet/story/RTGAM.20090108.wcosimp09/BNStory/National/columnists

 Their deficit, our perspective

JEFFREY SIMPSON

From Friday's Globe and Mail
January 9, 2009 at 12:00 AM EST

Close your eyes. Assume that, in just over two weeks, Prime Minister Stephen Harper's budget warns that the country faces deficits of around $100-billion "for years to come."

It would be a nightmare scenario for Canada. Deficits at that level would eclipse by far what Canada experienced at its worst deficit years in the late 1980s and early 1990s. It would mean deficits much higher as a share of national income than in those years.

We all should remember or learn what those deficits that stretched from the mid-1970s and ended only in 1995 brought or contributed to Canada: higher taxes, lower government spending, huge interest payments, lower private and public sector investment, stagnating productivity.

Year after year, until the Liberals stopped the deficits in the mid-1990s, governments pledged to dig Canada out of the fiscal hole, only to dig an even deeper hole. Every budget during those years, Liberal and Conservative governments pledged to restrain, reduce and eventually eliminate deficits. They never did.

The $100-billion figure would be the very rough Canadian equivalent to what president-elect Barack Obama is proposing for the United States. Mr. Obama warned Americans this week to get ready for "trillion-dollar deficits for years to come."

What a long way Mr. Obama has come in such a short time. In the dreamy days of summer, and throughout the fall election, he promised much new spending and tax cuts for all but the rich andeventually a balanced budget. Now the dreaminess of his analysis has smashed against an even more dire reality than he could have imagined.

"Change," his favourite word, he now interprets to mean the desire of Americans to curtail deficits at some point - which, of course, is not at all the meaning he gave the word a little while ago.

Think about a trillion-dollar deficit not for a year or two, but for "years to come." At $1-trillion, the deficit would represent about 7 per cent of national income. The deficit could easily be higher, once Mr. Obama's "recovery" package is added to the mix - at which point, the deficit ratio could rise to 7.5 per cent or beyond. And "for years to come."

The world's biggest debtor nation, therefore, is about to become, quite massively, an even bigger debtor nation, with consequences for itself and the whole world.

The dominant country of any era does not remain the dominant country indefinitely on borrowed money. At some point, money talks, in the sense that those with it begin to flex their muscles vis-à-vis those who need it.

We are therefore witnessing, and will continue to witness, a slow relative loss of influence for the United States, the debtor, against those from whom it must borrow. After all, Americans cannot possibly finance these new debts themselves, since they could not even finance the old ones.

Canadians will have a particular perspective on this slow relative loss of influence, since no country is more closely tied to the United States. We have put almost all of our economic and foreign policy eggs into the U.S. basket, thinking very little about Asia.

We might also have a perspective - or at least could offer one, if asked - about the challenges the United States will eventually confront now that the country faces deficits for "years to come."

What Canada learned was that the slaying of deficits involved a mix of higher taxes and reduced spending - and almost nothing else. There were lots of alternative ideas, from an industrial strategy to injecting massive amounts of additional public spending into the economy to slashing taxes. The mix that worked was that of higher taxes (at least for a while) and reduced spending.

Canadians also learned that it was much easier to talk about reducing and then eliminating deficits than actually doing something, which is why the deficits endured for so long. It took considerable political courage and an impending sense of genuine crisis to create the political conditions for action.

It also took a turn in public opinion, because after years of higher taxes and stagnant incomes, people found less money in their pockets and fewer government services, and then became receptive to explanations about what had happened and why.

None of these conditions appears even on the horizon in the United States, a country where the issue of deficits was barely raised during the 20 years of Republican rule when the government ran a deficit every year. The recession has turned everyone into big spenders and deficit financers, which is acceptable for a while but not over the longer term.

As Canadians learned, getting into deficits is easy, even alluring; climbing out of them is difficult. The means Canadians eventually used combined tax increases and spending cuts that almost no American is willing to even contemplate today.
--------------------

As Lorne Gunter said, on an unrelated topic, there is an _”infinite malleability of the Liberal conscience,”_ which allows for anything a Liberal does being forgotten _”by all other Liberals (and the vast majority of the Parliamentary press gallery), if shoving it down the memory hole is in the best interest of the Liberal party.”_ Thus Jeffrey Simpson, being one of those who truly believes that the Liberals are the _natural governing party_ because they are not the despised Alberta _red necks_, is able to consign the truth down the memory hole.

The truth is that there are, normally, two components to a rising government deficit: programme spending that exceeds revenue (taxes) and interest on the debt that must increase steadily until programme spending < revenue.

The truth is that Mulroney/Wilson balanced the *programme* spending in the mid ‘80s – they cut spending on most things, including, especially, defence, until all government spending on everything except the interest on the national debt was less than the revenue collected in the same year from taxes, customs duties, fees, etc.

The truth is that Mulroney understood exactly how to balance the whole budget by making all Canadians share in the pain. But, on a damp spring day in 2004 he met a lady named Solange Denis, who said, roughly, keep your hands off our pensions (and, by implication, other social programmes like Medicare) or, come the next election _“it’s goodbye Charlie Brown._” Mulroney was shaken to his boots and the plans to cut the ‘social spending envelope’ were shelved.

The truth is that Chrétien/Martin were equally terrified of the voters in traditional Liberal strongholds like Québec and Atlantic Canada that are deeply attached to federal government social programmes.

The truth is that Chrétien/Martin decided that only a select few Canadians – those living in AB, BC and ON and those involved in national defence – should bear the burden of reducing the residual deficit created by interest payments on the national debt.

But, Simpson is right in saying:

”Canadians also learned that it was much easier to talk about reducing and then eliminating deficits than actually doing something, which is why the deficits endured for so long. It took considerable political courage and an impending sense of genuine crisis to create the political conditions for action.

It also took a turn in public opinion, because after years of higher taxes and stagnant incomes, people found less money in their pockets and fewer government services, and then became receptive to explanations about what had happened and why.”

And I suspect Simpson is close to the mark when he says:

”None of these conditions appears even on the horizon in the United States, a country where the issue of deficits was barely raised during the 20 years of Republican rule when the government ran a deficit every year. The recession has turned everyone into big spenders and deficit financers, which is acceptable for a while but not over the longer term.

As Canadians learned, getting into deficits is easy, even alluring; climbing out of them is difficult. The means Canadians eventually used combined tax increases and spending cuts that almost no American is willing to even contemplate today.”

Simpson is wedded to the idea that high and even higher taxes are an essential component to a sound economy. In my opinion that is unproven, at best. However: Low and still lower government spending – by smaller, less intrusive governments – is, demonstrably, a good way to avoid large debts and deficits.

Many Canadian social programmes could be privatized: funded, through private sector providers, by user/insurance fees and, for the low income cohorts, direct government payments. I suspect that many social programmes could be provided, in a competitive, market based, environment at lower costs, than is the case today, and with better outcomes (we’re what? 30th in *quality* of health care) than we now enjoy.  

The only sensible way to lower government spending in Canada is to cut the 'social' envelope. Everything else of substantial size/dollar value, including - especially - national defence, is already at an irreducable minimum level thanks to Chrétien/Martin and Trudeau/Chrétien - who got us into the unnecessary deficit downward spiral in the first place.


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## a_majoor (9 Jan 2009)

Real deflation: when the bank pays your mortgage:

http://www.barrelstrength.com/2009/01/09/a-truly-wacky-world/



> *A truly wacky world*
> January 9, 2009 8:42 am Arran Gold Economics and Finance
> 
> The continuing decline in interest rates in UK, the lowest since the Bank of England was formed in 1694, could lead to financial events that were never contemplated.
> ...


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## Edward Campbell (10 Jan 2009)

E.R. Campbell said:
			
		

> Former Prime Minister Paul Martin is out flogging his new book. I have not yet read it nor will I get to it until, maybe, late winter, unless my _"read soon"_ stack shrinks a lot, even sooner.
> 
> He has been making one important (albeit self serving) point: the G20 *Heads of Government* (HoG) (president and prime ministers)  need to meet to discuss things like the credit crisis.
> 
> ...




Maybe I should reconsider my G_n_ ideas.

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Ottawa Citizen_, is a plea for more and better international cooperation by Austral;ian Prime Minister Kevin Rudd:
--------------------
http://www.ottawacitizen.com/opinion/op-ed/must+come+together/1160727/story.html

We must come together


BY KEVIN RUDD, THE OTTAWA CITIZEN

JANUARY 9, 2009


The stabilization of financial markets and stimulation of the global economy will require unprecedented policy co-ordination among the world’s political leaders in 2009. Failure to do this will slow recovery and reduce the aggregate impact of the stimulus packages of individual governments. Worse, fragmented actions could yield incrementally to “beggar my neighbour” policies that run the risk of accelerating rather than ameliorating the crisis.

The International Monetary Fund estimates the global economy needs a fiscal stimulus of at least two per cent, or $1,000 billion (Canadian) in 2009 to ward off the worst effects of the crisis.

Economists acknowledge that much more may be required if shattered confidence sets off a spiral of deleveraging, declining asset values, falling income and rising unemployment.

Some action has been taken by individual governments through both monetary policy and significant fiscal stimulus announcements. The truth is much of this will not be delivered in 2009, but in later years.

Also, some of the fiscal stimulus measures that have been announced are re-announcements and, therefore, unlikely to have any additional effect on growth projections. Individual national measures, meanwhile, will not capture the benefits of co-ordinated international action.

Such benefits are significant. First, there are real and psychological gains. Stimulus measures from one country spill over to its trade partners, creating an additional boost.

Co-ordination is also important to mitigate the volatility in currency and bond markets that can be an unintended consequence of unco-ordinated policies.

Second, co-ordination is an important defence against beggar-my-neighbour policies. We are already beginning to see worrying early forays into protectionism.

The number of anti-dumping cases rose by 40 per cent in the first half of 2008 and there has been a gradual creeping up of tariffs. Even within their World Trade Organization (WTO) commitments, there is scope for countries to raise tariffs.

If all nations put up tariffs to their bound rate (the highest rate consistent with their WTO commitments), exporters from middle- and high-income countries could face tariffs twice as high as current levels. Then there is the remaining challenge of concluding the Doha round of negotiations — where lack of progress represents a continuing failure of global political will.

Third, international co-operation is essential because this crisis has important implications for developing countries.

They did not create it but have been badly damaged by it. The global recession in advanced economies has weakened export opportunities for emerging countries. In addition, the financial crisis has restricted credit flows — with spreads on debt to developing countries having widened significantly.

This means many developing countries will struggle to finance their existing deficits, let alone fund the kind of fiscal rescue packages being contemplated by developed economies. Loans from multilateral development banks to developing countries totalled $34 billion in 2007.

This needs to be significantly increased across the board consistent with the World Bank’s recent decision to quadruple its lending. Aid must be increased, currency swaps need to be extended and the IMF must expand the scope of its short-term liquidity facility.

A fourth reason for co-ordinated action is the unprecedented opportunity the crisis presents to combine shorter-term stimulus requirements to boost growth and employment in 2009 with the longer-term requirement to lift global productivity growth and accelerate the transformation to a lower carbon economy.

The development of a global response to this crisis is a complex task.

The good news is that the Group of 20 summits in Washington last November and in London this April will have created a mechanism for effective, co-ordinated action — bringing together for the first time the main developed and developing economies, which represent between them 85 per cent of gross domestic product, 80 per cent of world trade and two-thirds of the world’s population.

In the immediate period ahead, G20 governments will need to work out the quantum of stimulus necessary for 2009 to offset the anticipated contraction in the private economy and the consequential impact on unemployment; to agree on the optimal content of stimulus policies to balance short- and long-term economic needs; to co-ordinate the implementation of these measures; and to develop a medium-term exit strategy to ensure that surviving this crisis does not shackle us with long-term inflation.

All these measures will require unprecedented co-operation among governments. If we fail, the consequences will be grave.

If we rise to the challenge, not only will we reduce the impact of long-term unemployment, but we will also have begun to fashion a new form of economic governance that the underlying forces of globalization have long been calling forth.

_Kevin Rudd is prime minister of Australia._

© Copyright (c) The Ottawa Citizen
--------------------

I have suggested in the past that the G20 is too big to be effective but I take Prime Minister Rudd’s point and so I suggest that a G_n_ that is, broadly, representative of most of the world’s economies ought to exist.

Here, according to the IMF, are the world’s “Top 49” individual, ‘national’ economies (with Hong Kong thrown in but not counted):
(Read in three columns: Rank, Economy and GDP in $US in 2007)

1	  United States	13,807,550
2	  Japan	4,381,576
3	  Germany	3,320,913
4	  China (PRC)	3,280,224
5	  United Kingdom	2,804,437
6	  France	2,593,779
7	  Italy	2,104,666
8	  Spain	1,439,983
9	  Canada	1,436,086
10	 Brazil	1,313,590
11	 Russia	1,289,535
12	 India	1,100,695
13	 Mexico	1,022,816
14	 South Korea	969,871
15	 Australia	908,990
16	 Netherlands	777,241
17	 Turkey	659,276
18	 Sweden	454,839
19	 Belgium	453,283
20	 Indonesia	432,944
21	 Switzerland	427,074
22	 Poland	422,090
23	 Norway	389,457
24	 Republic of China	383,347
25	 Saudi Arabia	381,938
26	 Austria	371,219
27	 Greece	313,806
28	 Denmark	312,046
29	 Iran	285,304
30	 South Africa	283,071
31	 Ireland	261,247
32	 Argentina	260,122
33	 Finland	246,350
34	 Thailand	245,351
35	 Venezuela	227,753
36	 Portugal	223,447
—	 Hong Kong	207,171
37	 Colombia	202,630
38	 United Arab Emirates	190,744
39	 Malaysia	186,718
40	 Czech Republic	174,999

A G40 is worse than a G20 so I have highlighted, in green the ones I think need to be in a revised G_n_ – that’s 24 countries, too many for effective ‘management’ of the world’s economy, so I have, further, underlined my choices for members of the (reasonably sized) management team – a new G9.


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## Infanteer (10 Jan 2009)

UAE, Malaysia and Norway but not China, Germany and Japan?


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## Edward Campbell (10 Jan 2009)

China is on both lists: in the G_n_ and the G9. (You may have looked at (24) _Republic of China_ which is in the G_n_ but not the G9 for fear of annoying the PRC.)

I picked UAE and Malaysia rather than Germany and Japan becaiuse I want *my* G9 to have regional and size balance.

More important, perhaps, I left Canada OUT of the G9 - Australia and Norway represent the 'middle powers.'


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## Edward Campbell (10 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from yesterday’s _Globe and Mail_ is an optimistic appraisal of our situation:
--------------------
http://www.theglobeandmail.com/servlet/story/RTGAM.20090109.wjobs_cycle10/BNStory/crashandrecovery/home

 Cheer up: Canada's in good shape

KONRAD YAKABUSKI

Globe and Mail Update
January 9, 2009 at 8:13 PM EST

MONTREAL — The worst economic crisis of a lifetime? Maybe if you were born in 1992.

Job numbers out Friday – showing a jump in the national unemployment rate to 6.6 per cent – confirm that Canada has followed the United States into a recession. But the odds are that workers here will come through the downturn of 2009 with far fewer scrapes and bruises than they did during the two previous recessions. They'll also – for a change – fare markedly better than their American counterparts.

The Canadian unemployment rate rocketed to 13 per cent in the 1981-82 recession and almost as high in the 1990-91 contraction. In both of those periods, Canada was an economic basket case compared with the United States, where unemployment rates peaked at 10.8 per cent in 1982 and 7.8 per cent in 1992.

So far, almost no economist expects Canada's jobless rate will surpass 8 per cent during this downturn. Most, by far, predict it will peak below that figure. The U.S. unemployment rate, however, could enter double digits.

Even an 8-per-cent jobless rate would have been embraced as practically full employment in the Canada of the '70s or '80s. Yet, Friday's news of 34,000 job losses in December, and a 0.3-percentage-point increase in the unemployment rate, had politicians in conniptions. It's easy to feel pessimistic when president-elect Barack Obama speaks of “a crisis unlike any we have seen in our lifetime,” and the U.S. economist Nouriel (Dr. Doom) Roubini warns that the bubbles “have only begun to burst.” But they're not talking about Canada. This country remains an island of relative tranquillity in a raging global economic sea. Our job market, in particular, faces this tempest with storm shutters firmly affixed.

One of the reasons has to do with demographics. The millions of Canadian baby boomers who reached adulthood in the '70s and '80s overwhelmed the labour market's ability to absorb them. Employers didn't have much of an incentive to hold on to workers during tough times, since they could draw on an overabundant supply of labour to replenish their work force when the economic tide turned.

Not now. The prospect of a looming post-recession labour shortage promises to factor into employers' staffing calculations this time around.

“The whole phenomenon of an aging population will act as a brake on layoffs,” predicts Desjardins Group senior economist Benoit Durocher. “Businesses will think twice before laying people off because it could be more difficult to find employees when the recovery comes.”

Claude Morin, an economic development officer in Quebec's export-dependent Beauce region, agrees, adding that more than a decade of solid growth has left firms with strong balance sheets. Though many of the region's clothing and furniture makers have closed in recent years, most of their workers have found jobs elsewhere in the Beauce.

“Our businesses are well capitalized, which allows them to play for time,” says Mr. Morin of the Conseil économique de Beauce. “Morale is good and no one tells me on my visits that things are bad or catastrophic.”

The relative strength of Canada's job market also stems from having an older work force than the Americans. While youth has certain advantages, they're not apparent during a recession. Layoffs will figure more prominently south of the border.

At the same time, Canada has largely succeeded in eliminating much of the structural unemployment that plagued the economy in the past. Though pockets of chronic joblessness still exist, they're modest compared with the unemployment rates in excess of 20 per cent that used to be common in some regions.

This shows up in Canada's employment rate – the percentage of those over 15 with jobs. It remains historically high, at 63.1 per cent in December, down 0.2 percentage points from November. In 1982, it was 57 per cent.

“There has been two decades of continued out-migration from places that were pools of structural unemployment,” observes Dalhousie University economics professor Lars Osberg. “And Internet job searches didn't exist in [past recessions], so there's a whole new way of matching vacancies with unemployed workers.”

Another measure of Canada's relative economic health lies in the so-called misery index, the combined total of the unemployment and inflation rates. It hovered around an excruciating 25 per cent during the '80s recession and about 20 per cent a decade later. Today, it is well below 10 per cent and likely won't surpass that threshold in this recession.

Monetary and fiscal stimulus are two reasons Royal Bank of Canada is predicting this recession will be shorter than the two previous ones. The bank expects Canada's economy to start growing again in the second quarter of this year, following only two quarters of contraction. As a result, the bank predicts the unemployment rate will peak at 7.4 per cent.

Some economists have been warning of deflation, a phenomenon where expectations of falling prices cause consumers to put off purchases. But with unprecedented liquidity being pumped into the financial system by the Bank of Canada, and the federal government promising a spending package that will make it look like Christmas in January, the longer-term threat is that of upward pressure on prices.

“There are risks in terms of the timing of the [stimulus] initiatives,” warns Paul Ferley, assistant chief economist at Royal Bank of Canada. “If they leave them in place too long, it could very well sow the seeds for an inflation problem.”

U.S. economist James Grant, author of the influential Grant's Interest Rate Observer, has also expressed this concern. Though with doomageddon in vogue, not many people are listening.

As Mr. Grant observed recently: “Frostbite victims tend not to dwell on the summertime perils of heatstroke.”
--------------------

*If* he’s right we should see “bottom” soon – we may already have seen it in late 2008 – and the long, slow upward climb of recovery should be underway by summer. It will be slow because, being primarily a resource exporter, we must wait for our customers to demand our goods and services but it will be faster than most because our resource exports will benefit from others’ stimulus projects.


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## Infanteer (10 Jan 2009)

E.R. Campbell said:
			
		

> China is on both lists: in the G_n_ and the G9. (You may have looked at (24) _Republic of China_ which is in the G_n_ but not the G9 for fear of annoying the PRC.)



Shit - my bad.  I should have looked harder.



> I picked UAE and Malaysia rather than Germany and Japan becaiuse I want *my* G9 to have regional and size balance.



Do Malaya and the UAE have the economic power to make things happen?  Germany and Japan could resent such organizational philosophy, seeing there larger contribution to the Global Economy as being discounted as "represented by PRC and Great Britain".  Is there a potential for failure right there?


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## Edward Campbell (10 Jan 2009)

Infanteer said:
			
		

> ...
> Do Malaya and the UAE have the economic power to make things happen?  Germany and Japan could resent such organizational philosophy, seeing there larger contribution to the Global Economy as being discounted as "represented by PRC and Great Britain".  Is there a potential for failure right there?




That (excluding Japan and Germany) certainly the big weakness of *my* list. 

It is hard, maybe impossible to kick anyone off any list - Russia ought not to be on anyone's list of much of anything, but ... that means, in practical terms, that any G_n_ is very likely to be a G20++ if one wants, as I do, to improve the 'balance' of the group (as I do because I think Paul Martin's original list was (is) unbalanced).

A G20++ is too big, even 20 is too large. Thus we need a G9 or G10 that doesn't include Russia but does have room for a few smaller economies from 'regions' beyond North America, North Asia and Western Europe. If we are to make room for Brazil, China and India (as we should) then someone has to come off, but ...


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## Kirkhill (10 Jan 2009)

So, are we back to the age old problem of determining the size of the oligarchy?  Its life expectancy and its powers?

Monarchy, duarchy (made that one up), triumvirate, tetrarchy, pentarchy, .....heptarchy, eicosarchy?  How about anarchy?  

We are obviously not yet at the point where we are willing to trust our fates to global democracy - due to well established cultural difference.  Therefore there is no basis for an International House of Commons.

There is a basis for an International House of Lords (or Senate if your more classically inclined). There is even a forum for such an institution.

But the problems of the House of Lords are visited on the United Nations.

The most powerful Lords cheerfully ignored the wishes of their fellow Lords, and even their Monarch etc, as the situation permitted.

Anything that splits out a representative group from the general population will eventually build an antipathy towards the representative group and everyone will want to have the "privileges" they have.

Isn't it better to adopt the guiding principle of liberal politics (OK Whig if you prefer): "That government is best which governs least" (Thomas Paine)?  And especially given that we are talking about economics here (the realm of the invisible hand)?

Why are we trying to organize a central organizing committee for something that can not and should not be organized?  Let the world's 200 odd sovereign nations make their own experiments as to what will work.  Isn't that what we preach in internal politics?   That while it is possible that one plan may work to the benefit of all it is more likely that one plan will fail to the detriment of all.  Therefore it is better to diversify and let each follow their own path so that failure is not generalized and success generates models for others to follow.

I think picking model states can be at least as hazardous an undertaking as picking model companies.  May be this is one of the times just to let loose the reins internationally while preparing to defend our own nationally preferred model at home.

It is the argument that says that Alberta and Quebec should be allowed to experiment with health care as they see fit.  Failure will cure itself and the whole country won't be affected.  Success will be copied.


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## Kirkhill (10 Jan 2009)

Just re-reading that I realized it can be interpreted as a call for isolationism.  It isn't meant that way.  I have no problem with establishing bilateral or multilateral co-operatives.  I just don't see any hope of, or need for, getting everybody on the same page.

But on to the reason for this post.

I saw this on realclearpolitics yesterday:

The realclearpolitics tagline was: We Need the Fiscal Equivalent of World War II 



> The New Republic
> 
> Not Doing Enough
> by John B. Judis
> ...



This prompted two lines of thought.  One was related to hockey sticks and the other related to the New Deal.

First of all the hockey stick.  One of the major challenges the IPCC faced was the Mediaeval Warm period.  With the MW in the record it was very hard to create a convincing case for a crisis.  Without a crisis there was no case for Change.  The same problem that FDR apparently faced in 1936 - things were improving too fast for his liking.  There was less impetus for Change.  The IPCC solution was to glom onto a model that completely ignored the Mediaeval Warm in order to create the impression of crisis.

In the absence of Palm Trees in Alberta (I understand we have snow in Houston) there seems to a bit of difficulty convincing folks that Global Warming is all that it was cracked up to be.  That crisis is fading, especially as people realize there is an economic cost involved.

However, in the problem we find the solution.  We have an economic problem.  All that has to be done is talk up the problem until it becomes a crisis and we can continue with the Change meme.  Like the man with the hammer, it doesn't matter that a nail is a screw. If everything looks like a nail it can be hit with the universal hammer.  All crises can be met with the same Change.

Hence it is not good enough to refer to 1992, or 1980,  or 1973  or even 1873.  We have to make everyone convinced that this is 1932 all over again so that we can retry the corporatist nostrums of Schickelgruber, Mussolini, Stalin and FDR.  We know that  the first three didn't do so well but FDR won the war so he must have been right.  Despite the fact that he did much the same as the others - just under a different flag.

Which brings me to the second line of thought.

World War 2 saved America and the rest of the world.  Fair statement.  Just not in the way the New Dealers usually phrase it.

The solution was not found in Americans selling goods to Americans.  The solution was found in Americans selling goods to the rest of the world.

Initially they sold to all comers, regardless of political affiliation.  Then they sold to Britain in exchange for real estate and gold cash on the barrel head.  Then they sold to Britain on credit.  

Meanwhile Europe and Britain were destroying their industrial capacity and European money was used to build US industrial capacity, ensuring that, after the war the US would be in a position to sell goods to Europe for a very long time (about two decades).  During that time Europe learned to meet their own needs from new factories while the US continued to rely on 1930s (heck 1890s) vintage, manpower intensive plants to meet their market requirements.

Once Europe, and Japan, got back on their feet in the 60s then America failed to respond.  Instead of investing in new plants it simply moved its manpower intensive operations off-shore to continue doing the same thing with cheaper labour. It continued with the same model.  Meanwhile American kids (and Canadians) all decided that the big money was to be made as lawyers, accountants and salesmen and eschewed careers in engineering.  (There is an aphorism in the food industry that the way to make money is to sell air, then water, then sugar, in that order in order to maximize profits.  In the recently departed world of Michael Millkan, Junk Bonds, Derivatives, Hedge Funds and Initial Public Offerings I have grafted "Hot Air" on to the top of that pyramid).

Where am I going with this.  I do hope that the New Dealers realise that the key to their emergence from the depression was not found in them building new bridges for each other.  It was found in them having a very large market into which they could sell things for a period of about 25 years and that the investment necessary to meet the market needs were met from offshore resources - in no small part to British Empire resources.

So when they are calling for a World War 2 prescription, does that include wrecking the economies of their competitors?  Otherwise their solution is no better than me getting my kid to move rocks in the back garden to create a rockery in return for his room and board.  He gets to live under my roof.  I have a nicer looking yard.  But it doesn't do anything to help me put food on the table for him, me or the rest of the family.  We still have to go out and trade services with the rest of the world for that to happen.   And when needs must you take the best deal on offer.


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## Infanteer (10 Jan 2009)

Kirkhill said:
			
		

> The most powerful Lords cheerfully ignored the wishes of their fellow Lords, and even their Monarch etc, as the situation permitted.



Ah...Hotspur and his Northumberland ilk always throwing a wrench into the system....


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## Kirkhill (10 Jan 2009)

Infanteer said:
			
		

> Ah...Hotspur and his Northumberland ilk always throwing a wrench into the system....



And Norfolk not any better.....


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## a_majoor (13 Jan 2009)

The Marcher Lords are actually a good wedge to reenter the idea of a G_n_. While certain economic or econometric measures can be used to determine who might or might not qualify, the real issue lies in the underlying values of the "qualifying" members. Does the United States really have much in common with the UAE, for example?

If the desire is to _get things done_, then the members of the putative G_n_ need to have lots of common interests and values, which explains my constant expressions of support for the idea of an Anglosphere. Alert readers will see elements of Huntington's "Clash of Civilizations" thesis (or perhaps Thomas P.M. Barnett's "Core and Gap" thesis as well).

If powerful sub groups inside the G_n_ have divergent interests, then they will pursue interests at cross purposes at the G_n_. Either the G_n_ is run by Edward the Longshanks, or the G_n_ gets taken over by the Marcher Lords who fell they can defy Henry VI with no risk or penalty....


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## Kirkhill (13 Jan 2009)

The question though, is what is this group convening for?

Is it a group of like minded individuals (nations) meeting to determine a strategy that benefits them?  Or is it a group of inimical individuals (nations) sitting down to resolve differences?

If the former then the size of the group matters less than their common philosophy.  If the latter then the group MUST include ALL interested parties.  There is no way that one nation can guarantee the conduct of another sovereign nation (individual).  Beyond that you are merely discussing spheres of influence, or hegemony ...... Unless you can convince the sovereign nations to elect a small steering committee with well defined terms of reference.

The proliferation of "Clubs" and the lack of utility of the United Nations doesn't give me much hope of a single, universally accepted steering committee being possible any time soon.

The Lords, like Parliament itself still is, was a forum for inimical entities to come together to hash out their differences.  In the bad old days the King was their final arbiter.....unless they didn't like the ruling.


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## a_majoor (13 Jan 2009)

We may be going from Marcher Lords to _warlords_ far faster than anyone could have imagined. A massive pension fund collapse in the United States is not only quite possible, but even probable, and the size and scope of this makes the sub prime mortgage bubble look like the warm-up act.

The full article is at the link, but the short summary is many pension funds (particularly Union funds and civil service funds in particular) became vehicles for political malinvestment and ended up backing investment losers. Since pensions are supposed to remain fully funded, corporations may have to sell assets or divert a large portion of their cash flow to maintain their pensions (with inevitable effects on their profitability and viability), while State and local pension funds shortfalls may lead to huge tax increases. The obvious answer of scaling down pension payouts does not seem to be on the radar:

http://reason.com/news/show/130843.html



> *The Next Catastrophe*
> Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode.
> Jon Entine | February 2009 Print Edition
> 
> ...



remainder at link


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## Rifleman62 (14 Jan 2009)

For thoes who were not aware:

http://www.cppib.ca/About_Us/


The CPP Investment Board is a professional investment management organization based in Toronto. Our purpose is to invest the assets of the Canada Pension Plan in a way that maximizes returns without undue risk of loss. The CPP Fund is $117.4 billion. Canada's Chief Actuary estimates that CPP contributions will exceed annual benefits paid through 2019. Thereafter a portion of the CPP Fund's investment income would be needed to help pay CPP benefits.

The CPP Investment Board was incorporated as a federal Crown corporation by an Act of Parliament in December 1997 and made its first investment in March 1999.

*November 12, 2008 * 

*Investment returns were negative 7.5 per cent on a year-to-date basis and negative 8.5 per cent for second quarter * 

TORONTO, ON (November 12, 2008): The CPP Fund ended the second quarter of fiscal 2009 on September 30, 2008 with assets of $117.4 billion, reflecting investment returns of negative 7.5 per cent for the first six months of the fiscal year and negative 8.5 per cent for the second quarter. The Fund declined $5.3 billion in value for the fiscal year to date and $10.3 billion since the previous quarter.

The Fund’s four-year annualized investment rate of return through September 30 was 6.6 per cent, which has resulted in $22.0 billion of investment income for the Fund over the four-year period. The CPP Investment Board reflects its long investment horizon by regularly reporting rolling four-year performance.

We report the performance and the market value of the CPP Fund on a quarterly basis.

Investments held by the CPP Fund include equities, fixed income (primarily government bonds), and inflation-sensitive assets (real estate, inflation-linked bonds and infrastructure).

Our fiscal quarters are: 

The fiscal year is from April 1 to March 31

1st quarter: April - June Release date: mid-August 
2nd quarter: July - September Release date: mid-November 
3rd quarter: October - December Release date: mid-February 
4th quarter: January - March Release date: mid-May


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## a_majoor (14 Jan 2009)

The problem isn't the CPP (although many of their investments will be at risk as we move closer to the vortex; this is a bit like orbiting a black hole, you seem to be quite safe until you get too close to the event horizon.....). The scale of these state and municipal pension losses is staggering, and so long as there is a demand to cover these losses, then vast amounts of taxpayer wealth will be drawn away from the productive economy to cover them.

The potentially nasty backlash is when taxpayers realize they are having their current standard of living reduced and their own future retirements placed in jeopardy to fund very generous government pensions (which provide coverage they could never achieve even in a growing economy). Taxpayers might try to take on "city hall" with political campaigns, referendums and lawsuits, while the public service will respond with strikes, work to rule and obstructing their opponents with red tape wherever they can. (If there is any positive aspect it is many alternative private services will grow and prosper to take care of business during disruptions; these will be the targets of the fiercest opposition and red tape entanglements).

All this will keep the productive economy in low gear, and this assumes that the pension funds don't collapse and spark huge asset dumps on the market, or force large sectors of the economy into receivership as the taxes on the business community is ramped up to cover the losses. The effects on our economy, with 82% of our exports going to the United States, is entirely predictable:

http://www.bloomberg.com/apps/news?pid=20601213&sid=ahb6gcv6yWcs&refer=home



> *State Pensions’ $865 Billion Loss Affects New Workers* (Update2)
> 
> By Adam L. Cataldo
> 
> ...


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## Edward Campbell (15 Jan 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is an interesting and slightly contrarian view on using infrastructure programmes to ‘stimulate’ the economy:
-------------------------
http://www.theglobeandmail.com/servlet/story/RTGAM.20090114.wrjobcreation14/BNStory/crashandrecovery/home

 As jobs tonic, big digs may be a thing of the past

TAVIA GRANT

From Wednesday's Globe and Mail
January 14, 2009 at 3:17 AM EST

The image is persuasive: Thousands of industrious workers wielding shovels to fix Canada's crumbling roads and bridges, netting a windfall of earnings for their families and motoring the economy out of recession. Trouble is, it may be an image from another era.

While infrastructure spending is a great way to prop up economic activity, many economists don't see it doing much for job growth, where money may be better spent on daycare and nursing homes.

The knocks against infrastructure are that it is not as labour-intensive as it used to be, tends to employ many more men than women and, these days, requires skills in engineering, technology and architecture that are already in short supply, critics say.

"A lot of this ethos of infrastructure-equals-jobs comes from the 1930s when you put a lot of guys to work digging ditches and shovelling gravel. And we don't do that any more," said Dr. Jim McNiven, professor emeritus and former dean of management at Dalhousie University.

"You can't just take unemployed people off the street and have them build roads and overpasses," he said.

Much new funding may well wind up being spent on new machinery rather than hiring, he added said.

"You might as well just send a cheque to Caterpillar in Illinois."

He's speaking from experience. Dr. McNiven oversaw job creation programs as Nova Scotia's deputy minister of development during the recession of the early 1980s. He believes now, as then, that employment growth should focus on the services side of the economy, where three-quarters of Canadian jobs already lie. It's where our economy has tilted in recent decades and where hiring could be stepped up quicker.

"If you want to create jobs, as opposed to buy equipment, you do daycare expansions, more help in senior citizens' homes and more community services. And you need to be more imaginative."

He's not alone in his skepticism. As Canadian employment losses mount, questions are emerging over what will best bolster job growth as the employment outlook deteriorates.

Canadian employers shed jobs for the second month in a row last month. Companies' opinions about future employment levels are the gloomiest in at least a decade, a Bank of Canada survey showed this week.

"Job creation will be a major issue and will probably be the No. 1 factor determining policy at this point," said Benjamin Tal, economist at CIBC World Markets Inc.

Just about everyone agrees Canada badly needs an infrastructure overhaul - and Finance Minister Jim Flaherty promised to boost such spending in his Jan. 27 budget. South of the border, president-elect Barack Obama hopes to create three to four million new jobs, partly through infrastructure spending.

Mr. Flaherty said last week that he wants to hear ideas from all parties and levels of government on how to best resuscitate the economy.

At least $61-billion in public and private money will flow into infrastructure projects this year, according to a report released today by ReNew Canada magazine.

The largest slated for this year, at a capital cost of $6.5-billion, is the Romaine Hydroelectric Complex Project in Quebec.

The second largest, Ontario's Bruce A Nuclear Generating Station Restart, plans to hire 250 people this year - mostly in skilled positions such as nuclear operators and control technicians.

Finding those specialized workers "has been and probably will continue to be a challenge," spokesman Steve Cannon said.

Labour experts are proposing a range of other options, from converting traditional factories to green manufacturing as global demand grows, to spending on retraining and education.

A low-skilled, unemployed worker, for example, could get a stipend for retraining at a community college.

In Alberta, where an economic boom caused a spike in school dropouts, many could now be nudged to finish high school, helping to create a better-educated work force for when hiring ramps up again.

"Measures that would encourage people go to school would have a short-term impact and boost productivity in the long term," said John Clinkard, chief economist at Deutsche Bank in Canada. "I'm talking about an investment in human capital."

He frets that lag times in starting infrastructure projects, heightened by the scarcity of skilled workers, mean that by the time many of these projects are up and running, the worst of the recession will have already passed.

Perry Sadorsky, associate professor of economics at York University's Schulich School of Business, suggests Central Canada's traditional factory base should morph into a hub of green manufacturing that would supply growing demand here and abroad.

"You're seeing changes in other countries with respect to renewables - Germany, Spain, and now Obama is talking about it in the U.S. I see massive changes in the energy sector globally and it would be a shame for Canada to lose out on that.

"We could build ourselves into a world-class manufacturing base for renewable energy components. But we need a sense of urgency."

*****

*PUBLIC WORKS THROUGH THE AGES*

Ambitious infrastructure projects have employed great swaths of the population in years past. Not all labour was voluntary, nor well paid, but here are some snippets from the history books:

*2009*

At least $61-billion in public and private money will flow into infrastructure this year, according to ReNew Canada magazine. Energy and transport projects dominate the list. _Globe and Mail Editorial Research, Canadian Encyclopedia_

*TORONTO SUBWAY*

On Sept. 8, 1949, construction began on Canada's first subway. The project took 7,250 'man years' of skilled labour, and 13,580 man years of unskilled labour, according to the TTC Archives Department.

*HOOVER DAM*

To control and harness the power of the Colorado River, construction on the dam was begun in 1930 and completed in 1935. About 16,000 people worked on the project, with about 3,500 employed there at any one time.

*GREAT PYRAMIDS*

Pyramids were erected in Egypt to serve as burial vaults. The Great Pyramid of Giza employed an average work force of 14,567 people, with about 40,000 workers at the peak, according to some theories.

*TRANS-CANADA HIGHWAY*

The 7,821-kilometre highway was formally opened on July 30, 1962. Work started in the summer of 1950 with an infusion of $150-million of federal funds but revisions increased the federal contribution to $825-million.

*TRANS-CANADA RAILWAY*

The railway was built by Canadian Pacific Railway Co. between 1881 and 1885 as a condition of British Columbia's entry into Confederation. About 15,000 workers helped build the railway.
-------------------------

In fact, there is, still, a large low skilled component in major construction projects and one can hire labour right off the street because a lot of low skilled/semiskilled construction workers are pounding the pavement. 

There are minimum skill sets required for almost any jobs: none are suited to or available for the chronically unemployed/unemployable, undereducated young people who are “on the streets” right now and about whom so many social scientists worry so much.. They are going to ‘mature’ into chronically unemployed/unemployable adults – and parents, and grandparents of new generations of people who know nothing but welfare and substance abuse.


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## GAP (15 Jan 2009)

> There are minimum skill sets required for almost any jobs: none are suited to or available for the chronically unemployed/unemployable, undereducated young people who are “on the streets” right now and about whom so many social scientists worry so much.. They are going to ‘mature’ into chronically unemployed/unemployable adults – and parents, and grandparents of new generations of people who know nothing but welfare and substance abuse.



Nothing will change until society decides that it is not on for them to be supporting fiscally and emotionally the continuance of these groups actions. They don't act, so the social scientists plead for more support for them, we give, and the cycle goes on. We make them account for nothing, require little or no work from them to  receive benefits, tell them its not their fault, etc. etc........


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## Edward Campbell (15 Jan 2009)

Now here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Ottawa Citizen_, is a ‘stimulus’ proposal that will warm the heart of Θουκυδίδης:*
------------------------
http://www.ottawacitizen.com/opinion/op-ed/Stimulus+cure/1177498/story.html

‘Stimulus’ is not the cure

BY NIELS VELDHUIS AND CHARLES LAMMAM

JANUARY 14, 2009

Earlier this week, Finance Minister Jim Flaherty wrapped up his cross-country pre-budget consultation trip in search of recommendations for the upcoming federal budget. Most interest groups, economists and activists are calling for massive increases in government spending to “stimulate” the economy — much of it directed at their own pet projects or industrial sectors.

The unfortunate economic reality however is that “stimulus” spending simply does not work. If the federal government is truly interested in doing what is best for the economy (and Canadians), the solution is reduced government spending and permanent tax cuts.

For starters, a fiscal stimulus package will require increased government borrowing, meaning that the government will take money from some Canadians (who will have less to spend) in order to give to others. The end result is more redistribution rather than more economic activity.

In addition, running a deficit today (to fund the stimulus package) implies higher taxes or lower spending some time in the future. As a result, Canadians will likely save most of a stimulus-induced windfall or use it to pay down outstanding debts in order to brace themselves for higher taxes or lower government spending in the future.

This would certainly apply to temporary tax relief measures. Recent evidence from the U.S. showed that temporary increases in income (from tax rebates) did little to stimulate consumption or the economy.

Other “stimulus” options being considered would likely be worse.

Business subsidies, bailouts, or emergency loans to troubled sectors (auto, forestry, etc.) will only delay the day of reckoning for these industries.

These initiatives transfer tax dollars and employment from healthy businesses to unhealthy ones.

While Canada’s infrastructure is in dire need of improvement, increased infrastructure spending will have little stimulus effect on the economy. Infrastructure initiatives are rarely “shovel ready.” It takes time to draw up project plans, get approvals, and co-ordinate among stakeholders. By the time the actual spending takes place, the economy may already be rebounding.

If past evidence is any indication, increased unemployment benefits will ultimately result in higher levels and longer spells of joblessness. The unfortunate reality is that higher benefits reduce the urgency and incentive for workers to look for employment in other industries and regions.

Rather than forging ahead with “stimulus” initiatives, the federal government should reduce government spending and focus on tax relief aimed at improving incentives to work, invest, and engage in entrepreneurial activities.

To that end, the government should first reduce wasteful spending. A recent study led by economists at the European Central Bank found approximately 25-per-cent waste in Canada’s public sector. Government should follow the lead of many Canadian households: it’s time to trim the fat.

With reductions in spending, permanent (not temporary) personal income and business tax reductions are possible. Specifically, this would allow the federal government to:

•	Reduce middle and upper personal income tax rates: reducing personal income tax rates would be a good first step to a single-rate personal income tax which would dramatically improve the incentives to engage in productive economic activity.  

•	Eliminate the Capital Gains Tax: the capital gains tax is one of the most damaging taxes in Canada in that it encourages the owners of capital to hold on to their investments and has a detrimental impact on entrepreneurship by reducing the return that entrepreneurs, venture capitalists, and other investors receive from risk-taking, innovation, and effort.

•	Accelerate and build on the reduction in the corporate income tax: over the next four years, the general corporate income tax rate should be reduced to 11 per cent, the preferential rate levied on small businesses. This will significantly improve the incentives for business investment and will eliminate the barrier, or disincentive, for small businesses to grow beyond $400,000 (the threshold for the preferential rate).

•	Work with the provinces to harmonize provincial sales taxes with the GST: Harmonization with the GST would exempt business inputs from provincial sales taxes and improve the incentives for business to invest in productivity-enhancing machinery and equipment.

The federal government could partially offset the revenue losses from tax reductions by eliminating direct corporate welfare (bailouts, subsidies, loans) and tax rebates, reductions, exemptions, and credits that favour certain types of business investments over others. Canadian governments have spent more than $182 billion on corporate welfare alone over the past 12 years.

As Finance Minister Jim Flaherty indicated, “We are in extraordinary times,” and that “calls for some extraordinary thinking.”

Let’s hope that his government makes the tough choices needed.

_Niels Veldhuis is director of fiscal studies and Charles Lammam is a policy analyst at the Fraser Institute._

© Copyright (c) The Ottawa Citizen
-------------------------

This also warms my mean, cold little _fiscal conservative_ heart but, for one big reason, I hope and trust it will not happen.

Such a bold, sensible move would, without a shadow of a doubt result in the government losing the confidence of the HoC and, in this circumstance, I’m sure that Her Excellency the Right Honourable Michaëlle Jean would, rightly and properly, call on Michael Ignatieff to form a government and that would be worse than any stimulus Harper/Flaherty will offer.

----------
* See here or here


----------



## Kirkhill (15 Jan 2009)

Last night I saw McGuinty on CTV fronting for the Premiers and declaring that they needed to fast track infrastructure projects as:  "We don't want the recession to be over before we see the funding."

I almost wet myself.  You could see him trying to bite that sentence back even as he blurted it out.  He at least had the grace to grin as he realized what he had said.

We need to spend money quickly to cure a problem that may cure itself before we can cure it.  I am reminded of the boy scout helping the old lady across the street whether she wants the help or no.

We are at risk, in the minds of the premiers, of committing Rahm Emmanuel's cardinal sin and letting a crisis go to waste.

It will be interesting to see the government's books in 18 months time if it plans for a deficit but costs aren't as great as they planned and revenues aren't as low as they planned.


----------



## a_majoor (15 Jan 2009)

Kirkhill said:
			
		

> It will be interesting to see the government's books in 18 months time if it plans for a deficit *but costs aren't as great as they planned and revenues aren't as low as they planned.*



Jerry Pournell deconstructs some numbers and comes to interesting conclusions:

http://www.jerrypournelle.com/view/2009/Q1/view553.html#bailout



> *On Bailouts and Mortgages*
> 
> The bailouts continue, or at least the distribution of money. Barrack Obama is now making vague threats against the Democrats if they don't quickly vote to give him $350 billion, the other half of the mysterious bailout package that was supposed to end our problems. I haven't been told where most of the first half went, and there seems to be little information on what Obama will do with the second half, but he assures us it is vitally needed and Right Now.
> 
> ...


----------



## a_majoor (7 Feb 2009)

Interesting perspective on what is happening and why Russia and Germany are taking the opposite tack. While neither Russia or Germany are hotbeds of Classical Economics or huge fans of Ludwig von Mises, maybe this is a trend we can jump aboard. as an alternative, Canada can make huge tax cuts and become the North American tax haven; attracting American investors and skilled workers to fuel our recovery:

http://www.riehlworldview.com/carnivorous_conservative/2009/02/russia-germany-shift-right-us-goes-left.html



> *Russia, Germany Shift Right - US Goes Left*
> 
> Is it possible that Europe and Russia, seeing a shift to the Left with Obama that will weaken America economically, are shifting to the Right to maximize any advantage coming out of the downturn? Because that is what is happening to some extent folks.
> 
> ...


----------



## Kirkhill (7 Feb 2009)

With the approach of the Deutsche Bank they are setting up the Euro as a safe haven from the dollar.....which is becoming more and more devalued as more and more are printed to cover an ever shrinking economy.  The Deutsche Bank remembers Weimar.

The Russians.....well their just plumb broke.  The spend what they take in and have no ready reserves.  Their reserves are in the ground.

It will be interesting to see what tack Canada takes.... if the opposition can stop playing silly bugger and Harper can find a pair.


----------



## a_majoor (9 Feb 2009)

If the non partisan CBO is correct; then the "stimulus package" is like throwing a large rock to a swimmer coming up for air. Not only does this invalidate the need for a US stimulus package, but all the "me too" packages that western governments have signed on for. 

Two short answers: If the US stimulus package is passed, our economy will be swamped by the detrimental effects of a dramatic slowdown in the US economy (our prime markets). If we continue with the Canadian stimulus package, we will only be moving closer to the vortex.

Counter solution: Let the Canadian stimulus package expire (canceling various provisions during this fiscal year as they are demonstrated to be counterproductive or ineffective) and make next year's budget the Opportunity Budget. Converting Canada to a North American tax haven will do wonders as well.

http://gatewaypundit.blogspot.com/2009/02/cbo-predicts-recession-will-end-in-2009.html



> *CBO Predicts Recession Will End in 2009 Without Stimulus*
> 
> The Congressional Budget Office predicted that the current economic recession will end in the second half of 2009 without the trillion dollar stimulus.
> From The Budget and Economic Outlook: Fiscal Years 2009 to 2019 (pdf):
> ...



edit for spelling


----------



## Kirkhill (9 Feb 2009)

But.......It's a catastrophe

Love that Hope thing.

Saul Alinsky would be proud.  As would Harold Laski.  A nice fusion.


----------



## a_majoor (6 Mar 2009)

Perhaps the greatest concern will be the drawdown of US military power as the Pentagon's budget gets slashed (but the "rent seekers" will still get their cut). The crippling of the productive base of the economy also means the drawdown will be very difficult to reverse.

http://online.wsj.com/article/SB123629969453946717.html



> *Obama's Radicalism Is Killing the Dow*
> 
> A financial crisis is the worst time to change the foundations of American capitalism.Article
> 
> ...


----------



## a_majoor (12 Mar 2009)

Pretty close to the worst case scenario. Even if Canada is the best positioned to recover from the current economic difficulties. our trading partners are not, and our internal market is much too small to make Autarky a viable proposition. Since the US Administration seems determined to sow uncertainty into the markets and prop up the values of unviable institutions and asset classes for the political rent seeker (looter) class, the markets will remain depressed until the administration gives up or a drastic event (like municipal and State bankrupcies due to pension default would be my guess) unblocks the market and clears the dead assets:

http://www.forbes.com/2009/03/11/recession-depression-bear-market-equities-opinions-columnists-nouriel-roubini.html



> *How Low Can The Stock Markets Go? *
> Nouriel Roubini, 03.12.09, 12:00 AM EDT
> The answer: Lower ... much lower.
> 
> ...


----------



## a_majoor (11 Apr 2009)

While witless people proclaim that the US is the cause of the global economic meltdown, real answers appear:

http://www.nypost.com/seven/04092009/postopinion/opedcolumnists/it_didnt_start_here_163630.htm?page=0



> *IT DIDN'T START HERE
> THE GLOBAL DOWNTURN BEGAN LONG BEFORE US FINANCIAL MESS
> *
> By ALAN REYNOLDS
> ...


----------



## a_majoor (18 May 2009)

Anyone surprised by this?

http://www.openmarket.org/2009/05/15/stimulus-ignites-job-killing-trade-war-with-canada/



> *Stimulus Ignites Job-Killing Trade War With Canada*
> by Hans Bader
> May 15, 2009 @ 12:57 pm
> 
> ...


----------



## a_majoor (22 May 2009)

Heh


----------



## Xiang (22 May 2009)

I have a feeling things are going to be getting much worse in the future, not better.  

If any of you have any investments, I would suggest putting those assets into precious metals (ie: gold and silver).   Paper currency is doing to be hitting a wall soon with the risk of hyper inflation.


----------



## a_majoor (27 May 2009)

While this should not be a surprise after the thuggish treatment of Chrysler bond holders, it is very instructive to see and understand. Should Canadian business or political interests conflict with "The One" or his political supporters, expect pretty rough treatment for our side. Even our trump card; plentiful oil, might not be enough to help us:

http://gatewaypundit.blogspot.com/2009/05/even-gop-congressman-loses-chrysler.html



> *Even GOP Congressman Loses Chrysler Dealership ...Plus Peoria GOP Supporter Losing "5 Star" Business*
> 
> More Hope and Change...
> 
> ...


----------



## GAP (27 May 2009)

Sure starting to look like Obama and Mugabe have a lot in common.


----------



## a_majoor (1 Jun 2009)

The real question should be; when will the repudiation of the debt take place?

http://business.theatlantic.com/2009/05/us_debt_668621_per_household.php



> *U.S. Debt $668,621 Per Household*
> 
> No that's not a typo: that's the statistic according to USA Today. The folks over there have done some really great work this week with another interesting interactive chart attached to an article about the nation's debt. If they keep this up, I'll have to stop considering it a useless free newspaper I step over when leaving a hotel room. The numbers it reports are staggering.
> 
> ...


----------



## a_majoor (3 Jun 2009)

Market forces are always at work, how they reveal themselves is sometimes tricky. The Obama Administrations spending plans are drawing out "Bond Vigilantes" who will push interest rates ever higher as they factor in risk, or the US Treasury will resort to massive inflation to monetize and devalue the debt.

Either outcome (and it is actually possible to end up with both) will make Canada's economy sputter. Possible outs for us include (but are not limited to): opening new trade agreements with Anglosphere partners like India and Australia, so we are not totally swamped by the effects of the US economy; making deep cuts in taxation and spending in order to really stimulate the economy and attract capital and talent from the US and EU; make changes to your personal portfolios and transfer assets to items with real value (the "bricks and mortar" referenced in the post):

http://www.dustmybroom.com/index.php?option=com_content&view=article&id=11775:the-sixth-estate&catid=42olitics



> *The Sixth Estate *
> Written by Publius
> Wednesday, 03 June 2009 05:15
> 
> Edmund Burke is suppose to have coined the term Fourth Estate, referring to the print media of his era.  The emergence of electronic broadcasting earned it, in some quarters, the title of the Fifth Estate, which was also a long running investigative program on CBC.  The modern welfare state, avaricious in its demands, often exceeds the tax base of its citizenry.  To make up for the shortfall the state turns to global capital markets and the printing press. Memories of Stagflation are still fresh enough to make inflating away the fiscal crisis, in effect a form of taxation, a unpalatable first choice.  When President Clinton attempted to spend his way out of the recession of the early 1990s, he was rewarded with a Republican Congress and rapidly increasing yields on government securities.  The global bond market balked as his spendthrift ways and earned the sobriquet of "bond market vigilantes."  They seem to be repeating the trick today.  Acting like a Sixth Estate of government, checking the fiscal recklessness of the legislative and executive branches.  *As President Obama finds it more and more difficult to finance his massive government expansion, he will be forced to abandon his plans - unlikely - or resort to monetizing the deficit*.  Getting yourself into bricks and mortar right now would be a good idea.


----------



## Edward Campbell (10 Jun 2009)

One of the most significant problems facing Canada is: *low productivity*.

Canada’s poor productivity is rarely discussed. First: productivity discussions tend to be technical and, therefore, for most people, boring; they are not “good” news; they do not attract viewers/readers; they do not, consequentially, sell soap. Second: there is a broad, ill informed, perception that improved productivity means workers doing more for less; this means that political and opinion leaders are reluctant to discuss productivity lest they be accused of “bashing” labour.

Labour *can* be, frequently is, *part* of the productivity problem but, usually – even when we see too high labour costs in e.g. the auto industry – it is a minor part of a deeper problem. Most of the “blame” for Canada’s poor productivity can be laid at the feet of two groups: business/industry leaders and managers, and political "leaders."

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is an *editorial* that deals, correctly, with one part of the failure in political leadership:



> NAFTA did its best to help
> *The ‘buy-American' problem for Canadian exporters and manufacturers might well have been averted*
> 
> From Wednesday's Globe and Mail, Wednesday, Jun. 10, 2009 03:27AM EDT
> ...




The key is: _”the path of least resistance”_. Canadian politicians, *heavily influenced by business/industry leaders*, are too timid or too lazy or, perhaps, just too disinterested, to “do the right thing” or even to “do things right.” (In case anyone is wondering, that maxim – _leaders do the right thing, mangers do things right_ - is from  Prof. Warren G Bennis  - see: here.)

Whether it is R&D (policy and funding), immigration, or treaty negotiation and internal trade barriers, Canadian politicians, Conservatives, Liberals, ND_ippers_ and PQ_istes_ alike, have *failed in their duties to their country*. This failure began with Sir John A Macdonald and extends, in an almost unbroken line, through to Stephen Harper - and anyone who thinks Michael Ignatieff might be any different is too naive to be allowed out alone.

Our national political culture rewards failure, so long as that failure doesn’t upset the parochial, counterproductive _status quo_.

The national hand wringing by e.g. municipal politicians is misplaced outrage. America is not the enemy; the enemy is in Ottawa and Victoria and St. John’s and Toronto (on Bay Street and at Queen’s Park) and so on. Ill informed, lazy and cowardly *Canadian* politicians – not Barak Obama’s Democrats – are the authors of our (quite unnecessary) problems with _Buy America_.

Of course, low quality politicians are just a symptom: *the disease is stupid, lazy, greedy and envious Canadian voters*. We get the governments we deserve.


----------



## a_majoor (14 Jul 2009)

Get used to our largest market sputtering:

http://online.wsj.com/article/SB124753106668435899.html



> *The Small Business Surtax *
> The Obama Democrats pick income redistribution over job creation and economic growth.
> 
> Jason Furman owes an apology to Michael Boskin, the Stanford economist who wrote a year ago on these pages that Barack Obama would raise American income tax rates nearly to 60%. Mr. Furman, then in the Obama campaign and now at the White House, claimed this was wrong and that Democrats would merely raise taxes back to their Clinton-era level.
> ...



Our plan should be very clear at this point, offer countervailing tax policies to attract American small businesspeople and capital to Canada, and power up our economy. If Canadian business leaders and politicians are not interested in productivity, then import the people with the talent and money to make it happen.

A combination of energizing our internal economy through tax cuts and importing talent and capital, and seeking alternative markets such as India for Canadian goods and services will go a long way to countering the effects of an American economic contraction.


----------



## tomahawk6 (14 Jul 2009)

As the tax bite gets bigger more companies will look for attractive markets. Capital flight will be a big problem for Obama.
Many punditd here think the democrats are intentionally tanking the economy by shredding the private sector and moving that capital into government control. National healthcare would enable Obama to fully control the lives of every citizen. This is all about control.


----------



## SeaKingTacco (14 Jul 2009)

I don't think its that sinister, T6.

A more likely scenario is that they don't have a friggin clue about basic economics and are just incompetent.

Never underestimate the damage that a well-meaning busy-body can do.


----------



## observor 69 (14 Jul 2009)

SeaKingTacco said:
			
		

> I don't think its that sinister, T6.
> 
> A more likely scenario is that they don't have a friggin clue about basic economics and are just incompetent.
> 
> Never underestimate the damage that a well-meaning busy-body can do.



The majority of US economists recognize that the national economy is in a place it has never been before and traditional solutions don't apply.
Obama is fortunately a pragmatic leader who problem solves by seeking the most qualified advice available.
Unfortunately he is restricted from following this best advice by the political reality of Congress.
This scenario applies to virtually all the national issue he is confronting.


----------



## Edward Campbell (14 Jul 2009)

Thucydides said:
			
		

> ...
> 
> Our plan should be very clear at this point, offer countervailing tax policies to attract American small businesspeople and capital to Canada, and power up our economy. If Canadian business leaders and politicians are not interested in productivity, then import the people with the talent and money to make it happen.
> 
> A combination of energizing our internal economy through tax cuts and importing talent and capital, and seeking alternative markets such as India for Canadian goods and services will go a long way to countering the effects of an American economic contraction.




Thucydides is correct: we need to find and set that fine balance between low enough costs to attract and maintain business/jobs, including taxes – they are only one cost, and high enough taxes to maintain public goods and services, including public works like sewers and roads, and public services like garbage collection, fire protection and health care.

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is a girlishly hysterical diatribe from resident tax-and-spend-Liberal Jeffrey Simpson in which he tells us that the sky is falling:

http://www.theglobeandmail.com/news/opinions/a-very-scary-pm-i-dont-believe-that-any-taxes-are-good-taxes/article1216778/


> A very scary PM: ‘I don’t believe
> that any taxes are good taxes’
> *Did Stephen Harper misspeak on taxes? Was it a figure of speech?*
> 
> ...




Actually, there is a respectable economic “school” that asserts that taxes are, broadly, bad, even though some, of some sort, are necessary.

Harking back to positive (bad) and negative (good) liberties, there are public goods and services that are “best" provided by the state and those that can and should be provided by the private sector. Very often public goods and services are best funded by the state and provided by the private sector; consider, for example: garbage collection, health care and sewage treatment. Those goods and services, like national defence, fire and police, *must* be provided, freely, to all, but, unlike soldiers and policemen, there is no good reason why trash collectors, doctors or water treatment plant engineers need to be public servants.

A fine balance is required to keep taxes low enough to attract and maintain savings and investment – otherwise known as jobs - and to keep consumers spending, and to raise enough revenue to provide adequate public goods and services – which also contribute to productivity.


----------



## observor 69 (14 Jul 2009)

Baden  Guy said:
			
		

> The majority of US economists recognize that the national economy is in a place it has never been before and traditional solutions don't apply.
> Obama is fortunately a pragmatic leader who problem solves by seeking the most qualified advice available.
> Unfortunately he is restricted from following this best advice by the political reality of Congress.
> This scenario applies to virtually all the national issue he is confronting.



And more on the same theme from Paul Krugman of the New York Times :

July 12, 2009, 6:57 pm 
Vegematic policy advocacy
Like Brad, I’m not too happy with the policy justifications we’re getting from the administration. It’s perfectly clear that the stimulus was too small; I think they know that too. But they’ve made a political judgment that (a) they can’t push another round through and (b) the thing to do right now is defend the policy they already have.

Maybe they’re right. But it does bring back unpleasant echoes of what I thought of as the Bush administration’s Vegematic approach to tax cuts: it slices, it dices, it purees! In other words, whatever policy they had been advocating in the past was still the perfect answer to whatever problems the economy faces now.

To be fair, Obama is nothing like Bush; the stimulus was designed to solve a real problem, and the Obamanites, unlike the Bushies, don’t go around inventing crises to solve. But I still think that Obama’s greatest strength is precisely his obvious intelligence and ability to talk to Americans like adults; it’s a shame to see him and his advisers saying something they have to know isn’t quite right.


LINK


----------



## a_majoor (18 Jul 2009)

More predictions:

http://cjunk.blogspot.com/2009/07/living-on-credit.html



> *Living on Credit*
> 
> Deleveraging from excessive national debt is a painful and long task ... just ask Canadians. Now in America, we have what may be the most incipient cabal of progressives to ever run a country, anywhere. America's Democrats are about to cause a catastrophe which will ensnare Canada. Simply put, tax strapped Americans won't spend ... which means Ontario is apt to become a rust-belt; and, as always happens when progressives get frustrated that things aren't working, they lash out ... the result this time being that any protectionism Canada suffered during the Bush years will seem tame in comparison to what the dolts down south will unleash.
> 
> ...


----------



## Edward Campbell (19 Jul 2009)

_Globe and mail_ columnist Jeffrey Simpson is just about ready to pee his pants; he is _soooooo_ annoyed at Stephen Harper and the Tories because they will not raise our taxes. Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from yesterday’s _Globe and Mail_, is his latest whinge:

http://www.theglobeandmail.com/news/opinions/our-politicians-take-the-easy-way-out-and-leave-us-with-the-bill/article1222872/


> Our politicians take the easy way out and leave us with the bill
> *Outside economists believe the federal budget will not be in balance in 2013-14*
> 
> Saturday, Jul. 18, 2009
> ...




Now, strange as it may seem, I agree with Simpson on one key point:  *”We can start moving when the recession is over to bring the budget back into balance through tax increases and/or spending cuts. Or, we can push off those decisions, and just let deficits roll on for a decade or so.”*

He’s right; that’s it: a simple, clear choice. Clear and simple if, big *IF*, one believes that balanced budgets are vitally important. I do. But some, actually many, do not share that view. They believe that low taxes are essential to stimulate investment and productivity. They also believe that most spending is, either:

•	Productive; or

•	Politically impossible to cut. 

The exceptions that prove the rule are high culture (symphonies and ballet companies) and national defence. Both can be cut without any hue and cry from either productivity conscious economists or voters.

But:

•	Our GDP is about $1.2 Trillion;

•	The Government of Canada (not including the provinces and cities) spends about $160 Billion each year. That’s 13% of GDP; that’s too high. The national government must be able to find $30 Billion+ in spending that can be cut – not shifted to provinces.


----------



## Edward Campbell (21 Aug 2009)

Jeffrey Simpson makes his case, again, for higher and higher taxes everywhere, in this column reproduced under the Fair Dealing provisions (§29) from today’s _Globe and Mail_:

http://www.theglobeandmail.com/news/opinions/the-worst-may-be-over-but-sustained-recovery-is-a-long-way-off/article1259135/


> The worst may be over, but sustained recovery is a long way off
> *Canada's economic prospects are uncertain to grim until the U.S. deficit and trade balances are rectified*
> 
> Jeffrey Simpson
> ...




Simpson has the _fundamentals_ right:

1.	Canada’s recovery depends, in very large measure, on a US recovery. It is our biggest market – by so much that nothing else, not Europe, at all, and not Asia, very much, really matters;

2.	The US budget deficit is a very real threat; and

3.	US legislators are, like their Canadian counterparts, reluctant to raise taxes or cut spending. That means deficit reduction is very, very difficult.

It may well be that taxes are too low in the USA. It is a *fact* that spending is too high and is getting higher. California is just the leader – America may well follow.

The sorts of (relatively) low skill/(relatively) high paying manufacturing jobs that have migrated to Asia *matter*. Many, many young men – still the “main” wage earners in lower middle class families – are and will remain unsuited for the “knowledge economy” and the “service economy” does not pay enough; they need those low skill/high pay manufacturing jobs, or something equivalent. Jeff Rubin argues that steadily rising oil prices will bring some of those jobs back to “local” markets because the transportation component of price will get too high. But that is still some time away, maybe at the oil ≈ $250.00/bbl price point. But those jobs are “why” the auto subsidies are politically necessary.

The Chinese do not want, indeed cannot afford to lose too many of those low skill/low pay (in their case) manufacturing jobs. They will take whatever steps are necessary to keep them.

Rubin’s argument is based on the presumption that the ratio of costs remains relatively static. The Chinese will be looking for ways to _lower_ the transportation component of overall product cost – maybe “better’ transportation systems, maybe even lower production costs (wages and raw materials), to offset higher fuel costs. The Chinese will aim to prevent Rubin’s _small world_ model and retain the advantages they have from Friedman’s _flat world_.

One of the things China *may* do is, gradually, sell off its US dollar reserves to protect itself from US inflation. It may, also, keep pressing for a “new” global reserve currency to replace the US dollar which, _de facto_ fills that role now. Both of these actions would help to isolate China from US inflation and “expose” everyone else in the world to China’s economic imperatives.

The American economy remains strong and vital. For us, Canadians, it is also close, safe and friendly. It will, for generations remain our biggest market. We *need* a US recovery but we will suffer, hugely, from US inflation – a much bigger threat than the recent recession.


----------



## Edward Campbell (1 Sep 2009)

Here, reproduced under the Fair Dealing provision (§29) of the Copyright Act from today’s _Globe and Mail_, is an item that *might* make a good election platform for _Prince Michael_ and the Liberal Party of Canada:

http://www.theglobeandmail.com/news/politics/ottawa-needs-a-clear-debt-busting-plan-watchdog/article1271251/


> Ottawa needs to plot a clear debt-busting plan, watchdog says
> *Government officials are worried it may be premature to lay out a detailed strategy to balance the books*
> 
> 
> ...




As a card carrying Conservative I am grateful that the Liberals appear to remain wedded to their _campaign left and govern right_ strategic tradition. They will be loath to tell Canadians that we must stop spending (stimulus) like drunken sailors and return to our frugal, even niggardly Scots roots.

But, Mr. Page is right: it is past time to start identifying and quantifying the *spending cuts* – cuts that will, sadly, include cuts to or, at least, _containment_ of defence spending – and it is nearly time to start implementing them.


----------



## Edward Campbell (1 Sep 2009)

China, according to this item, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is going to meet part of its ever growing resource needs from Canada:

http://www.theglobeandmail.com/globe-investor/chinas-bold-move-into-the-oil-sands/article1271058/


> China's bold move into the oil sands
> *PetroChina's $1.9-billion acquisition of stake in Athabasca Oil shows deep-pocketed investors still see value in Alberta resource*
> 
> Nathan VanderKlippe
> ...



See, also: Edmonton-to-Kitimat pipeline

The Chinese economy continues to grow, albeit at a slower rate than in the recent past, and will, likely, increase its rate of growth for several more years. This growth is fuelled by oil and creates increased demand for it. The oilsands are a logical place for Chinese investment – both for sound economic reasons and for security of supply. The African resources markets are cheap but unstable. Canada provides a nice balance.


----------



## GAP (1 Sep 2009)

I wonder how they are going to transport it to the coast....thru the States or over the Mountains?

oops...ER already answered that....


----------



## Edward Campbell (14 Sep 2009)

There is no need to worry about this report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, China will gobble up as much of the oil sands as America and Europe will sell off:

http://www.theglobeandmail.com/report-on-business/oil-sands-under-attack-on-environment/article1286239/


> Oil sands under attack on environment
> *The industry is accustomed to defending its image in North America, but it now faces a multifront war, with opposition growing from Norway to Washington*
> 
> Shawn McCarthy
> ...



Some (many? most?) American and European investors are looking for excuses to get their money out of long term, expensive projects so that they can solve immediate liquidity problems – pay their bankers and bond holders. The Chinese – who often are the bankers and bond holders – have oceans of US dollars that they are itching to invest in energy projects.

America still matters, but less than it did a year ago, but Europe doesn’t matter at all.


----------



## Edward Campbell (15 Sep 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_, is an interest take:

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/09/14/terence-corcoran-warm-fuzzy-dictatorship.aspx


> *Terence Corcoran*: Warm, fuzzy dictatorship
> *Canada would never accept a U.S. government resource takeover*
> 
> September 14, 2009
> ...




Absolutely spot on; Canadians are blinkered by their own, juvenile, knee-jerk anti-Americanism.


----------



## Edward Campbell (15 Sep 2009)

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ website, is a prediction of the situation for Canada, too:

http://www.theglobeandmail.com/news/world/from-stimulus-to-austerity-britains-political-whiplash/article1289102/


> From stimulus to austerity: Britain's political whiplash
> *After months of promoting stimulus as the economic way forward, even Gordon Brown has joined the tightwads*
> 
> Doug Saunders
> ...




A handful of Canadian politicians have campaigned, with considerable success, on spending cuts and belt tightening: Ralph Klein and Mike Harris come to mind. But it’s been foreign territory for federal politicians since around 1960.

We are, however, likely to be there sooner rather than later, I hope. And I have no doubt we will be like the Brits, _”adamant that health and education services be protected from cuts and that taxes not be increased – an impossible combination.”_ Don’t expect to hear too many cries of “save the defence budget!”


----------



## Larkvall (15 Sep 2009)

E.R. Campbell said:
			
		

> A handful of Canadian politicians have campaigned, with considerable success, on spending cuts and belt tightening: Ralph Klein and Mike Harris come to mind. But it’s been foreign territory for federal politicians since around 1960.
> 
> We are, however, likely to be there sooner rather than later, I hope. And I have no doubt we will be like the Brits, _”adamant that health and education services be protected from cuts and that taxes not be increased – an impossible combination.”_ Don’t expect to hear too many cries of “save the defence budget!”



Didn't Manitoba and Newfoundland and Labrador operate with balanced budgets for years? Didn't the feds have surpluses for over a decade? We can get back there. We can start by not giving the auto companies any more money!

Edit I could be wrong about NL. I thought they had balanced budgets in the late 90s.


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## Edward Campbell (16 Sep 2009)

Several provinces and Ottawa balanced their budget before and after the scares of the early '90s.

What's different and what  we are seeing in the UK - and what we saw in, especially, AB and ON - is politicians campaigning *for* spending cuts. Generally, voters - including, maybe especially Canadian voters - want governments to spend! Spend! SPEND!


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## Edward Campbell (25 Sep 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_, is an interesting column:

http://www.nationalpost.com/news/story.html?id=2030302


> Canada tries to take the lead in energy power play
> 
> Don Martin, National Post
> 
> ...



What we are facing is nothing more nor less than destructive, beggar-thy-neighbour protectionism – something at which American and Canadian politicians, businessmen and labour leaders all excel.

The oil, of course, will go to market, at market price – no one needs to give a tinker’s dam about what Americans do or don’t do.

The hydro issue is more dangerous because US states want to act exactly contrary to international trade law; they are trying to become outlaws all in the name of “protecting” their taxpayers against something “better.”


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## a_majoor (25 Sep 2009)

As Edward says, the oil _will_ go to market at market prices, and I doubt the Chinese or Indians will have any qualms about how green, blue or orange the oil is so long as C18 hydrocarbons (the common ones for fuels like gasoline and diesel) can be extracted.

WRT the Human Development Index; there are many potential technologies that can increase efficiency and lower fuel use (see blogs like Next Big Future, or reade the "Scarey Stratigic Problem; No Oil" thread on Army.ca), but even if all were to be adopted tomorrow morming, it would take decades to replace the capital plant of North America to take advantage of these technologies. It takes almost a decade to get a car off the road, imagine how long it takes to replace entire factories and powerplants. 

Devaluing the dollar and imposing government controls and ownership on industry and banking like the Obama administration has done will only make such a changeover more, not less, difficult as market incentives get distorted for political incentives instead.


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## Kirkhill (25 Sep 2009)

Pipeline you say?

Just keep an eye on those local interests.


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## Edward Campbell (28 Sep 2009)

Some good news, on the Canadian front, in this report,  reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site:

http://www.theglobeandmail.com/report-on-business/jobless-claims-post-surprise-decline/article1303685/


> Jobless claims post surprise decline
> *For the first time in 11 months, the number of Canadians claiming employment insurance falls*
> 
> Tavia Grant
> ...




Unfortunately, for us, our “fragile recovery” (Jim Flaherty’s words) needs *American* unemployment to fall. They, Americans, provide the _demand_ that stimulates our  _supply_ which, in turn, creates jobs for Canadians.


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## Edward Campbell (28 Sep 2009)

But, see here where the _New York Post_ says, _”The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept.”_

That bodes equally ill for *our* long term welfare unless or until we broaden or trading base.


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## Edward Campbell (30 Sep 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, is some not so good news about the “recovery:”

http://www.theglobeandmail.com/report-on-business/canadas-economic-growth-fizzles/article1306538/


> Canada's economic growth fizzles
> *GDP was unchanged in July, raising concern over the strength of the country's economic recovery*
> 
> Tavia Grant
> ...




Our “recovery” depends on a US recovery. The faster our major only significant source of *demand* (for our goods and services) recovers the faster our *supply* of those goods and services, and the concomitant jobs, will recover, too.

If the US government and financial sector screw up then we will chug along at a “no growth” rate.


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## Edward Campbell (14 Oct 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, is a report on China’s oil _demand_ and its potential impact on Canada’s oil _supply_:

http://www.theglobeandmail.com/globe-investor/chinas-oil-thirst-spurs-race/article1322267/


> China's oil thirst spurs race
> *With U.S. demand slumping, Canadian energy producers urged to forge new paths to booming Asian markets*
> 
> Shawn McCarthy
> ...




The “declining” US market remains big and rich, for now. But Chinese and Indian demand for oil will continue to rise for a generation. 

This is medium to long term _stuff_, not related to the _recovery_ from the 2008/09 crisis.


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## a_majoor (15 Oct 2009)

Hyperinflation:

http://moneyrunner.blogspot.com/2009/10/protection-against-hyper-inflation.html



> *Protection against hyper-inflation*
> 
> One of my clients called today to ask what he could do to protect himself against hyper-inflation. With the Democrats in congress and Team Obama using trillions as counters and billions as rounding errors, that concern is spreading. And it's a very good question. Let's use the experience of Germany during its experience during the early 1920s. Germany was a first-world country that was dealt hyper-inflation as a deliberate policy. Here’s Art Cashin:
> 
> ...


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## a_majoor (21 Oct 2009)

Why stumulus packages fail. As the Us economy continues to tank, our biggest market will shrink. This is also a cautionary tale for our own politicians:


http://reason.com/archives/2009/10/19/the-myth-of-the-multiplier/singlepage

*The Myth of the Multiplier*
Why the stimulus package hasn't reduced unemployment
Veronique de Rugy from the November 2009 issue

Give us money, and we’ll give you jobs. That was the promise President Barack Obama made when he asked Congress for a $789 billion stimulus bill. The cash, he said, would create millions of jobs during the next two years. Without the stimulus, the administration warned in a January report by economic advisers Christina Romer and Jared Bernstein, unemployment by the end of 2010 would reach as high as 9 percent. 

Well, Obama got his money. Since then, the economy has shed more than 2 million jobs and the unemployment rate has climbed to 9.4 percent. By May 2009, the Council of Economic Advisers (CEA) had changed its message. Now the stimulus would “save or create” 3.5 million jobs by the end of 2010.  

Measuring total jobs “saved” by a piece of legislation is as difficult as measuring total crimes prevented by police patrols. That’s why no agency—not the Labor Department, not the Treasury, not the Bureau of Labor Statistics— actually calculates “jobs saved.” As the University of Chicago economist Steven J. Davis told the Associated Press, using saved jobs as a yardstick “was a clever political gimmick to make it even harder to determine whether this policy has any effect.” 

A look at the CEA’s job creation model undercuts its promises even more. The model’s calculation of saved or created jobs is based on a macroeconomic estimate, not on actual data. According to the authors, the estimate rests on a “rough correspondence over history” that indicates a 1 percent increase in gross domestic product (GDP) represents an increase of 1 million jobs. They might as well have said the estimate was picked at random. 

How did they come up with the 1 percent figure? Since government spending is increasing, and since such spending is a component of GDP, they assumed GDP would grow whether or not the spending produced real growth in the economy. This is akin to assuming I will have a baby in nine months whether or not I am pregnant. 

The May report concedes that while the CEA will attempt to measure job creation through data collected from stimulus recipients, the results will contain errors and inconsistencies. “Because of these limitations,” it warns, “the reported jobs numbers will need to [be] used with caution and as part of a more complex estimation strategy.” 

Since then, Romer has told CNBC she couldn’t say for sure how many jobs would be created, since we can’t know what would have happened without the stimulus. But didn’t her report pro-ject what would happen if the stimulus wasn’t passed? Wasn’t the 3.5 million number supposed to be the difference between employment with the stimulus and employment without it? 

The confusion flows from the faulty theory underlying the stimulus bill. In Keynesian thought, a decline in demand causes a decline in spending; since one person’s spending is someone else’s income, a fall in demand makes a nation poorer. As a poorer nation cuts back on spending, it sets off another wave of declining income. So any big shock to consumer spending or business confidence can set off waves of job losses and layoffs, as fewer goods are demanded and more workers become useless. 

Under this logic, one possible remedy is for public spending to take the place of private spending. As government increases its spending, the money creates new employment. That, in turn, spurs those new workers to consume more and prompts businesses to buy more machines and equipment to meet the government-induced demand. Economists call this increase in aggregate income the “multiplier” effect. One dollar of government spending, the theory goes, ends up creating more than a dollar of new income. It’s a rare free lunch. 

As appealing as the Keynesian story sounds, many economists have long doubted it. In 1991, looking across 100 countries, Robert Barro of Harvard presented historical evidence that high government spending actually hurts economies in the long run by crowding out private spending and shifting resources to the uses preferred by politicians rather than consumers. For a dollar of government spending, we end up seeing less than a dollar of growth. Can long-term poison be short-term medicine? 

Even in the short run, if there’s a big decline in the demand for workers, why should that alone cause mass unemployment? If all those workers really want to work, why won’t wages just fall until all the workers have jobs? That’s how markets end a glut, whether it’s a glut of employees or a glut of blue jeans: with lower prices. If recessions really are caused by a fall in demand (and nothing else), why don’t wages fall enough to keep people from losing their jobs?  

It’s because wages are sticky, Keynesians argue. Wages and salaries don’t change on a daily basis the way stock prices and gas prices do, so if a company hits a sales slump, salespeople might earn fewer commissions, but the vast majority of workers don’t get a pay cut. There’s something about the market for workers that keeps businesses from cutting wages in a slump. As long as wages are sticky, in the wake of a nationwide collapse in sales, entrepreneurs will start firing people. 

If a decline in demand means mass firing, a rise in demand can mean mass hiring. Even if government spending is inefficient, pork-laden, and financed by future tax increases, the theory goes, it can still create some real jobs, some real output, in both the public and private sectors.  

So what do the data say? There aren’t many studies of the issue. But two stand out: Robert Barro’s work and research by Valerie Ramey, an economist at the University of California–San Diego, on how military spending influences GDP. Both studies found that government spending crowds out the private sector, at least a little. And both found multipliers close to one: Barro’s estimate is 0.8, while Ramey’s estimate is 1.2. This means that every dollar of government spending produces either less than a dollar of economic growth or just a little over a dollar. That’s quite different from the administration’s favored multiplier of four. What’s more, Ramey also found evidence that consumer and business spending actually decline after an increase in government purchases. 

Why this crowding out of private spending? Government spending comes from three sources: debt, new money, or taxes. In other words, the government can’t inject money into the economy without first taking money out of the economy. 

Take taxation: Taxes simply transfer resources from consumers to government, displacing private spending and investment. Families whose taxes have increased will have less money to spend on themselves. They are poorer and will consume less. They also save less money, which in turn reduces the resources available for lending. 

In addition, higher taxation encourages people to change their behavior to avoid taxes. They might switch their efforts to nontaxed activities, such as household production, or to the untaxed underground economy. Economists call this a deadweight loss, because people give up the taxed activity or good they prefer. 

There are high costs to the other options as well. If the government borrows money, that leaves less capital for the private sector to borrow for its own consumption. If the government prints new money, it will create inflation, which reduces the value of the money we own and decreases everyone’s purchasing power. 

Overall, government spending doesn’t boost national income or standard of living. It merely redistributes it—minus the share it spends on the bureaucracy that collects and spends our tax dollars. The pie is sliced differently, but it’s not any bigger. In fact, it’s smaller. 

Contributing Editor Veronique de Rugy (vderugy@gmu.edu) is a senior research fellow at the Mercatus Center at George Mason University. 
[/quote]


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## Edward Campbell (24 Oct 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is an interesting commentary:

http://v1.theglobeandmail.com/servlet/story/LAC.20091024.COESSAY24ART2021/TPStory/TPComment/?pageRequested=all


> *ECONOMIC HERESY*
> Putting to rest a too vigorous bird
> *The arguments in favour of a separate Canadian currency have been refuted by experience. The time has come for North American monetary union. It is essential for Canadian prosperity.*
> 
> ...




I am one who drinks the orthodox kool-aid because I do not feel that a _petrodollar_, which is what the Canadian dollar really is, can be _united_ with a well _balanced_ (service-industrial-resource-agricultural) currency like the US dollar. I think _governors_, from Louis Rasminsky through to Mark Carney have been right about _floating_ our dollar because it is so closely tied to resource demand – but Yakabuski makes an interesting and persuasive case.


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## Edward Campbell (26 Oct 2009)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is an interesting opinion piece:

http://www.theglobeandmail.com/report-on-business/managing/a-new-world-order-forged-in-crisis/article1337516/


> A new world order forged in crisis
> *The East will rule while the West pays for its carelessness*
> 
> Gwyn Morgan
> ...




The implications –for Canada, if Morgan is correct - are pretty obvious. Our manufacturing sector (Ontario and Québec) looks like toast, but, as Jeff Rubin predicts, higher and higher oil prices will make some manufacturing financially attractive again – when transportation costs outweigh labour cost benefits. Our resource sectors will prosper, allowing us (and Australians) to prosper and buy manufactured goods but we - 60± million Aussies and Canucks – are not enough of a market to _justify_ much of a home grown manufacturing base.

We *should* see stiff competition in the resource trade from Africa, South America and Russia but, again to paraphrase Abba Eban, the governments in those places have, historically, _never missed an opportunity to miss an opportunity_ and I’m guessing they will continue in that mode.

The prospect, for my grandchildren, (again, assuming Morgan’s predictions are soundly based) is that China and India, not America, will be our most important trading partners. That doesn’t mean America will be gone or even unimportant – just less important. Some will argue that a more _balanced_ trade relationship (multiple important trading partners) can only be to Canada's advantage.


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## Edward Campbell (3 Nov 2009)

Australia and Canada are at almost extreme opposites in recovery: Australia has, pretty much, returned to ‘normal’ and is hiking the bank rate to fight inflation, again, while the Bank of Canada holds us at record low rate because the recovery is slow and halting.

What’s the difference? Are we not similarly sized, similarly resource based, similarly _advanced_ economies? Yes, but:

•	Australia’s most important trading partner is China; and

•	Canada’s major and only important trading partner is the USA!  

China never went into recession; growth slowed to around a mere 6%! The USA? Well, time will tell for them and us.


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## a_majoor (9 Dec 2009)

Once again the US Administration gives us a potential opportunity to exploit. Lower our taxes and regulatory barriers and American business people and investors will come to Canada in droves ansd energize our economy:

http://tigerhawk.blogspot.com/2009/12/continuing-war-on-business.html



> *The continuing war on business *
> By TigerHawk at 12/08/2009 03:11:00 PM
> 
> In today's Wall Street Journal, we learn that the Obama administration is, again, proposing to discourage employers from hiring:
> ...


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## a_majoor (16 Dec 2009)

The forcast is inflation, but hyperinflation (in the classical economic sense) is not in the picture just yet. Some economists actually suggest the collapse of overvalued markets (i.e. housing) and the writing off of trillions of dollars in paper "wealth" (like GM) might actually counteract inflationary trends, but we will see. This cautionary tale applies to Canada as well:

http://www.american.com/archive/2009/december-2009/how-likely-is-hyperinflation



> *How Likely Is Hyperinflation?*
> By Peter Bernholz
> Tuesday, December 15, 2009
> 
> ...


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## a_majoor (16 Jan 2010)

given teh massive linkage between global economies, what happens "out there" can have deevastating effects "over here". While the growing US debt and deficits have the effect of a snake hypnotizing us economic mice, other forces are afoot which could blind side us and send the economy crashing like a house of cards:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002951/a-global-fiasco-is-brewing-in-japan/



> *A global fiasco is brewing in Japan *
> 
> By Ambrose Evans-Pritchard Economics Last updated: January 12th, 2010
> 
> ...


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## a_majoor (28 Jan 2010)

More on global debt:

http://www.barrelstrength.com/2010/01/27/fate-of-nations/



> *Fate of Nations*
> 
> January 27, 2010 10:21 am Arran Gold American Politics, Canadian Politics, Economics and Finance
> 
> ...


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## Edward Campbell (29 Jan 2010)

And then there’s this, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _National Post_:

http://network.nationalpost.com/np/blogs/fullcomment/archive/2010/01/28/terence-corcoran-the-loopy-obama-sarkozy-axis-of-trade.aspx


> Terence Corcoran:
> *The loopy Obama-Sarkozy axis of trade*
> 
> January 28, 2010
> ...




Corcoran is right: global trade is ‘in balance.’ Those with lots of cash on hand can buy whatever they want; those who need cash must sell at a discount, to gain market share. If American or French prices need to be lowered to remain competitive then Americans and the French must settle for lower wage and longer hours or they must learn to _work smarter_ – something at which the Americans have, in the past, been very successful and at which the French have, broadly, failed.

One alternative is to do with less, accept a lower standard of living - which is what Canada has done since the 1970s; another is to borrow more - which is what America has been doing for a generation and what Canada did, to finance its unsustainable social safety net, from 1970 to 1995. But it’s not clear, to me that those awash in cash (China, India, too) are willing to keep buying USD Treasuries when Barak Obama appears intent of making the US dollar worthless. No one wants to be paid in monopoly money.


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## a_majoor (29 Jan 2010)

The more things change:

http://www.theglobeandmail.com/report-on-business/commentary/brutal-economy-of-1700s-has-an-eerie-similarity/article1448623/?cid=art-rail-marketing



> *Brutal economy of 1700s has an eerie similarity *
> 
> A central bank and a brilliant central banker, easy credit and novel financial investments, high taxes and expansive state debt
> 
> ...


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## Edward Campbell (30 Jan 2010)

Every so often, even when he talks economics (not his strong suit), Jeffrey Simpson gets it right, as he does is this column, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_:

http://www.theglobeandmail.com/news/opinions/balanced-budgets-are-lifesavers-in-turbulent-times/article1449947/


> Balanced budgets are lifesavers in turbulent times
> *Canada must protect itself from its neighbour's terrible habits*
> 
> Jeffrey Simpson
> ...



So, how do we balance the budget?

First, ‘grow’ the economy by making it more productive. See e.g. here;

Second, cut spending – massively, even in the face of HUGE public opposition, because every programme and project has a public, political constituency. Then cut some more. But do not cut funding for education and R&D;

Third, cut, preferably eliminate, corporate taxes;

Fourth, introduce a new, green consumption tax which is paid, directly and measurably, by end users – by home owners in Halifax, drivers in Drummondville and grocery shoppers in Scarborough; and

Fifth, See here again, expand our trade and commercial limks with the 'Asian triangle’ (China, India and Japan) to help offset our unhealthy dependence on the US market.

None of it, especially cutting spending, adding a new green consumption tax, cutting the corporate taxes, and making the economy more productive, is easy. Some are damned hard, but all five steps should be taken.

The defence budget? _Constrained_ growth, at best.


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## GAP (30 Jan 2010)

To add one more....

eliminate the grants/subsidies/whatever they are called to favored businesses previously granted by both Liberal and Conservative governments to big businesses.... These were done in the days of back channeling $$ back to the political parties, but have hung on by the parties feeling they can't slight these businesses by eliminating their place at the trough.....

Bombardier, Oil Patch, Rail lines, for a few come to mind. If they are truely big competive businesses, then they can go it alone....

Oh, and eliminate the CBC totally....


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## Kirkhill (30 Jan 2010)

Perhaps a simpler formulation:

Decrease deficit - Increase Revenues - Decrease Costs

Costs are politically hard to cut - productivity increases are more palatable but often they translate into lost jobs

National Revenues, I believe, are easier to increase - not by taxing ourselves more but by selling more of what we own and the world wants to buy.

That is the lesson of Norway, Pre-Stelmach Alberta and Wall's Saskatchewan.

It makes no sense to leave resources in the ground when the demand is high and our need for revenue is great.

If, at some point in the future, we get to the point that we, Canadians, have run out of resources to support ourselves then the rest of the world is going be even deeper in the hurt locker.  Consequently cost analyses will be driving the markets to a different set of resources ( and maybe tide and wind power will be viable) and we will adapt accordingly.


The Canadian way out of being locked into Obama's  basket case is moving more resources to the coasts and loading them on to low cost (preferably Cnadian) transport.


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## a_majoor (5 Feb 2010)

European debt threatens economic recovery. The question I have is will the EU cut loose anyone who threatens the stability of the combined recovery, or will they dig themselves in deeper trying to keep underperforming national economies afloat. (History suggests plan "B")

http://www.theglobeandmail.com/report-on-business/economy/recovery-teeters-as-debt-threat-spreads/article1458282/



> *Recovery teeters as debt threat spreads*
> 
> Portuguese civil servants on Friday protest in Lisbon over the government's decision not to raise wages in 2010.
> Portuguese parliament defeats austerity plan, spooking investors; hangover from financial meltdown shows no sign of ending soon
> ...



Some interpolations.

The US unemployment rate is far higher than the official estimates, and has been calculated to run as high as 17 toi 22%. This includes "discouraged workers" who no longer seek employment and under the table workers eaking out a living in "the gig economy" performing odd jobs whenever they can.

Canada has the ability to eliminate the debt in six years by eliminating transfers to governments, subsidies and crown corporations (ignoring virtuous circle effects like savings in government operations and reductions in payments to the $30 billion/year carrying costs of the national debt). Of course the theoretical ability to eliminate the debt in a short period of time does not translate into the political will to do so; lots of pressure will need to be applied and political rent seekers who feed off these transfers will fight to the last taxpayer to maintain their positions at the trough. Still, the possibility of getting out from under the debt trap should be appealing at some level.


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## a_majoor (6 Feb 2010)

Yo yo yo, listen up an get the lowdown on da boom an da bust:

http://www.youtube.com/watch?v=d0nERTFo-Sk

"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem


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## Edward Campbell (11 Feb 2010)

I don’t often agree with Lawrence Martin but this time he is quoting one of the brainy Liberals: Donald Macdonald whose multi-volume study of the _Economic Union and Development Prospects for Canada_ (1985) is one of the few of those Royal Commission reports that actually spelled out useful solutions to a well defined problem. This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_, repeats what many others, me included - in my own small way in these _fora_, have been saying for years, but it is still worth a read:

http://www.theglobeandmail.com/news/opinions/the-us-economy-is-in-turmoil-royal-commission/article1463474/


> The U.S. economy is in turmoil. Royal commission?
> *To redefine Canada's global prospects, we must develop alternative strategies*
> 
> Lawrence Martin
> ...



There were rumours, back in the ‘80s and beyond, that the primary reason Macdonald was given the _opportunity_ to study and report on the _Economic Union and Development Prospects for Canada_ was that Trudeau wanted him out of the way because he was the only *effective* voice for fiscal probity and economic *responsibility* in Trudeau’s cabinet. Whatever the reason, his report was tightly reasoned and persuasive and it established him as a legitimate Canadian ‘wise man’ in the economic _strategic_ sphere – a very rare commodity in Canada.

Like Bob Rae, I have confidence in America’s ability to recover, but it’s not going to ‘bounce’ back and when it does recover it, and we, are going to discover that the top spot is no longer exclusive terrain – America will still be rich and strong, maybe even the strongest, but it will be one amongst a few, not even, necessarily, first amongst equals. The current (this whole generation) problem is that Americans are fiscally _ignorant_ and _*irresponsible*_ and they have perfected the ‘retail politics’ system so that their elected representatives – even those who know better – will pander to the mob that wants to either tax and spend or borrow and spend. America will claw its way back to the global economic/political top tier when it grows up and reforms itself and there is little prospect of that happening soon.

The big problem with Martin’s suggestion, a bipartisan panel, is that it’s not clear to me that Ignatieff knows or Harper cares enough to appoint one, much less listen to it.

At 78 Don (Thumper) Macdonald is too old to do anything except point the way. Pity.


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## Edward Campbell (15 Feb 2010)

An interesting bit of informed speculation, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Guardian_ web site:

http://www.guardian.co.uk/business/2010/feb/14/canada-china-investment-oil-sands


> Canada looks to China to exploit oil sands rejected by US
> *Canada courts Chinese investment in Alberta oil projects as US firms boycott tar sands fuel*
> 
> Suzanne Goldenberg - US environment correspondent
> ...



The facts are that:

•	There is a concerted effort by some US environmental groups and the oxymoronic US ‘clean coal’ lobby and the US natural gas industry to boycott the _Canadian tar sands_. All three have deep pockets and all three are well connected in the Obama While House and the US Congress. All three actually aim to damage the US economy and sexurity but that never stopped a lobby group;

•	The resource, especially energy hungry Chinese are investing in the Canadian heavy oil fields and they are lobbying for a new pipeline to a Pacific coast Canadian seaport; and

•	Canada remains ‘open for business,’ especially for business that will retain existing or create new jobs.


It’s all a neat fit but I’m not so sure one can make the leap of logic fro those few facts to _Canada is ‘courting China.'_ Canada is ‘courting’ new investment, to be sure and China is one of the few countries in the world with a big surplus of US dollars that it wants to invest overseas.

But, at the risk of repeating myself yet again, we need to look West, to East and South Asia for trade and investment. Europe is in absolute decline and America is stagnant – for a generation or more, probably, in each case. Asia is where the money is and we need a Willy Sutton sort of approach to our future and look to “where the money is.”


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## Kirkhill (15 Feb 2010)

Agreed across the board E.R.

Personally I wouldn't be surprised if, as the article states, everybody is just hitting the "Pause" button, not the "Stop" or worse "Rewind".  

In a matter of 9 months there will be a much clearer picture of Obamaland and whether he will have a chance to inflict further damage by legislative means and/or whether he will succumb to the temptation to chase his own demons by Presidential Fiat (Executive Order).  

It may be 2012 before the "Start" button is pressed again.

In the meantime Harper may be taking the opportunity to fire a couple of shots across the Yanks' bow, reminding them that they are not the only player and that other countries have real money.  As well this Chinese investment helps to build Canadian infrastructure that makes our resources available to the world at large.


I still don't like getting into bed with the Chinese but I guess I am enough of a whore that I wouldn't mind being paid for a roll in the sack that I might actually enjoy.  Especially if I get to kick them out int the morning if they misbehave.


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## Antoine (17 Feb 2010)

You might find the following topic in _Science_ magazine (one of the highest ranking journal in the science world) of interest. They are making access to this for FREE on line but keep in mind that some articles might fall in ``scientific reductionism`` which is not always the best angle to solve humanitarian problems.

Special Online Collection: Food Security, _Science_, 12 February 2010

www.sciencemag.org/special/foodsecurity


> In the 12 February 2010 issue, Science examines the obstacles to achieving global food security and some promising solutions. News articles introduce farmers and researchers who are finding ways to boost harvests, especially in the developing world. Reviews, Perspectives, and an audio interview provide a broader context for the causes and effects of food insecurity and point to paths to ending hunger. A special podcast includes interviews about measuring food insecurity, rethinking agriculture, and reducing meat consumption. And Science Careers looks at interdisciplinary careers associated with food security. Science is making access to this special section FREE (non-subscribers require a simple registration).


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## a_majoor (18 Feb 2010)

The apocalypse of debt. If you have the resources you might be able to capitalize on this, otherwise invest in home gardens, home and car repair skills and distributed energy systems:

http://www.forbes.com/forbes/2010/0208/debt-recession-worldwide-finances-global-debt-bomb_print.html



> *The Global Debt Bomb*
> Daniel Fisher, 02.08.10, 12:00 AM ET
> 
> Kyle Bass has bet the house against Japan--his own house, that is. The Dallas hedge fund manager (no relation to the famous Bass family of Fort Worth) is so convinced the Japanese government's profligate spending will drive the nation to the brink of default that he financed his home with a five-year loan denominated in yen, which he hopes will be cheaper to pay back than dollars. Through his hedge fund, Hayman Advisors, Bass has also bought $6 million worth of securities that will jump in value if interest rates on ten-year Japanese government bonds, currently a minuscule 1.3%, rise to something more like ten-year Treasuries in the U.S. (a recent 3.4%). A former Bear Stearns trader, Bass turned $110 million into $700 million by betting against subprime debt in 2006. "Japan is the most asymmetric opportunity I have ever seen," he says, "way better than subprime."
> ...


----------



## a_majoor (23 Feb 2010)

The contagion of debt spreads:

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/21/AR2010022102914_pf.html



> *Greece and the welfare state in ruins*
> 
> By Robert J. Samuelson
> Monday, February 22, 2010; A15
> ...


----------



## Edward Campbell (25 Feb 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ is a good analysis of the European economic problems by Timothy Garton Ash:

http://www.theglobeandmail.com/news/opinions/agonies-of-the-euro-zone/article1480148/


> Agonies of the euro zone
> *This Greek tragedy is also a defining moment for the whole project of a European Union*
> 
> Timothy Garton Ash
> ...



There are lessons here for those, myself included, who advocate varying levels of increased North American union or _creeping continentalism_ as I sometimes call it:

1.	_Customs unions_, like the original, pre-Euro, EU work – they _grow_ the economies of all members, albeit at varying rates and with some stumbles. Canada and the USA are 95% of the way along to a _customs union_. The final step is to _harmonize_ or, more likely, _standardize_ how we treat the outside world in terms of tariffs and trade rules;

2.	_Currency unions_, à la the _Eurozone_, are much, much harder because, as described above, they require a higher degree of political _integration_ than many are willing to accept;

3.	Lesser _agreements_ on e.g. labour mobility and travel, perhaps even analogous to the Schengen Agreement are possible for countries that are already in a _customs union_ but do not wish to form a _currency union_. 
Both Canada and the USA have or are practicing _”mendacious and self-harming profligacy”_ à la Greece and the other PIIGS and it is unlikely that, in a _currency union_ Canada could bail out the USA or the USA would bail out Canada. It is even more unlikely that either country would surrender the sort of political sovereignty (to some super-national body) necessary to make the two economies work as one and prevent the PIIGS problems.

Thus: Canada and the USA (but not Mexico) can and should, for their mutual economic benefit, proceed to a full _customs union_ and make labour mobility and travel simple and easy – essentially by _erasing_ the Canada/US border, rather than, as two less than smart administrations have tried, _thickening_ it. (The US Department of Homeland Security is doing real, measurable harm to the US economic future. It is a hazard to the _recovery_ which is as essential component of US security, in general. Homeland Security makes the USA less secure. Way to Go Janet Napolitano!)






Canada and the USA should not move towards a _currency union_ because the two economies are too disparate, the relative size of strength of each is too different and there is neither a will nor a need for the necessary degree of political union.


----------



## a_majoor (27 Feb 2010)

Cashing in on the crisis?

http://www.dailymail.co.uk/news/worldnews/article-1253791/Is-man-broke-Bank-England-George-Soros-centre-hedge-funds-betting-crisis-hit-euro.html#



> *Man who broke the Bank of England, George Soros, 'at centre of hedge funds plot to cash in on fall of the euro'*
> 
> By Karl West
> Last updated at 8:52 AM on 27th February 2010
> ...


----------



## Edward Campbell (28 Feb 2010)

This reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, illustrates a potential problem for the EU and the world:

http://www.theglobeandmail.com/report-on-business/economy/euro-in-most-difficult-phase-angela-merkel-says/article1484453/


> Euro in ‘most difficult phase,' Angela Merkel says
> *‘At the roots are the high Greek deficits and lost credibility'*
> 
> Berlin — Reuters and Globe and Mail
> ...



There are a limited number of options for Greece, Europe and the international financial community – none of them very good.

In the longer term Europe must come to grips with its propensity to allow the PIIGS (Portugal, Ireland, Italy, Greece and Spain) to lie to the EU and get away with it. None of the five can be in the _Eurozone_ under its own rules. Most should be expelled, even if they can bring their economies into line with the rules, because their governments are chronically dishonest and inept. There can be no case for making the Euro (€) a new, competitive _reserve_ currency, or even for using SDRs that are heavily weighted with Euros, so long as the PIIGS remain € members.

Germany, France, the Netherlands and a few other respectable/responsible European governments need to _sauve qui peut_ while there is still something, the € and the reasonably stable economies of North-West Europe, to be saved. The PIIGS should be "invited" to withdraw from the _Eurozone_ (before they destroy it) as a precondition for massive help from the solvent members of the EU.

As an aside, the US debt:GDP ratio makes it a ‘pig,’ too, and adds fuel to China’s push to replace the $ with SDRs as the global _reserve_ currency. The Chinese motive is not, totally, monetary/fiscal; China’s long term policy interests would be served by seeing the US _humiliated_ by the world’s ‘rejection’ of the _greenback_.


----------



## a_majoor (28 Feb 2010)

Mark Steyn:

http://article.nationalreview.com/426405/when-responsibility-doesnt-pay/mark-steyn



> *When Responsibility Doesn’t Pay *
> Welfare always breeds contempt.
> 
> While Barack Obama was making his latest pitch for a brand-new, even-more-unsustainable entitlement at the health-care “summit,” thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split-screen — because they’re part of the same story. It’s just that Greece is a little further along in the plot: They’re at the point where the canoe is about to plunge over the falls. America is farther upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen.
> ...


----------



## tomahawk6 (28 Feb 2010)

Some US analysts feel that the Greece and Spain's debt problems  could cause a collapse of the EU. Soros and a cabal of billionaires have already started to short the Euro,not good. The American public seems to have finally awoken to the fact that profligate spending is a huge threat to the US economy. Since the democrats are determined to collapse the economy that doesnt bode well for them in November. As a hedge against a falling dollar I have bought Loonies via FXC on the NYSE and I have bought into UUP a dollar hedge fund that cant print shares fast enough.


----------



## a_majoor (1 Mar 2010)

Comparison of Canada's banking system to the US:

http://american.com/archive/2010/february/due-north-canadas-marvelous-mortgage-and-banking-system



> *Due North: Canada’s Marvelous Mortgage and Banking System
> *
> By Mark J. Perry Friday, February 26, 2010
> 
> ...


----------



## Edward Campbell (2 Mar 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_ web site is a snapshot of some of the the Canadian _recession_ and _recovery_ data, measured against the USA and Europe:


----------



## Edward Campbell (3 Mar 2010)

Yet more dark clouds on the European horizon, according to this article from The New York Times News Service, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/economy/britain-grapples-with-debt-of-greek-proportions/article1488285/


> Britain grapples with debt of Greek proportions
> *‘If you really want a fiscal problem, look at the U.K.'*
> 
> Landon Thomas Jr.
> ...



I agree with Mark Schofield, a fixed-income strategist at Citigroup, that Britain has a serious fiscal problem; crisis is not too strong a word, just like the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and just like France and several other European countries …

.
.
.
.
.

... and just like America, too.

Canada is not immune to all this: these nations with fiscal crises are our major markets and trading partners; they buy our resources and products and invest in our economy. About the best we can do is to defend ourselves by _containing_ (or restraining) some necessary spending, like defence spending and transfers to provinces for healthcare, and by cutting most spending, including that which is very popular amongst many, many Canadians.


----------



## a_majoor (5 Mar 2010)

A look at how Canada stacks up against other nations in terms of debt:


----------



## a_majoor (6 Mar 2010)

So what happens when _everyone_ starts to default on their obligations?

http://www.nytimes.com/2010/03/06/world/europe/06iceland.html?partner=rss&emc=rss&pagewanted=print



> *Iceland Voters Set to Reject Debt Deal*
> By SARAH LYALL
> 
> REYKJAVIK, Iceland — After the dust began to settle last year — after the banks failed, the currency collapsed, the stock market crashed and the government fell — the dazed inhabitants of Iceland woke up to another unpleasant problem: They owed, it seemed, some $5.3 billion to more than 300,000 angry people in the Netherlands and Britain.
> ...


----------



## Edward Campbell (9 Mar 2010)

I know that almost no one, except me, cares about all this, but we all should because guys like Olivier Blanchard want to debase our currencies and impoverish us and our children and grandchildren so that a few bureaucrats can _manage_ the global economy:

http://network.nationalpost.com/NP/blogs/fullcomment/archive/2010/03/08/terence-corcoran-macroimprudential-monetary-policy.aspx


> Macroimprudential monetary policy
> 
> March 08, 2010
> 
> ...




Blanchard is proposing macroeconomic rubbish but Europe (France, in particular) has long been the source of a huge, pent up desire to disable the free market and impose state controls on everyone and everything.


----------



## Old Sweat (9 Mar 2010)

Cripes, this is scary stuff. High (or moderate) inflation has a certain allure for the big government types. It reduces annual deficits in real terms as time goes on, as the annual repayments are effectively reduced year over year. This was the kind of loopy thinking that drove Canadian officialdom in the late seventies and early eighties, and nearly reduced us to third world status. 

It is nothing but a massive ponzi scheme.


----------



## Kirkhill (10 Mar 2010)

Some others do care about this stuff.

I think that its kind of late to be worrying about inflationary targets.  IMHO inflation has been an implicit goal of the IMF at least since the seventies.  They may have turned the heat down a little in the 80s and 90s to a 2-3% level after discovering that the markets, and politics, couldn't cope with 10-20% levels, but ultimately the intent is to redistribute the wealth.  

Print more dollars, euros, carbon credits ..... whatever, and thus debase the holdings of the "rich" while concurrently putting scrip in the hands of those that didn't have it before and making them forever grateful to Government and the State for putting shoes on their feet and making the trains run on time.

Real value is still reckoned in Gold Sovereigns and Silver Dollars per Barrel of Oil.


----------



## a_majoor (10 Mar 2010)

Impoverishing the poor is the end result of inflation, so this creates an underclass that is susceptible to demagogues and political manipulation.

Sadly the only real way to end inflation may be to go back to the system of "free banking" (where individual banks  have the power to create or deflate the money supply based on their holdings of real wealth and financial assets) rather than allow governments to create money through the central bank. This will probably not happen in an orderly fashion but only as a result of an inflationary or hyper-inflationary collapse.


----------



## a_majoor (12 Mar 2010)

Looking at this mountain of debt, default is starting to look like the only rational option after all:

http://www.sortofpolitical.com/2010/03/nothing-like-little-bit-of-perspective.html



> *Nothing like a little bit of perspective...*
> 
> CNBC has a list up that definitely puts Canada's federal deficit and debt into perspective: The World's Biggest Debtor Nations
> 
> ...


----------



## a_majoor (14 Mar 2010)

More on popping bubbles:

http://baselinescenario.com/2010/03/11/the-coming-greek-debt-bubble/



> *The Coming Greek Debt Bubble*
> 
> By Peter Boone and Simon Johnson
> 
> ...



My big question is how would anyone *not* named George Soros make any money off this? (Imagine an Army.ca pool investing in means of cashing in on the deflating bubbles of Greek, PIIGS, Japanese or other heavily indebted nations debt obligations...)


----------



## a_majoor (14 Mar 2010)

And more on foreign debt holdings:

http://corner.nationalreview.com/post/?q=ODMyM2YzYjk1YzI4ZGNkNjYxNDQyMTk2ZmEyNmM4Zjg=



> *Is Foreign Ownership of Our Debt a Threat to the U.S.?*
> [Veronique de Rugy]
> 
> This is the question that economist Bruce Bartlett asks this morning over at Forbes. As with all his articles, Bartlett tackles an interesting issue. It's one where people have many preconceptions that are incorrect. As always, he does a terrific job at explaining the problem and its implications (especially since this time he refrains for saying that the only solution to our fiscal troubles is the implementation of a VAT without even reforming entitlement spending.)
> ...


----------



## Kirkhill (14 Mar 2010)

When does your "debt" become my "investment"?

If I encourage the bank to invest in me doesn't that mean that I incur a debt to the bank?

This article makes the point that that balance of investment has been skewed by the value of non-US holdings decreasing faster than the value of US holdings while concurrently foreigners have been fleeing insecure markets for the relative security of the US market.

Similarly in Canada.  Our nationalists demand freedom of action by also demanding that Canada free itself from foreign investments.

And yet it was foreign investment in the Beaver business (100 Companions, HBC and Northwest Company), the canals and railways, the lumber mills, the mines and the auto and aviation industries that created the wealthy country Canada has become - the country that can support the greedy population of a large metropolitan area in China, or a single state in the US, while laying claim to resources of land, minerals and water greater than all other Nation-States save one.

Foreign debt isn't necessarily bad.  Just like my mortgage isn't necessarily bad.  Just so long as I can service the carrying charges.


----------



## a_majoor (15 Mar 2010)

Kirkhill said:
			
		

> Foreign debt isn't necessarily bad.  Just like my mortgage isn't necessarily bad.  Just so long as I can service the carrying charges.



Of course the question on everyone's mind is if these carrying charges can be sustained (to give you an ides of the scale and scope, Canada spends @ $30 billion/year in our debt carrying charges). Here is the other half of the equation; what if no one is available to make new loans anymore?

http://money.ca.msn.com/investing/jim-jubak/article.aspx?cp-documentid=23629700



> *Is China actually bankrupt?*
> 
> The nation has erected a complex system for magically making its debts disappear, but a look up China's sleeve shows that its IOUs may equal its GDP.
> 
> ...


----------



## Kirkhill (15 Mar 2010)

On a related note - from the Daily Telegraph (a notable Left Wing rag praised world-wide by Guardianistas)
Ambrose Evans-Pritchard



> ....We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. China is ringed by states - Japan, Korea, Vietnam, India - that are American allies when push comes to shove. It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. Emerging Asia, Brazil, Egypt and Europe are all irked by China's yuan-rigged export dumping.
> 
> Michael Pettis from Beijing University argues that China's reserves of $2.4 trillion - arguably $3 trillion - are a sign of weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.
> 
> ...


----------



## CougarKing (17 Mar 2010)

The headline above as predicted by the world's current richest man, Mexican telephone magnate and billionaire Carlos Slim.

Forbes link



> (...)
> 
> *Slim's bold prediction for the decade: "Latin America is close to breaking the underdevelopment barrier, of around US$12,000 of income per capita. It seems to me that this should happen in the next 10 years."*
> 
> ...


----------



## Edward Campbell (17 Mar 2010)

A hundred years ago, or thereabouts, the same prediction was quite realistic. Argentina, Brazil and Chile were booming, by any and all standards; but the Latin American propensity for political and economic self destruction asserted itself. I remain confident it will do so again.


----------



## a_majoor (18 Mar 2010)

So far we have looked at public debt. (A lot of unfunded liabilities like pensions and benefits are not even listed in these calculations, in the US alone it is estimated that there is a 2 trillion dollar shortfall for unionized State and Municipal employee pensions and benefits). Private debt is another drag on the economy (since resources are not available for private investment or consumption). Don't think things are roses for Canada:

http://globaleconomicanalysis.blogspot.com/2010/03/canadian-credit-bubble-in-pictures.html



> Canadian Credit Bubble In Pictures
> 
> Here are 4 images from Jonathan Tonge at America-Canada Blog regarding Canada, The Country of Fiscal Prudence
> 
> ...


----------



## a_majoor (19 Mar 2010)

Given the huge size and potential growth of "carbon trading", this sort of instability will have serious consequences (especially with the industries forced to "buy" carbon credits in the first place). Add the frauds being pulled on the carbon trading market (see the Global Warming superthread) and political manipulation and you have the making of a perfect storm:

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7066315.ece



> *Chaos on carbon market over ‘recycled’ permits*
> Carl Mortished: World Business Editor
> 
> * 6 Comments
> ...


----------



## a_majoor (20 Mar 2010)

We are in a period of unstable equilibrium. The market hasn't cleared billions or trillions of dollars in overvalued assets. If that were to happen, we could see deflation on a massive scale (the Great Depression of the 20th century had it's initial start as the huge monetary inflation of the First World War got cleared). On the other hand, governments the world over are turning their currency into monopoly money, the conditions that lead to inflation and hyper inflation.

These are actions you can take if you believe that inflation or hyper inflation is possible or likely. I would suggest that these steps taken in moderation might still be useful: (FWD via email)



> What steps can I take to prevent losing everything in a crash? Avoid debt? … significant assets in banks … will all just evaporate during a hyperinflation episode … what would a prudent person do?
> 
> Welll… Market crash and hyperinflation can be different scenarios.
> Not mutually exclusive, but you can have one without the other; though hyperinflation tends to produce a market crash eventually.
> ...


----------



## a_majoor (21 Mar 2010)

Regulatory failure indeed:

http://www.city-journal.org/2010/eon0318gs.html



> The Euro in Crisis
> In Greece and elsewhere, statism proves riskier than free markets.
> 18 March 2010
> 
> ...


----------



## a_majoor (23 Mar 2010)

It looks like the financial crisis is causing a political crisis in the EU:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7494718/Has-Germany-just-killed-the-dream-of-a-European-superstate.html



> *Has Germany just killed the dream of a European superstate?*
> 
> So after weeks of Euro-bluff it looks ever more like an IMF rescue for Greece after all, and hence for any other eurozone nation driven to ruin by the wrong monetary policy.
> 
> ...


----------



## a_majoor (1 Apr 2010)

As goes the United States, so do we. About the only way out would be to circle the wagons in the rest of the Anglosphere (and the honouraries like the Japanese and the Dutch) and create a sort of economic "donut" (or maybe a bagel, since we are Canadian after all) strengthening economic links between the membership and away from the Americans as a defensive move:

http://blogs.reuters.com/james-pethokoukis/2010/03/31/obama-and-americas-20-year-bust/



> *Obama and America’s 20-year bust*
> Mar 31, 2010 06:51 EDT
> economic growth | New Normal | Obamanomics
> 
> ...


----------



## a_majoor (22 Apr 2010)

Natural disasters have global impacts too:

http://pajamasmedia.com/instapundit/
http://www.cbsnews.com/stories/2010/04/20/world/main6414739.shtml



> *VOLCANO ASH CLOUD SETS OFF GLOBAL DOMINO EFFECT:*
> 
> While the volcanic ash cloud covering parts of Europe continues to wreak havoc for airlines – costing the industry more than $1 billion as of Monday – grounding most of the continent’s air travel for several days has had a ripple effect extending far beyond Europe’s borders.
> 
> ...



Pretty amazing what is considered time sensitive; industrial production used to be shipped by sea. I would never have imagined large car parts (like transmissions) would be cost effective to send by air freight. The ripple effects will be felt here as well, although in strange and unexpected ways.


----------



## a_majoor (27 Apr 2010)

The PIIG's are getting roasted:

http://preview.bloomberg.com/news/2010-04-27/greek-debt-cut-to-junk-at-s-p.html



> *Greece's Debt Cut to Junk, First for Euro Member*
> By Emma Ross-Thomas and Andrew Davis - Apr 27, 2010 Email Share
> 
> Greece’s credit rating was cut three steps to junk by Standard and Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut. The euro weakened and stock markets throughout the region plunged.
> ...


----------



## a_majoor (2 May 2010)

Global deflation?

http://american.com/archive/2010/april/the-deflation-club



> *The Deflation Club*
> 
> By Vincent R. Reinhart Tuesday, April 27, 2010
> 
> ...


----------



## a_majoor (3 May 2010)

Counterproductive bailouts:

http://reason.com/blog/2010/05/02/greek-bailout-already-making-s



> *Greek Bailout Already Making Situation Worse*
> 
> Tim Cavanaugh | May 2, 2010
> 
> ...


----------



## a_majoor (5 May 2010)

More on Greece and the possible fate of the EU:

http://pajamasmedia.com/blog/so-long-and-thanks-for-all-the-drachmae/?singlepage=true



> *So Long, and Thanks for all the Drachmae*
> 
> Europe ought to consider giving Greece a lovely parting gift. Thanks for coming over! But the hour's late, and after your $146 billion bailout, tomorrow's hangover promises to be quite a nasty one.
> May 4, 2010
> ...


----------



## 2010newbie (5 May 2010)

Thucydides said:
			
		

> Pretty amazing what is considered time sensitive; industrial production used to be shipped by sea. I would never have imagined large car parts (like transmissions) would be cost effective to send by air freight. The ripple effects will be felt here as well, although in strange and unexpected ways.



I worked on a project in 2008 for GM Europe Powertrain managing a couple dozen of their worst performing suppliers (from a production perspective). Mainly it was due to increased production requirements in Europe after years of Opel declines. One supplier made transmission gears and were transferring their production from Germany to the US. The German factory couldn't make the gears fast enough and we couldn't wait for the US factory to make parts using US steel (due to the length of time required to validate the new steel source). We had to airship tonnes of German steel to the US for them to forge the gears and then airship the gears back to Austria for assembly into the transmission. If I remember correctly it was over $250,000 USD. Generally of course they want to send everything by sea, but it's cheaper to send by air than shutdown an assembly plant (supposedly). I know that a supplier in Mexico was shipping aluminum heads globally by air daily - Australia, Asia, Europe, and it lasted for over a year. It cost them millions. There were two other projects I've worked on in the past where we had to use helicopters to transport from the airport to the factory - landing in the parking lot to delivery the material because a truck was too slow.


----------



## a_majoor (6 May 2010)

Greece responds to the bailout, but in a way which pretty much garuntees there will be no help forthcoming in the future. The outlook seems pretty bleak right now:





> *Greek Default Averted . . . For Now*
> May 5 2010, 3:41 PM ET |  Comment
> 
> Can a Greek bailout work?  If by work, we mean prevent the country from defaulting when it's time to roll over its debt this month, then yes, it can and will work.  But over the long run?  I don't see how it can, barring some sort of miraculous global boom in olives and Greek cruises.
> ...


----------



## Edward Campbell (6 May 2010)

The problem we are seeing is not confined to Greece, nor just to the PIIGS,* nor even to Europe. Too much of the world, including the USA, is living on borrowed money and, consequently, borrowed time. Savings rates in most Western countries (and most third world countries, too) are too low because most people and the governments they elect are spending too much too fast on non-essentials. We have moved beyond being happy to have our votes bought with our own money to expecting our votes to be bought with someone else's money - Chinese money, mainly.

There is essential spending - including essential public spending, which includes but is not limited to defence and a few others.  Sometimes some essential services must be provided by the government, sometimes essential services are best provided by government, sometimes governments should contract out some essential services. The key point is that we should fund only essential services. The problem is that the people get very, even violently unhappy when they learn that 'free' public pensions and 'universal' and 'free' health care are not essential services but the national defence and paying the interest on the debt are.

Blood on the streets, as in Athens, will become more and more normal in more and more cities as the economic chickens come home to roost - not just in Greece, either.


--------------------
* Portugal, Italy, Ireland, Greece and Spain


----------



## PMedMoe (6 May 2010)

Apparently, a good economy can lead to bad things:

China has world's fastest-growing syphilis epidemic; fuelled by economic growth

Written by: Margie Mason, The Associated Press  May 5, 2010

Every hour a baby is born in China with syphilis, as the world's fastest-growing epidemic of the disease is fuelled by men with new money from the nation's booming economy, researchers say.

The easy-to-cure bacterial infection, which was nearly wiped out in China five decades ago, is now the most commonly reported sexually transmitted disease in its largest city, Shanghai.

Prostitutes along with gay and bisexual men, many of whom are married with families, are driving the epidemic, according to a commentary published Thursday in the New England Journal of Medicine.

*The increase reflects the country's staggering economic growth, providing both businessmen and migrant labourers more cash and opportunity to pay for unsafe sex while away from home.*

More on link


----------



## a_majoor (7 May 2010)

Without comment:

http://blogs.the-american-interest.com/wrm/2010/05/07/its-a-crisis-of-faith-not-a-crisis-of-stocks/



> *It’s A Crisis of Faith Not A Crisis of Stocks*
> 
> Posted In: Economics, History, Middle East, Religion
> 
> ...


----------



## Kirkhill (7 May 2010)

I see four options.

Blame the world's ills on:

No One
Me
My Neighbour
God

I find it disconcerting to exist in an environment where random chance rules and I have nothing beyond this existence.  It makes it difficult to get up in the morning.

Blaming myself is even more debilitating.  If everything I do has negative consequences then better I should do nothing.

Blaming my neighbour?  Well neighbours tend to take exception to that and I spend a fair bit of time ducking and jabbing.  Not much time left to be productive.

What does that leave?  I figure he/she/it is probably big enough to suck it up for both of us.

Cheers.


----------



## a_majoor (9 May 2010)

Once the foundation cracks, the entire structure will shift or collapse:

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490



> *U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's*
> 
> By JED GRAHAM, INVESTOR'S BUSINESS DAILY Posted 05/05/2010 07:56 PM ET
> 
> ...



Raising taxes to stem the tide will be counterproductive, we are *already* seeing a reduction in tax revenue in the US in advance of the expiration of the Bush administration's tax cuts and implementation of Obamacare, and people and investors are pulling in their horns even further in expectation of VAT and "Cap and Trade" tax schemes.

No, the only sure way to safety lies in massive spending cuts; the end of subsidies and "entitlements". We have seen the reaction in Greece to the realization of this truth (riots, firebombings and even death), and you can imagine the political and economic elites, bureaucrats, members of the academy and every other taxpayer funded institution fighting desperately to the last taxpayer to retain their powers and privileges even as everything collapses around them.

What happens after you draw the sign of the dollar in the air?


----------



## Edward Campbell (9 May 2010)

It appears, to me that the main American _tactic_ (I don't think there is a _strategy_ worth the name in DC or on Wall Street), is to *inflate* their way out of debt. Debasing the currency might be a good useful, short term _fix_ but it has deleterious long term consequences. See e.g. Thomas Gresham and the reform of England's debased currency in Elizabethan England.

The solution to America's problems are the same as the solutions to the problems facing Greece, Portugal, Italy, Spain, France and Britain: stop spending more than you earn. In America's case it is defence + social spending that will, left alone, drive the country to destruction - bankruptcy. America is not rich enough and cannot continue to borrow enough to be powerful and _fat_ at the same time.

Despite the pain it inflicts upon Ontario's manufacturing (export) sector, the high value Canada's currency is reflecting the (relatively) sound state of the economy (relative that is to the PIIGS, Britain, Japan and America). But we, Canada, will be *badly* hurt when, not if, America must face fiscal and monetary reality. The Americans will try debase their currency enough to settle their foreign debts at pennies to the dollar and, in the process, drive us out of their markets; they will fail - at least at lowering the value of the Chinese debt. When, again not if, the Chinese choose to assert their important position in maintaining America's internal, social _harmony_ they will have demands, including, I'm guessing, America's _strategic_ withdrawal from Asia.


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## Kirkhill (9 May 2010)

> The Americans will try debase their currency enough to settle their foreign debts at pennies to the dollar and, in the process, drive us out of their markets; they will fail - at least at lowering the value of the Chinese debt.


¸

Debasing the currency drives down the value of your debt but increasess the cost of imports.  So the cost of servicing old debt is increased but the tendency to aquire new debt is also increased.......Only solution, stop buying new clothes and knit your own sweaters.

And that would be truly unfortunate.


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## Kirkhill (9 May 2010)

Coincidentally found while scanning through the Sunday commentary.

This chap says, with much more precision, clarity and authority, what I have been skating around for a while:  *15 barrels to the ounce*.



> ...As the late Warren Brookes wrote in his 1982 book, The Economy In Mind, "In 1970 an ounce of gold ($35) would buy 15 barrels OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl)......
> 
> ....Considering oil's aforementioned spike to $147/barrel in 2008, an ounce of gold then only bought 6.8 barrels of oil. What this meant at the time was that oil was due for a major correction as its price fell back to historical ratios.....
> 
> .....Right now gold trades in the $1176 range, and the price of oil is roughly $79 per barrel. That an ounce of gold buys 15 barrels of oil signals yet again that the real price of oil has hardly changed at all over the last 10 years of allegedly costly crude. Still, $79 oil ensures $3/gallon gasoline as far as the eye can see, and it's a fair bet that the price will stay there so long as gold continues to test all-time highs.........


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## Edward Campbell (9 May 2010)

Here are some reputable Canadian economists’ views on the global economy, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _CTV_ web site:

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20100509/EU-financial-rescue-plan-100509/20100509?hub=TopStoriesV2


> Euro crisis could drag world into recession: economists
> 
> CTV.ca News Staff
> Date: Sunday May. 9, 2010
> ...




Greece is not the only problem; it’s not even the real problem. The USA is, in most respects, more profligate and less  honest than Greece – it is living on borrowed money and borrowed time because the American people – Tea Partiers included – are unwilling to make the direct, personal sacrifices necessary to restore some balance in their economy.

The Chinese are willing to sustain them for a long, long time but, eventually, China will demand to be paid and Americans will be very, very unhappy. So unhappy, I fear that some many, including some politicians, may be willing to risk a war that American cannot win.


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## Antoine (9 May 2010)

> The Chinese are willing to sustain them for a long, long time but, eventually, China will demand to be paid and Americans will be very, very unhappy. So unhappy, I fear that some many, including some politicians, may be willing to risk a war that American cannot win.



That is exactly what I say to my surrounding, but no one seems to care. Glad I can read it on a forum.


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## a_majoor (10 May 2010)

More regulatory failure, note how rating agencies were made into the arm of the State, only now the State turns on them...

http://reason.com/blog/2010/05/10/rater-haters-finally-find-a-re



> *Rater Haters Finally Find a Reason to Turn On Moody's, and It's a Bad Reason*
> 
> Tim Cavanaugh | May 10, 2010
> 
> ...


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## Edward Campbell (11 May 2010)

Maybe Al Franken's move is prompted by this report from _Forbes_, which say that Martin Weiss, who runs his own rating system, is actively advocating stripping the US of its AAA- rating arguing, correctly, in my view, that the USA is not a safe, secure place for individual, American investors.

Weiss says, "Worst of all, by continuing to reaffirm America's triple-A rating, you help create a false sense of security overall--the recipe for a possible meltdown in the market for U.S. sovereign debts."

It's strong medicine, if, Big *IF*, it ever comes, but it just _might_ instil a wee tiny bit of fiscal realism into Obama, Franken, _et al_.


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## Edward Campbell (17 May 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is some excellent advice for the new UK Prime Minister David Cameron which is equally applicable to Barack Obama, Nicholas Sarkozy and most other world leaders:

http://www.theglobeandmail.com/news/opinions/cameron-could-learn-from-the-grand-old-mans-passion-for-economy/article1569535/?cmpid=rss1


> Cameron could learn from the Grand Old Man’s passion for economy
> *Gladstone preferred to let money ‘fructify in the pockets of the people’ rather than waste away in the public purse*
> 
> Neil Reynolds
> ...




Gladstone was and Reynolds is right: democracy is a spendthrift. A strong, reliable currency is one of the government’s primary obligations to its people: see Thomas Gresham and the ‘restoration’ of a sound currency in Elizabethan England.

The idea of “optional wars” is interesting and one which we all ought to consider.

Finally, Gladstone was right again: inflating (debasing) the currency and defaulting on debts are immoral – but that will not prevent many countries, including some advanced, sophisticated democracies from adopting either or both options, as the USA is doing in 2010; growing the economy and paying down debt are the only proper courses for responsible governments and responsible countries/peoples.


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## Infanteer (18 May 2010)

Shows how far I'm outta the loop - I didn't even know there was an election in the UK.... ^-^


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## Edward Campbell (20 May 2010)

There are a few smart Liberals and the best of that lot, John Manley, gives some good, sound practical advice to, primarily, our provincial governments in this article reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Financial Post_:

http://www.financialpost.com/story.html?id=3049694


> No time for complacency, Manley warns
> *Balanced budgets ASAP*
> 
> Paul Vieira, Financial Post
> ...



The _cult of entitlement_ that another Liberal, Pierre Trudeau, imposed upon Canadians must, sooner rather than later, be abandoned. We, most of us, want good, affordable health care; we will have to pay more for it. We, Canadians, want good schools and universities for our children; we shall have to pay more for them. We, Canadians, want operationally effective and cost effective armed forces; we shall have to pay more that, too. And so on. We can have what we want if, Big IF, we are prepared to pay. If or when we decide we do not want to pay any more then we shall have to learn to make do with less. There are municipal and provincial governments and a national government, too, but there is only one taxpayer, or, rather about 15 million of us who pay, directly or indirectly (through e.g. corporate taxes), for everything: sewers, warships, hospitals and foreign aid.


Edit: added the "fair dealings" bit, which I forgot when I wrote this  :-[


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## Edward Campbell (20 May 2010)

More on how we fit into the global economy, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/news/world/g8-g20/news/harper-looks-to-china-for-g20-results/article1575089/


> Harper looks to China for G20 results
> *PM courts Beijing as ally against global bank tax even as he presses China to spend more or lower trade barriers*
> 
> Campbell Clark
> ...




Despite our enviable fiscal position – relative to Europe and the USA, anyway – we are a _bit player_ on the world’s financial stage and we need the _big boys_, America and China, to help us or, at least, to avoid hurting us.

The bank tax, favoured by Merkel and Obama and all the other dimwits, is bad policy and we must hope that China and India will side with us and shoot the Americans and Europeans down in flames.


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## Edward Campbell (25 May 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from _Bloomberg.com_ is an important assessment from one of Canada’s most respected economists:

http://www.bloomberg.com/apps/news?pid=20601039&sid=a8advNgW4inI


> Canada’s Fiscal Edge to Fade Without Tough Action: David Dodge
> 
> Commentary by David Dodge
> 
> ...



I’m guessing that Dodge is right, that reduced spending alone will not work because government*s* will not cut deeply enough. The plural is important because even if we had a properly _conservative_ government that would cut and cut some more just because they enjoy cutting programme spending (see: here), there are too many free spending Liberal and NDP administrations.

I reiterate my favourite solution: a nice, green carbon tax, paid, *in full*, by all of us consumers every time we heat our homes, drive our cars, buy food or watch our big screen TVs. We could, I believe, accomplish important economic goals quickly, and we _might_ even do something good for society and the planet, _en passant_.


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## Edward Campbell (26 May 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_ is a good explanation of the EU+ version of the stupid economically unsound _Tobin Tax_ and the good reasons why Canada opposes it:

http://www.theglobeandmail.com/news/world/g8-g20/opinion/canadas-global-bank-tax-stand/article1549315/


> Global bank tax? More like a tax on customers
> *Canada was right to stand firm against the G20 levy*
> 
> Neil Reynolds
> ...



It is good to see Canada standing firmly, albeit alone, on the *right* side of an important, global, _strategic_ issue. America and Europe are led by populists and economic amateurs. We have to hope for maturity and leadership from Asia, especially China. In any event, even if the G19 decides on one thing we must, resolutely, do the other. We do not want to enter the fetid fiscal swamps with America and Europe.


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## Edward Campbell (30 May 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_ is more solid analysis and advice:

http://www.theglobeandmail.com/news/opinions/prudent-perhaps-but-the-canadian-model-pays-off/article1585057/


> Prudent, perhaps, but the Canadian model pays off
> *What the rest can learn from what some have called the world’s soundest financial system*
> 
> Kevin Lynch
> ...




There is plenty of credit to go around in Canada: Mulroney, Chrétien, Martin and Harper all get some of it. But so do the apolitical central bankers, like Dodge and Carney and a succession of skilled bureaucrats, not least Lynch himself.

One hopes that our Canadian delegation to the G8 and G20 will heed Lynch’s counsel: we need to part of a _global_ solution but, at the same time, we must not join a _global_ solution that does not adhere to Mr. Lynch’s principles – which none of the EU, UK or US proposals do. None of the EU, UK or US proposals are sensible or acceptable; all must be rejected; let’s hope and pray for some leadership from Canada and some support from China and India.


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## a_majoor (31 May 2010)

An unstable Euro has all kinds of consequences, most are not good:

http://pajamasmedia.com/blog/what-would-a-euro-collapse-mean-for-the-united-states



> *What Would a Euro Collapse Mean for the United States?*
> 
> Posted By Soeren Kern On May 31, 2010 @ 12:00 am In Column 2, Europe, Germany, Greece, Money, Politics, Spain, US News, World News, economy | 11 Comments
> 
> ...


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## Edward Campbell (1 Jun 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is a thoughtful piece by Nouriel Roubini, the fellow who, in 2005, predicted the housing bubble and the chaos that followed:

http://www.theglobeandmail.com/report-on-business/economy/solutions-for-a-crisis-in-its-sovereign-stage/article1588038/


> Solutions for a crisis in its sovereign stage
> *Nouriel Roubini and Arnab Das say the euro zone offers a lesson in how not to respond to a systemic crisis*
> 
> Nouriel Roubini and Arnab Das
> ...



The Glass-Steagal Act, referenced in the penultimate paragraph, established the Federal Deposit Insurance Corporation (FDIC) in the United States and introduced banking reforms, some of which were designed to control speculation. Glass-Steagal was repealed in 1999.

I’m not sure that the _creditors_, especially China, are willing to “take a hit” in order to help restore global solvency but I agree with Roubini that it is their best, long term interests to do so.


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## a_majoor (2 Jun 2010)

Taking a hit _wil_l happen, the only real question is will it be a controlled process or will it happen due to some sort of cascade failure (take your pick, the Euro and EU unravelling; unfunded public service pensions pushing municipalities and State governments in the US into bankruptcy, a prolonged capital strike due to massive State intervention in the US economy, personal debt defaults turning into a tidal wave in Canada, Chinese real estate bubbles popping....)

As military people we have certain habits and skills which support levels of self sufficiency. This means that with proper preparation and maybe with a little coordination we can survive and even prosper in the turmoil to come, so long as we have a stockpile of tools, a "victory garden", a posse of friends, co workers or fellow travelers to pool skills and resources with and (worst case scenario) the means to defend what is ours from the looters.

For me the worst part of this is I grew up in a time of incredible optimism. Man landed on the Moon, Canada celebrated the Centennial and all kinds of things seemed to be possible just over the horizon (remember flying cars and missions to Mars?). Throughout my adult life, things seem to have "shrunken", and what sort of world will be left for my children?


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## a_majoor (2 Jun 2010)

Proof that the solution does not lie in impoverishing ourselves and our children:

http://freedomnation.blogspot.com/2010/05/cut-spending-without-delay.html



> *Cut spending without delay*
> 
> I have heard several politicians and members of the chattering class claim that cutting spending immediately would be disastrous to the economy. This was a constant refrain of Gordon brown during the recent UK elections. Mr. Brown constantly claimed that it would be ‘taking money out of the economy.’ The Cato Institute takes on this assumption by using a historical example:
> 
> ...


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## Edward Campbell (3 Jun 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is a good explanation of what’s *wrong* with the Euro-American “bank tax,” Obama's latest brain fart:

http://www.theglobeandmail.com/news/world/g8-g20/economy/why-harper-is-taking-his-bank-tax-fight-to-europes-doorstep/article1590224/


> Why Harper is taking his bank-tax fight to Europe's doorstep
> *With the G20 approaching, time is running out for the Prime Minister to sell his maverick opposition to the world*
> 
> Grant Robertson
> ...




There are several reports in the media indicating that Brazil, China and India are “on side,” with Canada, on this issue and one hopes that will be enough to put paid to this Euro-American populist rubbish.


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## a_majoor (4 Jun 2010)

A further look ahead:

http://american.com/archive/2010/june-2010/athens-on-the-potomac



> *Athens on the Potomac*
> 
> By Veronique de Rugy Friday, June 4, 2010
> 
> ...


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## Edward Campbell (5 Jun 2010)

It appears, according to this report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, that the “rest” of the G20 (including Australia, Brazil, China and so on) have sided with Canada and have put paid to that bit of American and European populist political rubbish, the bank tax:

http://www.theglobeandmail.com/news/world/g8-g20/economy/canada-wins-key-fight-against-bank-tax/article1593382/


> Canada wins key fight against bank tax
> *G20 finance ministers approve a plan that allows countries to manage the issue as they see fit.*
> 
> Bill Curry
> ...




Of course the Americans and Europeans can still punish the survivors of the financial crisis and, thereby, appease the economically illiterate majorities in their populations. Bank taxes are popular and stupid; people want them so the American and European governments will give in. Obama may actually believe in what he’s doing.


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## Brad Sallows (7 Jun 2010)

I can only hope the "bank tax" is dead.  It is an insurance scheme which just happens to propose payments based on some formula tied to revenue rather than an actuarial calculation.  I am not impressed by an invitation to share the costs of insurance we do not need, from those  those who would draw on the insurance pool.


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## Edward Campbell (9 Jun 2010)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is an interesting comment on the interactions at the forthcoming G8/G20 meetings:

http://www.theglobeandmail.com/news/world/g8-g20/economy/what-china-wants-from-the-g20/article1595426/?cmpid=rss1


> What China wants from the G20
> *Aside from greater influence within the IMF and World Bank, Beijing isn’t saying much*
> 
> Mark MacKinnon
> ...



As a start: this is probably the last G8 meeting that has any meaning at all. A G_n_ without China is worthless – a forum of America, Europe, Japan, Russia – Russia for heaven’s sake – and Canada has nothing much to say to anyone.

There is an _emerging_ G2: America and China which _might_ become a G4 America + China + Europe (one ‘seat,’ one ‘voice,’ one ‘vote’ – very tough for the Europeans to manage) and India. Canada needs to try to _steer_ that towards ASEAN + China + EU + India + MERCOSUR + NAFTA (multiple 'seats' (if desired) but only one 'voice' or 'vote' each) so that we can retain some influence. Meanwhile the G20, in which Canada, China and India have seats and votes,  is rapidly emerging as the key forum – despite being too large and filled with too many _failing_ economies.


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## Edward Campbell (11 Jun 2010)

According to this report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, American legislators remain laughably hypocritical:

http://www.theglobeandmail.com/report-on-business/economy/chinese-trade-numbers-fuel-angry-us-response/article1599957/


> Chinese trade numbers fuel angry U.S. response
> *Lawmakers demand to know what Obama administration will do to address widening imbalance*
> 
> Brian Milner
> ...




First: China *should* float its currency, despite the near term, but temporary, economic hardship that will create for its own people. My guess is that internal social harmony is much, much more important to the Chinese leadership than is all the huffing and puffing the USA can manage.

Second: the US is debasing its own currency in a conscious effort to emulate the Chinese by artificially lowering the price of their exports and, concurrently, making imports more expensive. That’s why people like Baucus, Geithner and Schumer are hypocrites. Oh, and intentionally debasing one’s own currency is economic stupidity – congratulations, Mr. President, on shooting yourself (and your country) in the foot.


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## Kirkhill (11 Jun 2010)

Max Baucus is an annoying, arrogant, pig-headed b*st*rd.  He is the face of Softwood Lumber and Montana.

He is also a great Senator that constantly gets re-elected because he does what he is paid to do: protect the interests of those that elected him. He fights bare-knuckled in a bare-knuckled world and really doesn't care if that makes him appear hypocritical to the rest of the world - including his own party.  Check that comment about "his" administration.  





> “I'm not sure what this administration’s policy is,”
> 
> 
> 
> ...


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## Edward Campbell (12 Jun 2010)

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, illustrates that, indeed, China is _“no longer just a low-wage workshop:”_

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/a-breakthrough-in-china-another-blow-for-sudbury/article1601530/


> A breakthrough in China, another blow for Sudbury
> *No longer just a low-wage workshop, China is reshaping world markets through innovation - including a revolutionary alloy that takes aim at Canada’s nickel belt*
> 
> Andy Hoffman Asia-Pacific Reporter,
> ...




Don’t read too much into this. With 1.3(+) Billion people the Chinese are, now and again, bound to be creative and entrepreneurial and to get things ‘right.’ China still has many, many problems and its “rise” to global great power status, while almost certainly inevitable, will not be perfectly smooth.

But it does point out the importance of innovation, something that, over and over again, is found to be lacking in Canada.


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## Edward Campbell (12 Jun 2010)

I like the headline on this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, as a _counterpoint_ to the article just above about China’s new nickel industry:

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/nickels-nice-but-oil-is-the-china-card/article1601438/


> Nickel’s nice but oil is the China card
> 
> David Berman
> 
> ...




Message to President Obama: there is no suck thing as “dirty oil;” if the USA doesn’t want our heavy oil the Chinese will buy all we can produce. I’m not sure that we shouldn’t be using oil as a lever to ‘soften’ the border – the Americans (Homeland Security and the Congress) are being stupid and, probably, dishonest, in their efforts to ‘protect’ the USA by ‘thickening’ their Northern border. They can, of course, do as they please with their border but so can we, with the NAFTA. The NAFTA *guarantees* the USA fair access to Canadian oil; if we withdraw from NAFTA, as Obama threatened to do during the 2009 campaign, that guarantee is nul and void and we can sell as much, or as little of our oil as we please, to anyone who will pay. 

But, just selling resources does not do much for our real *productivity* problems - that's where the Americans and the Chinese are kicking our asses: innovation. They do it, we don't. Our _corporate culture_ and our _political culture_ are both incredibly 'conservative' - content to hew the wood and draw the water and to let others figure out how to process it and add value.


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## Edward Campbell (14 Jun 2010)

Following from an item posted just a few days ago: here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe And Mail_, is a report on China’s reaction to Timothy Geithner’s recent hectoring re: echange rates:

http://www.theglobeandmail.com/report-on-business/china-hits-back-at-us-over-yuan/article1603071/


> China hits back at U.S. over yuan
> *Foreign ministry says Washington ‘politicizing’ the exchange issue as an excuse to engage in trade protectionism*
> 
> Beijing — Reuters
> ...




I especially liked this bit: _” U.S. Treasury Secretary Timothy Geithner said last week that the yuan was an impediment to global rebalancing, suggesting that U.S. patience with China’s currency policy was wearing thin.”_

:rofl:

Who on earth, at least in the ‘middle kingdom,’ cares what the US thinks about China’s economy?

This is a fairly sharp, public rebuke, suggesting that Beijing’s patience with Washington’s hectoring has worn away.


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## observor 69 (18 Jun 2010)

I have been waiting for an update on Paul Krugman's thinking on the international economy and here it is  from the New York Times:
LINK

June 17, 2010
That ’30s Feeling
By PAUL KRUGMAN
BERLIN 

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s. 

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic. 

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity. 

What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up. Point this out, and they come up with different rationales, which also don’t add up. Arguing with German deficit hawks feels more than a bit like arguing with U.S. Iraq hawks back in 2002: They know what they want to do, and every time you refute one argument, they just come up with another. 

Here’s roughly how the typical conversation goes (this is based both on my own experience and that of other American economists): 

German hawk: “We must cut deficits immediately, because we have to deal with the fiscal burden of an aging population.” 

Ugly American: “But that doesn’t make sense. Even if you manage to save 80 billion euros — which you won’t, because the budget cuts will hurt your economy and reduce revenues — the interest payments on that much debt would be less than a tenth of a percent of your G.D.P. So the austerity you’re pursuing will threaten economic recovery while doing next to nothing to improve your long-run budget position.” 

German hawk: “I won’t try to argue the arithmetic. You have to take into account the market reaction.” 

Ugly American: “But how do you know how the market will react? And anyway, why should the market be moved by policies that have almost no impact on the long-run fiscal position?” 

German hawk: “You just don’t understand our situation.” 

The key point is that while the advocates of austerity pose as hardheaded realists, doing what has to be done, they can’t and won’t justify their stance with actual numbers — because the numbers do not, in fact, support their position. Nor can they claim that markets are demanding austerity. On the contrary, the German government remains able to borrow at rock-bottom interest rates. 

So the real motivations for their obsession with austerity lie somewhere else. 

In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion. 

German deficit hawkery seems more sincere. But it still has nothing to do with fiscal realism. Instead, it’s about moralizing and posturing. Germans tend to think of running deficits as being morally wrong, while balancing budgets is considered virtuous, never mind the circumstances or economic logic. “The last few hours were a singular show of strength,” declared Angela Merkel, the German chancellor, after a special cabinet meeting agreed on the austerity plan. And showing strength — or what is perceived as strength — is what it’s all about. 

There will, of course, be a price for this posturing. Only part of that price will fall on Germany: German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover. Europe’s troubles are also leading to a weak euro, which perversely helps German manufacturing, but also exports the consequences of German austerity to the rest of the world, including the United States. 

But German politicians seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead. 

How bad will it be? Will it really be 1937 all over again? I don’t know. What I do know is that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day.


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## a_majoor (19 Jun 2010)

What Paul Krugman refuses to see is there is no easy out now. Either deficits and debts are dealt with in a controlled fashion, or the market will rebalance itself in a drastic and probably unexpected way.

The Great Depression was a reaction to the huge inflation central governments allowed and encouraged in order to prosecute the "Great War" of 1914-1918. All the fiddling of the British Empire trying to maintain the Sterling and the US Federal Reserve playing with interest rates in the 1920's may have been the actual trigger, but the huge bubbles were deflated away, one way or another. The huge bubbles of credit and debt that central banks have encouraged (and reckless spending by Federal State and municipal governments) _will_ be deflated.

The Credit Strike of 1937 was more of a reaction by business to the chaos caused by the New Dealer's micromanagement of the economy (and the crossed signals caused by such micromanagement; see the local knowledge problem), Krugman's efforts to prod government into greater economic control will simply lead to the same end state or worse; Soviet style controlled economies have horrible records, and the DPRK is probably the only example of the ultimate end state of this line of thought we will see in our lifetimes.


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## observor 69 (21 Jun 2010)

More Paul Krugman with a fuller explanation of why we should "Spend now, while the economy remains depressed; save later, once it has recovered."

The New York Times

June 20, 2010
Now and Later
By PAUL KRUGMAN
Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand? 

Very hard, if the current state of political debate is any indication. All around the world, politicians seem determined to do the reverse. They’re eager to shortchange the economy when it needs help, even as they balk at dealing with long-run budget problems. 

But maybe a clear explanation of the issues can change some minds. So let’s talk about the long and the short of budget deficits. I’ll focus on the U.S. position, but a similar story can be told for other nations. 

At the moment, as you may have noticed, the U.S. government is running a large budget deficit. Much of this deficit, however, is the result of the ongoing economic crisis, which has depressed revenues and required extraordinary expenditures to rescue the financial system. As the crisis abates, things will improve. The Congressional Budget Office, in its analysis of President Obama’s budget proposals, predicts that economic recovery will reduce the annual budget deficit from about 10 percent of G.D.P. this year to about 4 percent of G.D.P. in 2014. 

Unfortunately, that’s not enough. Even if the government’s annual borrowing were to stabilize at 4 percent of G.D.P., its total debt would continue to grow faster than its revenues. Furthermore, the budget office predicts that after bottoming out in 2014, the deficit will start rising again, largely because of rising health care costs. 

So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control — without that, nothing will work. It will also require finding additional revenues and/or spending cuts. As an economic matter, this shouldn’t be hard — in particular, a modest value-added tax, say at a 5 percent rate, would go a long way toward closing the gap, while leaving overall U.S. taxes among the lowest in the advanced world. 

But if we need to raise taxes and cut spending eventually, shouldn’t we start now? No, we shouldn’t. 

Right now, we have a severely depressed economy — and that depressed economy is inflicting long-run damage. Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there are job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives. And with each passing month we drift closer to a Japanese-style deflationary trap. 

Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues. 

So now is not the time for fiscal austerity. How will we know when that time has come? The answer is that the budget deficit should become a priority when, and only when, the Federal Reserve has regained some traction over the economy, so that it can offset the negative effects of tax increases and spending cuts by reducing interest rates. 

Currently, the Fed can’t do that, because the interest rates it can control are near zero, and can’t go any lower. Eventually, however, as unemployment falls — probably when it goes below 7 percent or less — the Fed will want to raise rates to head off possible inflation. At that point we can make a deal: the government starts cutting back, and the Fed holds off on rate hikes so that these cutbacks don’t tip the economy back into a slump. 

But the time for such a deal is a long way off — probably two years or more. The responsible thing, then, is to spend now, while planning to save later. 

As I said, many politicians seem determined to do the reverse. Many members of Congress, in particular, oppose aid to the long-term unemployed, let alone to hard-pressed state and local governments, on the grounds that we can’t afford it. In so doing, they are undermining spending at a time when we really need it, and endangering the recovery. Yet efforts to control health costs were met with cries of “death panels.” 

And some of the most vocal deficit scolds in Congress are working hard to reduce taxes for the handful of lucky Americans who are heirs to multimillion-dollar estates. This would do nothing for the economy now, but it would reduce revenues by billions of dollars a year, permanently. 

But some politicians must be sincere about being fiscally responsible. And to them I say, please get your timing right. Yes, we need to fix our long-run budget problems — but not by refusing to help our economy in its hour of need. 


http://www.nytimes.com/2010/06/21/opinion/21krugman.html?hp=&pagewanted=print


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## Brad Sallows (22 Jun 2010)

When Krugman writes of depressed revenues, I wonder what he regards as the normal level?

I speculate that the revenues enjoyed by governments at all levels prior to the recession represent levels well above normal, sustainable levels (a bubble economy).  Governments must now adjust not only to a fall back to the "normal" level, but to a level further below.  The reason is simple: government revenues depend, mostly, on the net volume of economic transactions. Fewer transactions means fewer sales taxes and less gross income to be taxed (corporately or privately).  The past period of prosperity was debt-fueled.  Governments with the authority to increase their own money supply can do that indefinitely; a corporation or private person can not.

Krugman's point is simple enough: fill in the revenue hole in front of us until we reach the other side, by clawing in from a pile on the other side (future revenues).  What if the hole is too large (ie. the period of depressed revenues endures for too long)?  What if the pile on the other side (the ability of lenders to finance so much debt, or future revenues) is too small?  Then we will have to cut spending anyways, and have a much larger net debt - and cost of debt servicing - to boot.

I maintain my position from the fall of 2008: cut spending now, at all levels of government, to match current revenues.  As revenues recover, retire debt and reduce the cost of supporting debt.  Each time we push off the reckoning, we find it is harder to face when it comes due.  It is not going to go away.

A policy of spending tomorrow's money today assumes that tomorrow will be prosperous enough to cover its own requirements as well as today's burden.  The assumption is not reasonable, and on the evidence is invalid.


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## Kirkhill (24 Jun 2010)

> Merkel Tells Obama Spending Cuts to Boost Economy, Not Put Brake on Growth


  Link



> Soros tells Germany to step up to its responsibilities, or leave EMU
> Legendary investor George Soros has called on Germany to leave the euro unless it willing to embrace a growth strategy, describing Berlin’s austerity doctrine as a threat to democracy and political stability in Europe.


  Link

If he's against it, it must be ther right thing to do.  I'm for it.


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## a_majoor (28 Jun 2010)

So the G-20 plans to reduce deficit spending by 1/2 by 2013? A bit like trying to bail out the Atlantic with a tea cup.

The problem of deficits and massive overhanging debts (and unfunded liabilities like government pensions) must be addressed or the current structure of the global economy will be destabilized and swept away in a series of chain reaction failures. The PIIGS will probably crack the Eurozone and end the Euro as a currency (if not the EU in its current form), and there are enough apocalyptic predictions about the US economy that I need not go on here.

And yet...

The biggest economic non event ever was the "Great Depression of 1946". Don't remember that one? Keynesian economists widely predicted economic disaster as the US ended wartime contracts and wound down military spending (and demobilized millions of servicemen). The economy rapidly adjusted and the economy prospered (largely due to the "Do Nothing" congress, which refused to impliment President Truman's plans for a highly controlled and regulated economy). Note the economy didn't really take off until President Kennedy implimented a series of deep tax cuts early in his administration, ushering the "go-go 60's".

I have calculated that if Canada were to eliminate Crown Corporations, transfers to other levels of government and economic subsidies (while not touching transfers to individuals; although wrong, they would be political suicide for whoever tried to eliminate them), we would eliminate the National Debt in a bit over six years. (savings such as elimination of government departments would fule small tax cuts during that period). Once the payoff period passed, deep tax cuts would be possible to drive the economy and cover the unfunded liabilities like Government pensions and CPP.

So if bold action were to be taken, we could eliminate the structural causes of the current economic crisis, and position ourselves for a stable economy into the forseeable future.


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## observor 69 (29 Jun 2010)

One more try from Paul Krugman NEW YORK TIMES

 --------------------------------------------------------------------------------

June 27, 2010
The Third Depression
By PAUL KRUGMAN
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31. 

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses. 

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense. 

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. 

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer. 

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps. 

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy. 

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels. 

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine. 

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating. 

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. 

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again. 

More on the same theme at:

http://www.theglobeandmail.com/news/world/g8-g20/economy/g20s-plan-for-deficit-cutting-draws-fire-from-paul-krugman/article1622050/


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## GAP (3 Jul 2010)

We can complain all we want, but the south is.....er.......going south......

Imagine the ramifications if public sector workers, etc. went from an average of 65,000 a year to 15,000......

Calif. state workers brace for minimum wage
By JUDY LIN Associated Press Writer Jul 3, 8:12 AM EDT
Article Link

  SACRAMENTO, Calif. (AP) -- Some California state workers are preparing to tap into their savings while others already are cutting expenses as Gov. Arnold Schwarzenegger's minimum wage order moved one step closer to reality.

On Friday, the Schwarzenegger administration won an appellate court ruling saying it has the authority to impose the federal minimum wage of $7.25 an hour on more than 200,000 state workers as California wrestles with its latest budget crisis. It was not immediately clear if the state controller, who cuts state paychecks on a decades-old payroll system, will comply. The office says its computers are unable to make the change until an upgrade is completed in two years.

The effect, however, was chilling for state government workers, many of whom say they have to prepare as if the pay cut will happen.

"I feel like we have a target on our backs," said Robert Blanche, a 20-year state worker in the disability division of the Employment Development Department. "My wife stays at home with the kids. This is our sole source of income. And people are going to lose their homes, lose their cars."

The loss of wages - even temporarily - for such a large work force would deal an especially harsh blow to the capital region, where one out of 10 workers is a state government employee. According to the state Employment Development Department, there were 84,600 state workers out of 819,100 people employed in the Sacramento region in May. The number is higher when counting colleges and universities.

A cut to a minimum wage would mean state workers would make the equivalent of $15,000 a year. The average state worker makes $65,000 annually, according to the state Department of Personnel Administration.

"We all understand the immense budget pressure facing governments right now," Sacramento Mayor Kevin Johnson said in a statement. "However, paying state workers minimum wage will have a devastating effect on Sacramento's economy and on thousands of families."

Jeff Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton, said it's hard to judge how workers and their families will react to this latest possible financial hardship. He said some may pull back spending while others may charge bills to their credit cards and "hope the money will come back before the bill is due."

State workers already have endured 46 days of furloughs that cut their pay by 14 percent. The furloughs ended in June, with Schwarzenegger trying to persuade unions to take a 5 percent pay cut through contract negotiations.

Sacramento-based Golden 1 Credit Union, which serves more than 56,000 state workers, has announced it will provide a loan to members who receive minimum wage or do not get paid as a result of the budget impasse. State doctors and workers will not get paid until a budget is signed because by law they cannot be paid minimum wage.

Some of the loans will be interest-free.

In what has become an annual spectacle, California began its new fiscal year Thursday without a balanced budget. The budget gridlock usually affects only a few thousand workers, many whom work for lawmakers, while companies that contract with the state have to plan for payment delays.

This year, after several previous rounds of budget cuts, Schwarzenegger and Democratic state lawmakers remain far apart on ways to close the state's $19 billion deficit. Several workers taking their lunch breaks near the Capitol on Friday indicated they already have begun cutting back because Schwarzenegger has been threatening the minimum-wage move for months.

Niki Ortiz Levy, 33, an office technician at the transportation department, said she is hoping Schwarzenegger and lawmakers can reach a compromise on the budget before paychecks are cut at the end of the month. She makes $29,000 a year.

"We're not going to spend any money on anything we don't need," said the mother of a 3-year-old. "We're not eating out, we're going to cancel our DirecTV. We can't not plan for it." Ortiz Levy said she and her husband, who works for Hewlett-Packard Co., expect to tap into savings to pay for day care and other expenses if the minimum wage goes into effect.

Michelle Carlson, a 42-year-old married mother of two, said her family can weather the minimum wage for a short time.

"We can absorb it for a few months, but I've heard a lot of people say they cannot," said Carlson, a recycling specialist at the Department of Resources, Recycling and Recovery. "For some people, it could be pretty tough."

Schwarzenegger's minimum wage order will not affect all of California's government employees. The 37,000 state workers represented by unions that recently negotiated new contracts with the administration will continue to receive their full pay because they agreed to pay cuts and pension reforms.

Salaried managers who are not paid on an hourly basis would see their pay cut to $455 a week.
More on link


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## Brad Sallows (5 Jul 2010)

Unless the other articles I read are misinformed, it isn't a permanent loss of pay.  It is in effect a withholding of some of some public sector pay until the California legislators properly pass a budget.


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## a_majoor (10 Jul 2010)

Never thought Lady Ga-Ga would become an object lesson in economics:

http://dailycaller.com/2010/07/09/the-lady-gaga-economy/



> July 10, 2010
> *The Lady Gaga economy*
> By Wayne Crews | Published: 11:43 AM 07/09/2010
> 
> ...


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## a_majoor (18 Jul 2010)

An interesting series on sovereign debt and historic instances of default:

http://www.calculatedriskblog.com/2010/07/sovereign-debt-series-summary.html

Enjoy


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## a_majoor (26 Jul 2010)

Unstable equilibrium indeed. Inflation or deflation may be the order of the day; here are some historical examples:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html



> *The Death of Paper Money*
> As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.
> 
> By Ambrose Evans-Pritchard
> ...


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## a_majoor (11 Aug 2010)

US deflation risks:

http://www.investmentweek.co.uk/investment-week/news/1727390/pimco-us-real-risk-outright-deflation



> *Pimco: US faces real risk of outright deflation*
> 10 Aug 2010 | 19:29
> 
> Hysni Kaso
> ...


----------



## CougarKing (11 Aug 2010)

From last month:

Reuters link



> *China overtakes Japan as No.2 economy: FX chief *
> 
> Fri Jul 30, 9:40 AM
> 
> ...


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## a_majoor (13 Aug 2010)

Interesting look at inflation (minus all the pictures in the article; follow link). Much of the comparison is difficult due to "apples and oranges" problems; cars and houses are quite different from the ones we could get in 1979, and things like home computers, the internet and cheap air travel simply did not exist then. The comants section is also interesting:

http://chicagoboyz.net/archives/14754.html



> *Changing Prices*
> 
> Posted by James R. Rummel on August 11th, 2010 (All posts by James R. Rummel)
> 
> ...


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## Edward Campbell (25 Aug 2010)

I have, in the past,* expressed considerable scepticism about the BRIC, ay least in so fa as it contains Brazil and Russia. I always expect that Brazil and Russia will find ways to fail despite their manifest and manifold advantages.

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_ is one reason for my scepticism:

http://www.theglobeandmail.com/news/opinions/brazils-developing-dilemma/article1683938/


> Brazil’s developing dilemma
> *Presidential protagonists should abandon Third World politics in favour of Third Estate leadership*
> 
> Alvaro Vargas Llosa
> ...



Now it is only fair to note that China, just for example, has _advanced_ while staging some grandiose projects/events and being pretty anti-American. But Chinese anti-Americanism is of a different order than that found in Brazil *and in Canada*; Chinese anti-Americanism is based on a _sound_ assessment of China's best interests, not in sophomoric, populist 'opinion.' Further, China has maintained a coherent economic policy that gets “better” year after year.

My point?

The BRIC doesn't matter; China matters; India matters but the two are not joined in any meaningful way - they are competitors not compatriots. We need to focus on what (who) matters not on a phony _Goldman Sachs_ construct.

__________
*See: http://forums.army.ca/forums/threads/92304/post-913131.html#msg913131 and http://forums.army.ca/forums/threads/70156/post-874249.html#msg874249


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## a_majoor (9 Sep 2010)

Germany did this once before; a lesson for all of us today?

http://online.wsj.com/article_email/SB10001424052748703369704575461873411742404-lMyQjAxMTAwMDAwNzEwNDcyWj.html



> *The German Miracle: Another Look*
> 
> Germany has cut government spending and its economy is growing smartly. It's not the first time that market-friendly policies have led the nation out of crisis.
> 
> ...


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## Edward Campbell (10 Sep 2010)

There is much excitement in the media, today over Nancy Pelozi’s distaste for fossil fuels and, more broadly, for the Obama administration’s distaste for foreign oil but it is all smoke and mirrors.

First, only Saskatchewan Premier Brad Wall is is making economic sense. Oil is a fungible commodity, no one cares who buys it. The simple fact (and it is a fact) is that every drop of oil produced, economically, anywhere will be sold at market prices – so long as a profit can be made. The demand for oil will not decline – even if the *rate of growth* of demand might grow less rapidly as (if) suitable alternative fuels become available. If America prefers Saudi or Venezuelan oil to Canadian oil you may be 100% sure that China will not.

It is better best necessary for us, Canadians, to protect, even enhance, our natural environment while we extract oil and it is right, proper and fair that those (e.g. me, a shareholder in several energy companies, included) pay to cleanup the messes ‘our’ companies make. (You are probably a shareholder/owner too – through a mutual fund or your Canada Pension Plan contributions.)  But that doesn’t alter the fact that we need to extract and produce oil, now, for our own use and for the export market.

We, Canada, as a matter of national policy, can decide to not allow our oil to go to the open market, *if* we are willing to forgo the jobs and tax revenue and so on. We should not do that – there is a global market for oil, of all sorts, and we are a major producer/exporter and there are few, if any, consumers/importers about whom we should worry.


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## Rifleman62 (10 Sep 2010)

> We, Canada, as a matter of national policy, can decide to not allow our oil to go to the open market, if we are willing to forgo the jobs and tax revenue and so on. We should not do that – there is a global market for oil, of all sorts, and we are a major producer/exporter and there are few, if any, consumers/importers about whom we should worry.



    
http://www2.parl.gc.ca/content/LOP/ResearchPublications/prb0633-e.htm
  
PRB 06-33E

Canadian Oil Exports to the United States Under NAFTA
Michael Holden
Economics Division

16 November 2006

Contents:

Introduction
What Does NAFTA Say About Energy Exports?
Interpreting the Energy Provisions in NAFTA
What if There Were Oil Shortages in Parts of Canada?
Conclusion

--------------------------------------------------------------------------------

Introduction
There is a widespread belief that the North American Free Trade Agreement (NAFTA) requires Canada to sell a fixed percentage of its total oil production to the United States.  It has been suggested that, under NAFTA, Canada can do nothing to curtail oil exports to the United States, even in the event of energy shortages at home.  This paper examines that claim.

What Does NAFTA Say About Energy Exports?
Canada’s trade in energy products with the United States and Mexico is governed by the rules found in Chapter 6 of NAFTA, “Energy and Basic Petrochemicals.”  The scope of NAFTA Chapter 6 is such that it includes virtually all forms of energy, ranging from uranium to fossil fuels to electricity.  Only a handful of energy products, none of them significant, are exempt.

There are four specific clauses within NAFTA Chapter 6 that directly or indirectly affect Canada’s ability to restrict exports:

■Article 603(2) prohibits the use of minimum or maximum export-price requirements in cases where restrictions on the volume of exports are prohibited.
■Article 604 explicitly prohibits NAFTA members from imposing any export tax or duty on the sale of energy or petrochemical products, unless the same tax is placed on all NAFTA members, including the exporting party.
■Article 605 outlines the conditions under which Canada can restrict energy exports.  It can do so only if all of the following conditions apply:
■exports as a percentage of total Canadian supply do not fall;
■Canada cannot charge a higher price to the United States or Mexico by means of taxes, licence fees, minimum prices or any other regulation; and
■any restriction cannot result from a disruption of normal supply channels.
■Article 607 outlines four specific national security-related scenarios under which energy exports could be restricted: 
■to fulfil a defence contract or supply a military establishment; 
■to respond to a situation of armed conflict; 
■to implement policies related to the non-proliferation of nuclear weapons; and 
■to respond to threats of disruption in the supply of nuclear materials for defence purposes.
These four clauses apply only to Canada and the United States.  Mexico reserves the right to control its own energy industries in most cases and is explicitly exempt from the provisions of Articles 605 and 607. 

Interpreting the Energy Provisions in NAFTA
From the Canadian perspective, NAFTA Chapter 6 prohibits government intervention in the normal operation of North American energy markets, whether in the form of price discrimination (e.g., the imposition of export taxes), or the direct disruption of supply channels. 

Article 605 of NAFTA has been interpreted by some to mean that Canada is required to sell a certain percentage of its energy output to the United States, even in the face of a severe domestic shortage.  Moreover, they argue that NAFTA prevents this percentage from falling over time. 

Neither of these statements is true.*  Canadian producers are free to sell as much oil as they wish to whomever they wish, including, for example, overseas customers.  As a result, the share of total output exported to the United States can rise or fall according to the normal forces of supply and demand.*

The only condition that NAFTA imposes on Canadian energy products is that all buyers in North America must have equal rights to buy those products. 

Article 605 does stipulate that energy exports to the United States as a percentage of total output cannot fall.  However, this does not refer to the day-to-day operation of the Canadian energy sector.  It is valid only as a limitation on the extent to which the Canadian government can interfere in energy markets. 

NAFTA prohibits the Canadian government from imposing (under normal conditions) any restriction that causes U.S. imports of Canadian energy to fall.  In essence, therefore, NAFTA does prevent the Canadian government from imposing a policy like the National Energy Program in the 1980s.

What if There Were Oil Shortages in Parts of Canada?
It is occasionally suggested that the energy provisions in NAFTA could result in Canada exporting a significant share of its oil production to the United States, even as some parts of Canada suffer shortages.  For a number of reasons, this is not a legitimate concern.

As mentioned above, NAFTA requires that all oil produced in Canada be available to all consumers in North America.  Since it would not be economically logical for oil producers to charge higher prices to Canadian consumers, this fact alone ensures that NAFTA could not create shortages in Canada because Canada was obliged to export to the United States. 

Moreover, oil is bought and sold in global markets.  In this way, oil is no different from any other commodity.  Nickel producers, for example, sell at prices determined by global supply and demand. Minor differences aside, consumers buy at comparable prices, regardless of whether they live across the street or around the world. 

Alberta energy consumers, therefore, have little to no advantage over other Canadian consumers in terms of access to oil supplies.  Indeed, under current market conditions, it is advantageous for Eastern Canadian refineries and other users to import oil from countries such as Venezuela and Norway.  If, for whatever reason, those supplies were not available, those consumers would simply buy from other sources at prevailing (global) prices. 

The important point to ensuring oil supply to all parts of Canada is sufficient infrastructure.  If shipping terminals and pipelines (with sufficient capacity) exist, then consumers across Canada will have access to world oil supplies (including those in Western Canada) at world oil prices.  The only way a local shortage could exist, then, would be because there was a global shortage.

NAFTA ensures that Canadian and U.S. consumers have equal access to oil produced in either country.  In no way does it give U.S. consumers preferential access.  

Conclusion
Contrary to some claims, NAFTA does not commit Canada to exporting a certain share of its energy supply to the United States regardless of Canadian needs.  Canadian producers sell without restriction on the open market.

The only significant limitation NAFTA places on Canada is that it prevents the Canadian government from implementing policies that interfere with the normal functioning of energy markets in North America.  Provided they have the demand and can pay the price, Canadian consumers could conceivably buy 100% of all energy produced in the country without violating NAFTA.


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## a_majoor (25 Sep 2010)

Despite our best efforts, we might not be able to escape the effects of hyperinflation or deflation, it will be imported as the events change the values of the purchaser's currencies and their own economic conditions determine how much of our commodities and manufactured goods and services they buy:





> *Interview With Marc Faber: It Is Not A Matter Of If With Hyperinflation, But When*
> Ron Hera, Hera Research, LLC | Sep. 23, 2010, 1:28 PM | 5,330 |   29
> 
> 
> ...


----------



## Edward Campbell (6 Oct 2010)

It appears more and more likely that the USA will try to _deflate_ its way out of debt by debasing its currency, according to this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/economy/currencies/officials-clash-on-currency-policies/article1745532/


> Officials clash on currency policies
> 
> STEVEN C. JOHNSON
> 
> ...




The US policy is nothing more nor less than _beggar thy neighbour_, and that includes Canada in spades. The Obama administration, like the one before it, is the captive of a stupidly protectionist congress – an institution with a sad history of colossal economic ignorance and irresponsibility. (Smoot Hawley, anyone?)


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## a_majoor (10 Oct 2010)

PIIGS in spaaaaaace!

Ireland moves up the list of most likely to default, but any one of these nations could set the domino's in motion:

http://www.businessinsider.com/19-countries-most-likely-to-default-2010-10



> *Ireland Surges Higher*
> Gregory White | Oct. 9, 2010, 5:59 AM | 152,686 | comment 6
> 
> Ireland's bank bailout and the failure of its austerity budget has been the big sovereign debt story since September.
> ...


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## Edward Campbell (12 Oct 2010)

E.R. Campbell said:
			
		

> It appears more and more likely that the USA will try to _deflate_ its way out of debt by debasing its currency, according to this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:
> 
> http://www.theglobeandmail.com/report-on-business/economy/currencies/officials-clash-on-currency-policies/article1745532/
> 
> The US policy is nothing more nor less than _beggar thy neighbour_, and that includes Canada in spades. The Obama administration, like the one before it, is the captive of a stupidly protectionist congress – an institution with a sad history of colossal economic ignorance and irresponsibility. (Smoot Hawley, anyone?)




More, this time with a familiar ‘cold war’ metaphor, on the _currency wars_ and a potential destructive trade war, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/carl-mortished/canada-in-the-forefront-of-a-currency-cold-war/article1752447/


> Canada in the forefront of a currency cold war
> 
> CARL MORTISHED
> 
> ...




I need to get my opinion out first: *if there is a trade war then China will win*. Those, mainly Americans with far, far too many supporters in the US congress, who want to provoke a trade war with China are self destructive fools who are hell bent on destroying America.

There is, contrary to what Mortished says, no _hope_ that the G20, or anyone else, can “gang up on Beijing and force a yuan revaluation, using the threat of trade sanctions.” At least there is no hope that China will tolerate any revaluation sufficient to rescue the sadly mismanaged US economy. Nor should it, in my opinion. Yes, it is quite true that “China has embraced a form of capitalism but it has not embraced free markets any more than it has embraced democracy. In the world view of Beijing’s mandarins, the global economy is a finite resource in which every nation seeks to grab as much wealth as it can. For China, the notion of the level playing field is nonsense because resources are not evenly apportioned.” But that is not, as Mortished suggests, a “divide” between China and the West. It is, rather, an exact, near perfect copy of US policy since the 1850s. Why, many Chinese ask, is what America did, does and will continue doing be ‘bad’ when China does it? It’s a fair question because we, in the American led West, are the worst sort of hypocrites when it comes to economic policies.

I think Mortished is right on one key point: “It _[American retaliatory tarrifs]_ is the nuclear option and, as in the 1960s Cold War, no one wants to pull the trigger because a global trade war would cripple a world economic recovery that is already looking shaky.” Cooler heads, including Canada’s I wager, will prevail and the US will be left to debase its own currency and Gresham’s Law will apply because it still does apply to paper money and 21st century finances.

Canada needs to look West – all the way West – to the globe’s _other_ future leaders. America will not, suddenly, decline and fall; history shows us that it (decline and fall) doesn’t work that way but the world will not return to 1940 to 1990 – there will be a _new_ (bipolar or, perhaps, multi-polar) _world order_ and, for the rest of my life and maybe the rest of your lives, America will lead one faction but the American _zenith_ has passed.


----------



## Edward Campbell (22 Oct 2010)

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, illustrates the Canadian dilemma, we *need* the US economy to turn around and grow again, even if that means helping it to make bad choices:

http://www.theglobeandmail.com/report-on-business/canada-backs-us-push-for-g20-deal-on-economic-rebalancing/article1768285/


> Canada backs U.S. push for G20 deal on economic rebalancing
> 
> BILL CURRY
> 
> ...




The Japanese Finance Minister is correct: specific targets are unrealistic, even dangerous. China will not tolerate anyone, especially not the USA, dictating its monetary policy. That’s a recipe for failure but it is a recipe Geithner may have to follow in order to placate an economically illiterate US Congress and an instinctively protectionist Democratic administration and party base.


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## Edward Campbell (25 Oct 2010)

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is mildly good news:

http://www.theglobeandmail.com/report-on-business/top-business-stories/loonie-surges-greenback-sinks-after-weak-g20-pledge/article1771183/


> Loonie surges, greenback sinks after weak G20 pledge
> 
> MICHAEL BABAD |
> Globe and Mail Update
> ...




The US dollar _needs_ to find its own fair value, reflecting the state and outlook for the US economy. It’s status as the _de facto_ global reserve currency demands a fair, sensible valuation.

Although Canadian manufacturers will scream for help, the appreciating Canadian dollar is, in fact, a good opportunity for them to buy tooling, _talent_ and equipment (and even complete subsidiaries) from/in the USA. New tooling, _talent_ and equipment, not an artificially devalued Canadian dollar, are the keys to productivity.

On balance, chalk up a small victory for the Chinese, and for common sense and an opportunity for Canada's manufacturing sector.


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## Kirkhill (25 Oct 2010)

I think the hand has been played reasonably well by Flaherty.  Canada can't drift far from America, or at least not quickly.  However the economic situations of Canada and America are widely different.

America is, I believe, widely perceived as a nation sitting on the pot of gold and the rest of the world is trying to separate Americans from as much of the gold as possible.  The trouble is that the pot is a figurative one not an actual one. Their reality is they don't have the proverbial pot to p*ss in.  Ever since they gave up on the gold standard they have been living in fear of the little boy in the crowd pointing out their lack of appropriate attire.

On the other hand Canada is seen less as a treasure house and more as a warehouse.  Its dollar is backed by wheat, coal, oil, strategic metals including rare earths and good, old-fashioned gold and silver.  The more that the world consumes of those resources the greater the value of the loonie.

Of course in the financial world perception and reality are intertwined.  The physical reality is that the US has many of the same physical advantages Canada has so its dollar should be strong as well.  But the perception is different.  Just as the illusion of emperor being fully clothed has been maintained since Nixon severed the last tenuous official link between the dollar and gold.

Untill the US starts exploiting their own resource base fully, and re-establishes that link between fiat and physical that Canada enjoys then I think that the market will continually drive a wedge between Canada and the US.


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## a_majoor (2 Nov 2010)

Trouble from Greece. 

http://www.businessinsider.com/theodoros-pangalos-debt-gaffe-2010-11



> *Greek Deputy PM Makes A Huge Gaffe, And Accidentally Reveals The Country's Debt Plans*
> Joe Weisenthal | Nov. 1, 2010, 7:09 PM | 6,760 | comment 12
> 
> Theodoros Pangalos
> ...


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## a_majoor (4 Nov 2010)

Economics for the masses. If you have children of a certain age (i.e. listen to rap music at high volume) let them listen to this.

Sometimes you have to slip the education in when they are not expecting it.....


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## jhk87 (4 Nov 2010)

Kirkhill said:
			
		

> I think the hand has been played reasonably well by Flaherty.  Canada can't drift far from America, or at least not quickly.  However the economic situations of Canada and America are widely different.
> 
> America is, I believe, widely perceived as a nation sitting on the pot of gold and the rest of the world is trying to separate Americans from as much of the gold as possible.  The trouble is that the pot is a figurative one not an actual one. Their reality is they don't have the proverbial pot to p*ss in.  Ever since they gave up on the gold standard they have been living in fear of the little boy in the crowd pointing out their lack of appropriate attire.
> 
> ...



Extractive economies are notoriously vulnerable to economic downturns, as demand can drop rather precipitously.

Given that Bretton Woods asked for the US to be the *only* economy sitting on gold with other currencies tied to it, it's difficult to be too condescending towards them - they really did what they could to keep currencies stable and played a huge part in European economic recovery throughout the 1940s and 1950s.


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## Edward Campbell (9 Nov 2010)

Here, reproduced under the fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is a pretty fair (in my opinion) assessment of what the US is doing:

http://www.theglobeandmail.com/globe-investor/investment-ideas/experts-podium/the-ingenious-us-currency-ploy/ 


> The ingenious U.S. currency ploy
> GEORGE ATHANASSAKOS | Columnist profile | E-mail
> Special to Globe and Mail Update
> Published Tuesday, Nov. 09, 2010
> ...




George Athanassakos is a finance professor and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario. 

Interesting times, indeed!


----------



## a_majoor (11 Nov 2010)

Since this involves both China and the US, it seems appropriate for this thread. remember, these are ideas that have been floated, and the deficit and debt cutting ideas in the US portion will certainly have a long, uphill battle ahead:

http://nextbigfuture.com/2010/11/china-yuan-will-rise-faster-as-part-of.html#more



> *China yuan will rise faster as part of a grand bargain and a US Debt plan is floated*
> 
> 1. China is accelerating the yuan’s appreciation as part of the “grand bargain” to win U.S. support for Beijing to gain a bigger say at the International Monetary Fund, says Goldman Sachs Asset Management’s Jim O’Neill. The yuan will rise faster than the 3 percent traders are betting on in the non-deliverable forwards, according to O’Neill.
> 
> ...


----------



## Edward Campbell (12 Nov 2010)

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, resonates with me because, while I accept the articles assertion that the depth of the problem in the UK and USA is worse than in Canada, I believe that we too have _”a large population of uneducated, perpetually unemployed”_ people who need to be nudged off their comfortable perch:

http://www.theglobeandmail.com/news/world/europe/tearing-apart-the-british-welfare-state/article1795942/


> Tearing apart the British welfare state
> 
> DOUG SAUNDERS
> LONDON— From Friday's Globe and Mail
> ...




Despite our real and growing _wealth_ in natural resources, our greatest, best resource is an active educated workforce. Every person who can be, fairly, classified as _”uneducated_ [and] _perpetually unemployed”_ is a real problem, not just an unhappy statistic.

I also believe that the people, themselves, do not want to be _”uneducated_ [and] _perpetually unemployed”_ although many, thanks to parental and community pressures, may have had little choice in the matter.


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## gun runner (14 Nov 2010)

They are products of their environments if that is the case. Sad, but true. Ubique.


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## jhk87 (15 Nov 2010)

> Despite our real and growing wealth in natural resources, our greatest, best resource is an active educated workforce. Every person who can be, fairly, classified as ”uneducated [and] perpetually unemployed” is a real problem, not just an unhappy statistic.
> 
> I also believe that the people, themselves, do not want to be ”uneducated [and] perpetually unemployed” although many, thanks to parental and community pressures, may have had little choice in the matter.



But our real wealth in natural resources must neccesarily decline. The second we take a non-renewable resource out of the ground, it is lost.


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## a_majoor (15 Nov 2010)

jhk87 said:
			
		

> But our real wealth in natural resources must neccesarily decline. The second we take a non-renewable resource out of the ground, it is lost.



What constitutes a valuable resource changes with time (both renewable and non renewable). Up until the mid 1800's, oil was viewed as something of a waste. When whale oil became too rare and expensive, oil suddenly came in great demand. Even in renewables, the sort of wood that is in demand today for pulp and construction is much different than the sorts of wood considered valuable in the past. (In Elizabethan England, the prime use of wood was to create charcoal for heating and industry, once "peak wood" was reached it became more economical to switch to coal). Today copper is being displaced by sand (the raw material for silicon and glass).

The bigger issue for Canada should be how do we get value added out of the raw resources we extract; rather than sell the low value raw materials and pay for value added finished products.


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## Kirkhill (16 Nov 2010)

The differences between Canada and the typical Third World extractive economy are:

They are usually based on single commodities while Canada has multiple commodities on offer.
They have a poorly educated labour force, often increasing in number while Canada has a highly educated labour force declining in number.

We are Wal Mart.   You don't want shoes.  We have Tshirts.  You don't want Tshirts.  We have mouthwash.
You don't want oil.  We have lumber.  You don't want lumber.  We have wheat.

Canada is the very definition of a diversified economy with the built in advantage that there is very little we MUST buy from outside our borders.  There is a lot of stuff we like that is produced outside the country but not a lot that we MUST have.

We are not subject to the same market pressures as a third world country dependent  on the revenue from a single product like cotton, coffe or oil.


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## a_majoor (29 Nov 2010)

The Irish bailout is a huge mistake, not only from a moral hazard point of view but also since all the resources have been expended while Portugal, Italy and Spain's problems continue to fester...

http://www.nationalreview.com/exchequer/253982/irish-bailout-world-record



> *The Irish Bailout a “World Record”*
> November 28, 2010 7:28 P.M.
> By Kevin D. Williamson
> Tags: Bailouts, Debt, Deficits, Despair, Europeans, General Shenanigans
> ...


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## jhk87 (30 Nov 2010)

Two points:

1 - The British welfare state is one of the weakest in Europe, and has been since the 1950s. The Thatcherite reforms began with an economy that was far more privatised than say, France. The UK is beset above all by cultural problems -  a paternalisitc civil service and militant labour unions that find it difficult to focus on the ends over the means.

2 - Economies based on resource extraction inevitably run out of them. The UK, for example, had to build much of its first empire at great expense in order to secure resources, and then abandon it because it was fighting the very same people who held the resources. It simply became too expensive.

What constitutes a valuable resource changes with time (both renewable and non renewable). Up until the mid 1800's, oil was viewed as something of a waste. When whale oil became too rare and expensive, oil suddenly came in great demand. Even in renewables, the sort of wood that is in demand today for pulp and construction is much different than the sorts of wood considered valuable in the past. (In Elizabethan England, the prime use of wood was to create charcoal for heating and industry, once "peak wood" was reached it became more economical to switch to coal). Today copper is being displaced by sand (the raw material for silicon and glass).

The bigger issue for Canada should be how do we get value added out of the raw resources we extract; rather than sell the low value raw materials and pay for value added finished products.



Commodity economies never do well over the long term, and we're quickly running out of cheap access to many key commodities that are fuelling global economic growth - with the world population set to peak at about 9 billion with a rising standard of living, we're going to have to work a lot smarter. Our future is with knowledge-based industries, not the same wood-hewing that we have been doing.


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## Edward Campbell (30 Nov 2010)

jhk87 said:
			
		

> ...
> The bigger issue for Canada should be how do we get value added out of the raw resources we extract; rather than sell the low value raw materials and pay for value added finished products.
> ...




This is always problematical because, now especially, the resource importers also want to provide the "value added:" components. They are _willing_ (maybe not the best word) to pay top dollar for the resource itself (iron ore, say) but they, just like us, want all the good, steady, well paid, low skill jobs that go with making iron ore into machine tools and auto parts.

This is certainly the case in China where unemployment is already an issue and where jobs are a major part of the ever present 'drive' for the all important _social harmony_.


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## Kirkhill (30 Nov 2010)

Also, on a general principle, it is cheaper to ship refined raw materials than it is to ship finished goods.  By refined raw materials I mean squared timbers, ingots and pure bulk goods like coal and wheat.  

The finished goods are, like cars and tvs are very bulky - of low density, that means a big ship is required to transport a small mass.  That same mass could be transported in a small ship if it were just transporting the raw materials for assembly at the point of use.   Consider it as the Ikea principle.

Additional benefits include: the consumer of the raw material gets to build to meet their local market demands and doesn't have to deal with the waste materials;  the supplier of the raw material doesn't have to worry about generating products that comply with the myriad of government regulations proliferating around the world1 and gets to keep the "waste materials" which can often be reprocessed to create by-products which can in turn be sold onwards.

Finally, a resource based economy works very well for a rich nation of idle layabouts because we don't have to spend many man hours working.  We can use all those intelligent minds to create a machine to do the job, put it on autopilot, and go have a coffee.  We can then go and sell the machine to other countries aspiring to be layabouts - of course many of them have too many layabouts as it is and would prefer to force them to use picks, shovels and axes.

1 As it stands often the hardest working and unhappiest person in a plant is the poor blighter stuck with reading, interpreting, understanding and enforcing all those regulations at the plant floor - your friendly, neighbourhood, Quality Assurance Manager.


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## Kirkhill (2 Dec 2010)

> Federal Reserve May Be `Central Bank of the World' After UBS, Barclays Aid
> 
> .....“We’re talking about huge sums of money going to bail out large foreign banks,” said Senator Bernard Sanders, the Vermont independent who wrote the provision in the Dodd-Frank Act that required the Fed disclosures. “Has the Federal Reserve become the central bank of the world? I think that is a question that needs to be examined.”
> .....
> ...



Bloomberg

It seems to me that this has been the case ever since the US relieved Britain of the Responsibilities and Privileges associated with having the Bank of England control the gold standard based monetary system at Bretton Woods.  The US took over the remaining responsibilities in 1971 when Nixon unilaterally declared that the gold standard was defunct and the US Dollar was the basis of the global economy.  With that assertion theu US reaped the benefits of being able to set value basedd on what its market was willing to bear and its taxpayers benefited mightily.  At the same time, however, it became its responsibilty, its taxpayers responsibilty, to ensure that the international monetary system remained on a stable footing.

Perhaps we could consider it the US's greatest unfunded liability.


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## jhk87 (3 Dec 2010)

Bretton Woods established the US Dollar, not the Pound, as the gold-based common global currency. Nixon took the US off this standard about the same time that the US began to "punish" labour, resulting in four decades of (real) income _decrease_, allowing the huge US debt crisis to build.


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## Edward Campbell (12 Dec 2010)

I will not get around to reading Brown's new book until around end December so I will have to rely upon this “review,” reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, but, IF Brown is right (and he's a pretty astute observer) then we – the US led Western “we” are headed down a dangerous path:

http://www.theglobeandmail.com/news/world/a-stark-warning-from-britains-former-pm/article1833930/singlepage/#articlecontent 


> A stark warning from Britain's former PM
> 
> DOUG SAUNDERS
> 
> ...




A couple of useful, in my opinion, observations:

_“It's very difficult to explain these things to electorates who are looking for quick answers. And I wasn't able to communicate the full strength of the choices that we have had to make.”_ *This is, in part, what Kim Campbell was trying to say in 1993: election campaigns are poor places to debate policy.*

_“The problem is that we've had a restructuring of the world economy, which means that Europe and North America are out-produced and out-invested and out-manufactured and out-traded by the rest of the world now, for the first time in 200 years … but we're not out-consumed by them. And amid all the talk of deficit reduction, I don't think you can ignore the fact that America and Canada and the rest of Europe have got to invest in the future. Because the big opportunity about to come up is that you're going to have a consumer boom in Asia that is so big that it is going to be the equivalent of two Americas. And that is a huge opportunity for exporting countries to get products to these markets, which will create jobs in their own countries.”_ *This is my constant drumbeat – we need to make goods and services that China and India want to buy from us – goods and services they cannot produce for themselves, perhaps because their education systems do not inculcate the sort of creativity they need.*

_“I've got 2,000 students applying for our local college who didn't get places because there have been cuts in educational support,” he says. “So you've got direct consequences from a chain of destruction, if you like, that started in the subprime housing market in America and has ended up with students not being able to get places in a local college thousands of miles away in Fife.”_ *There is, as Brown says, a huge risk that cuts, for the sake of cutting, ends up cutting off one's nose to spite one's face.*

_“If you don't go for growth in an atmosphere where you have low inflation, then you're missing an opportunity to use your resources effectively, to create both jobs and higher living standards. And if you become protectionist, as happened in the 1930s, and ban this and ban that, and opt out of the benefits of world trade, then you're going to miss out on the huge opportunity that exists in the future.”_ *History does repeat itself.*

_“At the moment people want to see these problems as purely domestic problems, and they either feel they've done well or badly in relation to their domestic situation. But actually for most countries these are global problems that are impinging on them as national problems.”_ *This is what is happening in America and Britain and in many other countries. We turn towards destructive protectionism in a misunderstood effort to apply a domestic solution to a global problem.*

Maybe Brown is right and maybe more and more talk around more and more G_n_ tables will stave off the a round of harmful protectionism. One can hope.


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## a_majoor (18 Dec 2010)

Spanish ghost towns. A similar thing is happening in China, (and had happened at the end of the 80's in Japan and in 2008 in the United States), and in the case of Japan, a refusal to allow the markets to clear resulted in two lost decades of deflation and sluggish economic growth. TARP and similar foolishness could cause a similar episode in the United States, and the article demonstrates some of the possible dangers:

http://www.nytimes.com/2010/12/18/world/europe/18spain.html?_r=2&src=twrhp&pagewanted=print



> *Newly Built Ghost Towns Haunt Banks in Spain*
> By SUZANNE DALEY and RAPHAEL MINDER
> 
> YEBES, Spain — It is a measure of Spain’s giddy construction excesses that 250 row houses carpet a hill near this tiny rural village about an hour by car outside of Madrid.
> ...


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## a_majoor (28 Dec 2010)

Sovereign debt. I will note that late in the article the author suggests there is only one solution to the debt crisis (economic growth), but discounts cutting spending as a solution. In any practical sense, cutting spending is the immediate action that buys time to set the table for economic growth:

http://www.newsweek.com/2010/12/27/the-west-and-the-tyranny-of-public-debt.html



> *The West and the Tyranny of Public Debt*
> 
> Peet Simard / Corbis
> French deficit spending led to revolution.
> ...


----------



## a_majoor (3 Jan 2011)

European nations start seizing private pensions. Americans are also vunerable since they have accumulated several trillion dollars in their 401(k) savings accounts, which would balance the books for about a year, or bail out underfunded public service union pensions or whatever else politicians would deem fit to do. Our RRSP's havn't been publicly looked ove yet, but don't imagine there are not some people who would love to get their hands on them....:

http://www.csmonitor.com/Business/The-Adam-Smith-Institute-Blog/2011/0102/European-nations-begin-seizing-private-pensions?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+feeds%2Fcsm+%28Christian+Science+Monitor+|+All+Stories%29



> *European nations begin seizing private pensions*
> Hungary, Poland, and three other nations take over citizens' pension money to make up government budget shortfalls.
> 
> Old women eat lunch in a retirement home in Budapest Dec. 13, 2010. Hungarian lawmakers rolled back a 1997 pension reform, allowing the government to effectively seize up to $14 billion in private pension assets to reduce the budget gap while avoiding painful austerity measures.
> ...


----------



## a_majoor (3 Jan 2011)

More on Europe's socil and cultural defects:

http://pajamasmedia.com/richardfernandez



> *The Voyage of the Doomed*
> 
> Posted By Richard Fernandez On January 2, 2011 @ 10:50 pm In Uncategorized | 9 Comments
> 
> ...


----------



## kstart (3 Jan 2011)

@ Thucydides:  I like what you are doing here, these are important questions and very relevant.  I'll have to catch up.

Re: The Spanish Ghostowns, housing bubble-- I saw this in the documentary Let's Make Money, by Erwin Wagenhofer. The link is here: http://www.letsmakemoney.at/

I was trying to find a good review on-line, tough to find.  Wikipedia described it as "anti-capitalist".  I wouldn't call it that my self, but it's a critique and warning that's worth looking at IMO.  We should be learning by the mistakes of others, rather than repeating them.  Free-market all well and good, but responsible also back to country. . .and thinking forwardly.  I'm worried.  I have much to learn though.


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## kstart (3 Jan 2011)

The bottom line is oil/gas   

I was researching re: oil connections. . . freaky, freaky stuff.  I looked into the history, back in Nixon's time, the abolishment of Bretton Wood and gold standard, replacement to the American US dollar standard, and the implications re: safe speculation (e.g. Spanish ghosttown, investors invest, but pull out quick enough, money to make money, despite no use for those homes-- destroyed some pretty pristine shoreline, natural beauty).

I think we are in trouble, Canada and US as relates to the petrodollars-- we have to keep purchasing, no going green, it's like riding the tiger's back, can't jump off without huge instability, financial crisis.  No doubt Bush admin was completely wired into OIL. . . found an interesting connection re: Condaleeza Rice and Chevron, which was set up for Condeleeza (they even named a tanker after her, for her service on the Board of Directors) via George Shultz.  Enron, Unocal, Cheney and Haliburton, and of course Bush family, Penzzoil.

It's over the head of the average Lefty, but this was a pretty trippy analysis:
[http://www.tacomapjh.org/petrodollartheories.htm]

Is the US trapped into perpetual warfare?  Is there another way. . .?  New negotiation of trading standard. . .?  We're just as trapped possibly, because we're highly reliant on petrodollar, we consume a lot.  Can't even go green?

This is really scary stuff.  I don't wish for major instability, but a lot of this is madness. Is there a softer way through it?  It's interesting that Stateside, subsidized purchases of SUVs. . .   who could possibly introduce changes or challenge this. . . work out another way cause it's eggshells.  It scary how precarious and very fragile it it all is.  Democracy, our environment (food, water are way more essential to life), future generations. . . our seniors, disabilited, children. . . scary stuff.


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## Edward Campbell (3 Jan 2011)

kstart said:
			
		

> The bottom line is oil/gas
> ...
> I think we are in trouble, Canada and US as relates to the petrodollars--
> ...
> This is really scary stuff.  I don't wish for major instability, but a lot of this is madness. Is there a softer way through it?  It's interesting that Stateside, subsidized purchases of SUVs. . .   who could possibly introduce changes or challenge this. . . work out another way cause it's eggshells.  It scary how precarious and very fragile it it all is.  Democracy, our environment (food, water are way more essential to life), future generations. . . our seniors, disabilited, children. . . scary stuff.




I almost hate to tell you this, but the Canadian dollar IS a *petrodollar*.


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## kstart (3 Jan 2011)

E.R. Campbell said:
			
		

> I almost hate to tell you this, but the Canadian dollar IS a *petrodollar*.



This is brand new learning for me (economics obviously not my forte  ).  I'm relatively young and was not taught about this history, the ramifications really freak me out.  

It's like the movie, the Matrix, I was seeking to understand something, something is off here about the way things are going, but I'm shocked.  So, these wars and what they've been telling us, are hiding the reality of the actual eggshells we are walking on re: our basic economic security, old age pensions, the financial security needed for the basic health and functioning of our own democracy here at home?  That these wars are deemed necessary to prevent total financial collapse of the Western World. . . it freaks me out.  

So, maybe Obama wasn't so hip to this when he first campained for office.  He can't even stand up to BP re: Gulf of Mexico, poor Lousianna.  If he had any ideals and principles, I gather that he must be loathing himself right now (it looks that way too, the shine has gone out of him).


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## GAP (3 Jan 2011)

It sure sounds like you are parroting something/someone. 

Obama didn't do any worse than any other president would have done. He tagged BP with the spill, and they are on the hook for it. Hindsight is often 20/20 but I doubt there was anyone else out there that could have done anything else but make BP responsible and keep the pressure on.


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## GAP (3 Jan 2011)

US National Debt Tops $14 Trillion
Article Link
 The latest posting today of the National Debt shows it has topped $14 trillion for the first time.

The U.S. Treasury website today reported that as of last Friday, the last day of 2010, the National Debt stood at $14,025,215,218,708.52.

It took just 7 months for the National Debt to increase from $13 trillion on June 1, 2010 to $14 trillion on Dec. 31. It also means the debt is fast approaching the statutory ceiling $14.294 trillion set by Congress and signed into law by President Obama last February.

The federal government would have to stop borrowing and might even default on its obligations if Congress fails to increase the Debt Ceiling before the limit is reached.

Some Republicans in the new Congress have said they'll seek to block an increase in the Debt Ceiling unless a plan is in place to significantly reduce federal spending and unfunded government liabilities on entitlement programs such as Social Security and Medicare.

White House economic adviser Austan Goolsbee warned yesterday that it would be "catastrophic" if the U.S. Government were to default on its financial obligations.

"That would be the first default in history caused purely by insanity," said Goolsbee of plans to block an increase in the Debt Ceiling.
end


----------



## kstart (4 Jan 2011)

GAP said:
			
		

> It sure sounds like you are parroting something/someone.
> 
> Obama didn't do any worse than any other president would have done. He tagged BP with the spill, and they are on the hook for it. Hindsight is often 20/20 but I doubt there was anyone else out there that could have done anything else but make BP responsible and keep the pressure on.



 :-[ I'm actually not sure who you mean re: that I'm parroting someone/something. . .?  (I don't have cable TV even :-[. . . I'll rent documentaries, etc., but no I'm not really smart about economics).  

I got swept up with hopes with Obama, but it's true it's an inheritance of a system that's showing it's frailty-- the debt is astounding.  De-regulation is an on-going theme, less outside authority to check up on corporations, and/or bribes, lobbying etc. (so that the aging wells were properly looked after).   Without the strength of laws, nor the will of the people re: those laws, nor the money to go to battle with large corporations . . .  

I agree, no-one else could have really kept the pressure up. . . probably makes no difference, republican or democrat. . . ?  Hands are tied with a lot of things, even with introducing new legislation, Congress is Republican. . .favours always to the corporate sponsors. . .

It's just that the situation is graver than I imagined.  Democracy is not looking very healthy


----------



## ModlrMike (4 Jan 2011)

The global impact of the US defaulting on its obligations is almost incalculable. If we're having a recession now, wait until the world looses what little confidence it has left in America.


----------



## Journeyman (4 Jan 2011)

kstart said:
			
		

> :-[ I'm actually not sure who you mean re: that I'm parroting someone/something. . .?


I try to avoid speaking on behalf of other people. The impression you've left so far with me, however, is like the Grad Student character in _Good Will Hunting_  who, having read a couple of books, has many quotes and buzzwords, but none of the understanding.

I _suspect_ you've been exposed to a couple of left-wing, conspiratorial treatises on TAPI and now believe that that is the only reason CF troops are in Afghanistan. Quelling an insurgency while encouraging and supporting freedoms, schools, village infrastructure has all been a big lie, orchestrated somehow by Dick Cheney, so we can build an oil pipeline across south-western Asia.

That's my read of your posts anyway. And I strongly encourage you to keep reading, however, be discriminating in your sources of information. 

Several threads here, for example, resulted from a 24-hour posting frenzy that has resulted in a follow-on stream of "oh, but what I _meant_ to say was...."  -- such poorly thought-out submissions, especially when the poster is obviously not a subject-matter expert, tend to add more confusion than clarity.


----------



## Kirkhill (4 Jan 2011)

Journeyman said:
			
		

> I try to avoid speaking on behalf of other people. The impression you've left so far with me, however, is like the Grad Student character in _Good Will Hunting_  who, having read a couple of books, has many quotes and buzzwords, but none of the understanding.
> 
> I _suspect_ you've been exposed to a couple of left-wing, conspiratorial treatises on TAPI and now believe that that is the only reason CF troops are in Afghanistan. Quelling an insurgency while encouraging and supporting freedoms, schools, village infrastructure has all been a big lie, orchestrated somehow by Dick Cheney, so we can build an oil pipeline across south-western Asia.
> 
> ...



What he said Kstart - with one modification.

You say that you are just starting out and that much of this new information comes as a surprise to you.  At this stage I would suggest that you NOT be discriminating in your readings but rather be very "catholic" - or all encompassing in your reading.  

You should, however, be very aware of the biases of the authors.  Even the worst propagandist, no matter what their master's view point, resorts to facts occasionally.  And if you can get a right winger and a left winger to agree that a specific event occured on a certain date and involved agreed individuals at a defined location then you have a pretty solid starting point for drawing your own conclusions.  That covers the traditional Who, What, Where, When. 

The other W, Why..... well do like every other propagandist, journalist and participant....make it up for yourself.  Nobody really ever remembers why they did something.  There were reasons to act and reasons not to act.  There were reasons that benefited the actor and reasons that benefited others.   In the end decisions are made just because a decision had to be made  and no thought given to the consequences.


----------



## Journeyman (4 Jan 2011)

Kirkhill said:
			
		

> What he said Kstart - with one modification.


Ya, what he said about what I said......given my "be discriminating in your sources of information" is pretty close to his "be very aware of the biases of the authors."


----------



## kstart (5 Jan 2011)

There is a clear relationship re: OIL/GAS and Security; it’s not the imaginations of the ‘loony-left“; it is fact as stated in US energy and security policy directives and I believe they are seen as intrinsically linked.  It's evident in 1) Cheney's stated policies re: pre-emptive strikes re: energy resources; 2) US Policy re: "Preventative War and Pre-emption"/containment.  It's not a grasp at thin air.   It can also help to understand this as it's possibly a point of resistance and counter-insurgency.  

Here’s a source document, properly referenced and the following quotation summing up the nature of my fears and reactions:
USAWC STRATEGY RESEARCH PROJECT
PREEMPTIVE ENERGY SECURITY: AN AGGRESSIVE APPROACH TO MEETING
AMERICA’S REQUIREMENTS
by Lieutenant Colonel Dennis D. Tewksbury
United States Army
Captain Donald Root
Project Adviser

http://www.dtic.mil/cgi-bin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA448259



> The 2002 NSS fails to adequately address this kind of threat. The President believes we
> can achieve energy security through the shared prosperity gained by working with our friends
> and trading partners and discovering new technologies.51 However, these goals are oriented
> towards the future offering no specific timeframe for implementation and fail to address the
> ...



I’ve heard "right-wing conspiracy theories", that the “green movement’ is meant to threaten US global financial superiority (though in reality might be more closer to essential financial stability, a very real "National Security" reason, prevent anarchy, democracy falling apart etc.).  

My panic reactions (yes, fair criticism of my expression) was from spontaneous connection of some dots (a longer story to that).  “Green values” are not intrinsically a bad, there are just some serious problems with how economy works that is a threat to the health of the earth and to its people.  There’s a lot of junk produced that we truly don’t need, but at present it’s a trap. . ?  But water, food, shelter, health care, democracy, peace and stability are essential.. It’s this conundrum I’m reacting to.  I wish “Green” wasn’t vilified, but I understand better where that’s coming from-- it’s virtually a ‘national security threat‘?

I seek middle ground, responsible changes.

This thread is about global economics, I put forth a perspective, that's all, but I don't think there are grounds to deny the very real OIL/GAS/ENERGY and it's direct relationship to NATIONAL SECURITY and security abroad.  It's clearly stated in US policy and directives, and the history of that goes as far back and the late 1940sIf we are truly honest, we would all admit to the fact of our own own biases, our and those trigger issues that stem from attachment to ideological viewpoints-- and if we look deeper, those elements exist behind any argument, or position.

I'm also not denying the importance of ISAF, peace, security, democracy to quell insurgency-- and the economic relationships re: potentials to develop WMD.  This is an essential component:democracy peace, stability, good for all of us..  ideas even re: TAPI is that it is an economic partnership, and development being an important fact to a stable democracy (self-sustenance, independence, $ to fund democratic institutions: education, law, enforcement/NDS/ANA, etc.)  and to make sure that pipeline is not used as one massive weapon.  I've read some of the thinking behind this as well.  I'm not a 'radical', my core values though maybe come into conflict with the current stream, ebb and flow.  

I just desire some honesty here and looking out for the common good, and yes, away from the rhetoric (and know it exists both sides, hawks, doves, right, left, etc.)-- somewhere in the middle there is a reasonable ground and foundation. . .?  I'm not an 'evil person' because some of my core values coincide with greeny stuff or humanitarian, etc.  Greeny stuff is just not atm, a possible threat, and I think there has been some propaganda liewise that is against green, and the same can be said for 'pro-green' (e.g. EU vs. Us), but the value in itself is not a bad thing.  It's just a wall I had not fully realized  But EU is on board, because they likely recognize the importance of peace and stability in the first place and how frightening WMD are.


----------



## kstart (5 Jan 2011)

P.S. The criticisms are fair enough, I did a poor job expressing myself-- I ought to have sat on my hands first and let my reactions wash over me first.  I'm still interested in middle ground and constructive solutions, even longer-term planning, but to at least start some of that to add to stabilization, because it's very frightening also this OIL dependence and frailty of economy.

I don't have to be an "expert" to raise questions, or counter-viewpoints-- this is about dialogue here and it's a place to learn from each other.  Confuscious says:  "A wise man learns from both the Fool and the Wise; A Fool learns nothing from either". (might be misquoted. . .?)

The other point to raising leftier sides is most radicals/leaders, e.g. Osama, et al., have been schooled via the West, are aware of 'political economy/geopolitical' aspects; guerilla warfare (remember the FLQ here. . .).  Trust is a really important factor I believe in the building peace and security and assurance of non-abuse.  There are perceptions of the West, religion the means of gathering an identity in opposition to us (radical fundamentalist Islam), but for the leaders I imagine, they have accessed Western education. at least with Talilan/Al Queda. . .not to mention civial war, and waring tribes/warlords.


----------



## Edward Campbell (5 Jan 2011)

kstart said:
			
		

> P.S. The criticisms are fair enough, I did a poor job expressing myself-- I ought to have sat on my hands first and let my reactions wash over me first.  I'm still interested in middle ground and constructive solutions, even longer-term planning, but to at least start some of that to add to stabilization, because it's very frightening also this OIL dependence and frailty of economy.
> 
> I don't have to be an "expert" to raise questions, or counter-viewpoints-- this is about dialogue here and it's a place to learn from each other.  Confuscious says:  "A wise man learns from both the Fool and the Wise; A Fool learns nothing from either". (might be misquoted. . .?)
> 
> The other point to raising leftier sides is most radicals/leaders, e.g. Osama, et al., have been schooled via the West, are aware of 'political economy/geopolitical' aspects; guerilla warfare (remember the FLQ here. . .).  Trust is a really important factor I believe in the building peace and security and assurance of non-abuse.  There are perceptions of the West, religion the means of gathering an identity in opposition to us (radical fundamentalist Islam), but for the leaders I imagine, they have accessed Western education. at least with Talilan/Al Queda. . .not to mention civial war, and waring tribes/warlords.




You may, indeed, have misquoted Master Kong, but he did say a lot, perhaps even that. I  think that both Socrates and Bismark said something along those lines. What K'ung-fu-tzu did say, for sure, was _"A fool despises good counsel, but a wise man takes it to heart."_ Both Journeyman and Kirkhill, two people whose counsel I respect and heed here on Army.ca, have given you some very "good counsel," you should take it to heart.



Edit: spelling  :-[


----------



## Journeyman (5 Jan 2011)

Caution: long-winded, opinionated response follows   ;D

First, I don't think anyone has actually _denied_ a relationship between "OIL/GAS and Security" -- the point is more on the emphasis it plays in strategic thinking. Oil is critical for western infrastructure, and hence, security. There are, however, much more readily available and less costly ways of acquiring it than fighting in Afghanistan for the _sole_ purpose of the TAPI pipeline.



			
				kstart said:
			
		

> Here’s a source document, properly referenced and the following quotation summing up the nature of my fears and reactions: USAWC STRATEGY RESEARCH PROJECT......


Please note on the very first page:





> The views expressed in this student academic research paper are those of the author and do *not* reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. Government.


The purpose of these research papers at staff college is to enhance the research, thinking, and writing abilities of senior military officers. While the research may subsequently _inform_ government thinking, it tends not to be as significant as you may be implying. Occasionally, the research is right out to lunch.



> But water, food, shelter, health care, democracy, peace and stability are essential.


Here, we disagree, but perhaps it's only a matter of scale.

- Water, food, shelter: yes, essential.

- Health care, democracy: nice to have, but not _necessarily_ essential -- otherwise a large percentage of the planet would fail to have their "essential" needs even remotely met.

- Peace and stability: I think you're conflating the two. Stability is good. Even during the bad old days of staring nuclear eyeball-to-eyeball with the Soviets, it _was_ a form of 'stability' -- with largely understood rules of the game. Peace, however, I believe is a utopian concept that cannot be achieved as long as humans, with all of our faults and foibles, are part of the equation.....no matter how many placards are waved or Starbucks' windows smashed.

Perhaps my pessimism is based unfairly on having deployed to some crappy places to deal with less-than-stellar humanity.......oh, and divorce lawyers! They can negatively colour one's views as well.  



> I just desire some honesty here and looking out for the common good...


Ah, but there's the problem, which again gets back to that snag of humans in the equation; who decides on "the common good"? I'm vaguely familiar with some people who believe the "common good" holds that some people should be beheaded for drawing cartoons, or for being a girl going to school, or a female (but not the male) who commits adultery. Who is to say your hypothetical "common good" is any more valid than theirs? It's difficult to "standardize" opinions, as you saw with my views above, on essential needs.


Oh, and if you wish to eliminate "rhetoric" from political/economic discourse, your may want to Google "herculean labours" first; it isn't going away any time soon.


But keep going. You're on the right track -- if nothing else, you're using fewer terms like "trippy" and "freaky, freaky stuff" -- all you need now is to embrace proofeading with spell-check  ;D


----------



## CougarKing (5 Jan 2011)

To think that Vietnam was supposed to have taken its privatization of state enterprises much further than China has.

Perhaps Vietnam's further planned defence acquisitions other than this one might not go through if the economy gets threatened by this development?



> *Massively indebted Vietnamese shipbuilder misses payment*
> 
> _Prime minister left vulnerable before party congress as Vinashin's debts reach almost 5% of GNP_
> 
> ...



Mods, please move if you believe this belongs in its own topic.


----------



## kstart (6 Jan 2011)

Thank you Journeyman for helpful perspective and recognition of my need to get clear.  I'm not omnipotent to see all the processes leading up to US economic and security policies.  All your points are completely reasonable and valid.  

I am familiar with hermaneutics, subjectivity, critical thinking, though I think I will take a trip down to the local library though and treat myself to a pleasure read  ;D. 

I’m an undergrad- social sci. dropout, though that lead up to a hunger for Kantian-related work, in particular the works of Bernard Lonergan ("cognitive method", epistemology, 'foundations of knowing').  Lonergan was also a Jesuit, some interesting applications in his work Method in Theology.  Some interesting concepts re: "conversion", and this doesn't have to be about conversion to a religion, but learning that sticks, because is fully reflected, truthfully engaged, so that it is one's own (it's protection from being picked up by the tides, whether that be insurgencies, or ideological identity-politics, etc.)

I too despised having ideology shoved at me, e.g. Marx is a 'critical perspective', but not all-encompassing 'critical thinking'   I've had some inner rebellions, because of a need to pursue things truthfully and with integrity.  So, Kirkhill, I won’t lose my ‘catholic’ core   Values and principles do matter to me, as well as practical applications.

I'm a very poor example of a person who's read/applied Lonergan, part of the problem has been my 'ptsd-urgency 'to understand and know and settle with some facts.  The quotation from the USAWC, was a coincidental de facto find, following the spontaneous insight experience, which was everything in that paragraph I referenced.  I am calm now, despite knowing there‘s some tough challenges ahead.  

Re: Common Good, ‘Universals’ (human rights) vs. ‘Relativism’ (particularities of cultural sets).   In principle, and from observable ISAF/CF accomplishments, I’m feeling secure about that.  Safety is an important basic need, and Afghanistan is a population of those living without that for so many years and IMO, that’s hard on the human spirit, individually and collectively.  I do believe in the “universalism’ of  e.g. UN Human Rights principles, but in terms of the peculiarities/relativism of a people and culture that’s endured years and centuries of intense violence, both in the domestic spheres, e.g. subjugation of women and community levels (tribal warring, etc.) they may not be there yet, and we may need patience.   

I’m starting to settle with and square with that.  I know it’s a conflict and we at home also place heavy standards and demands upon CF, because that is also part of our duty.  The fear is if we bend, do we keep bending and what becomes of us (because there’s legal realities, precedents, consequences and that also is about maintaining and protecting the health of our own democracy here at home); there’s the fear of a slippery slope.  At the same time, I recognize that this is also a process, and to start with at least common agreement on safety, security, and so other things can follow, e.g. development, employment, sustainability of stability (affording APA, NDS, etc. and plus).  So, it is frustrating that Karzai implements Sharia Law as given a radically different set of cultural values, this is a ‘middle ground’ to start with, hopefully through time, it shifts.  I know our demands are high, but I think they have to be and sometimes in the greater pursuit of the good, others wind up ‘taking one for the team’, because the laws and standards are important across time.   It is further sacrifice.  

I too dislike politics.   Poor representation of centre, left-of-centre parties.  We need some balanced planning on economy.  New energy programs would be nice, but we’re also stuck and I wish for some innovative ways to get past that impasse, even if it is just small steps.  I think we’ve lost most of our sovereignty, most has been sold out. 

I’ll go quiet again.  To the library and to some re-certification of training.  If things become problematic here at home, I want to be able to help as best as I can.


----------



## Journeyman (7 Jan 2011)

_kstart_, I'm flattered.  I'll just provide one story that got me 'thinking about thinking.' 

Several years ago, I was posted into a position that got me several trips to NATO HQ to participate an annual threat assessment. Many of the committee members lived in their countries' line serials for that sort of work so they were quite familiar to one another. 

As committees tend to do [ : ] we would go through the assessment line by line. Several members had strengths or quirks that it was best to know. For example, if the French representative raised a point in English, before correcting himself and speaking in French, we knew it was a significant issue to France. He knew how the game was played. 

More importantly though, the Italian rep had apparently spent much of his academic life amongst the Jesuits. If he raised a point on logic, or causality, _everyone_ listened; yes, even the Turkish rep who was just in Brussels to get laid (OK, and to make sure the Greeks didn't gain any advantage    ). 

While I _personally_ think Kant missed the boat on several points  ;D ... 'thinking about thinking' -- why you believe what you do -- can be kind of important.

*I now return you to your regularly scheduled discussion on Global Economics  *   :-[


----------



## kstart (7 Jan 2011)

Great story, _Journeyman_-- thanks for sharing (enjoyed the humour too ).
It's interesting, the pause that can be taken to reflect on 'foundations' of the thinking, as a process is occurring, a good break for reflecting on the common ground of reasonability.

Kant and Longergan have some blindspots, but what's interesting is the continual refinement, growing from ideas, the 'dialectics' among areas of thought, the academic rigour, and in the the 'field' of it, learning to utilize it to promote clearer thinking, re-grounding and dialogue.  

There's an interesting field of "Applied Ethics" and I think those practicioners can be a useful contribution to any team effort into practical problem solving and involving multi-disciplinary approaches to problems.

I realize to this was a divergence from the topic at hand.  It's just a pause.  This was a great experience for me, even the conflict of it (my stumbling ).  Values-thinking is also important, and it doesn't have to be rigid, there's a flow to it and consensus-building.   Anyway, I'm just a total hack with it.  I am taking away with me, some new inspiration and I'm grateful.  Familiarity with Kant, check out Lonergan's Insight: A Study of Human Understanding, that is if you have some extra time on your hands  ;D  Cheers.

Back to The Global Economy.


----------



## GAP (15 Jan 2011)

While not Global in nature, I think this is going to have a huge impact down the line.................

Bank charges produce windfall of nearly $6B
January 14, 2011 | 09:00  Michel Munger, QMI Agency | Money
Saturday, January 15, 2011
Article Link
  
MONTREAL - Canadian banks reap nearly $6 billion a year in bank fees from their clients, a windfall that's only growing larger as the banks hike the charges.

According to figures compiled by Money, Canadians paid $5.57 billion in bank fees in 2009, an estimate that’s based on $111.5 billion in bank revenues.

The Canadian Bankers Association says that year over year, fees comprise 5% of bank revenues in Canada, or $163 per person. That's consistent with data from Statistics Canada and the results of an Angus Reid poll, where it's estimated the average Canadian pays $185 per year in bank charges.

An analysis of the big banks’ financial statements reveals that the average Canadian paid $134 in annual fees in 2005 and that the charges increased 18% between 2005 and 2009.

On Feb. 1, Scotiabank increased its fee packages, with the price of unlimited transactions rising by a whopping $9.95, to $11.95 per month from $2 a month.

Banks have other ways to maximize profits. Many now require account holders to maintain continuous balances of several thousand dollars to avoid paying monthly fees. Clients are charged for monthly printed statements and overdraft fees are as high as $5 a day.

Nevertheless, Canadian consumers aren’t complaining.

Julie Hauser of the Financial Consumer Agency of Canada, a federal consumers' group, said his agency only received 35 complaints about bank charges in 2009 out of 4,666 total complaints.

Hauser suggested that customers shop around if their fees are too high.

“If you are looking for (an account) with no annual fee or lower fees, you can use our web tool and change banks,” she said.

Caroline Arel, a lawyer for the Montreal consumer group Option consommateurs, says she regularly meets people who want to put their finances in order but are unable to maintain minimum account balances.

“I may have met at least five people since 2001 who have managed to maintain a balance in their account to avoid paying fees, and I’m being generous,” she said.
little more on link


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## Nemo888 (15 Jan 2011)

Canadian GDP(Gross Domestic Product)
agriculture: 2.3%
industry: 26.4%
services: 71.3% 

I wonder what percentage of this is banking and financial services related? Could a predominance of financial services and not actually making anything useful be the problem with Western economies? Interest and fees on moving money is technically GDP "growth" on paper.

The best guesses for banking are around 8%-10% and the third largest sector in the economy but if someone can find a breakdown by sector please post it. I think a  predominantly service economy and globalization are what are killing our prosperity. Bankers are one of the least productive elements of our society IMO and are taking too big a slice .


----------



## Edward Campbell (15 Jan 2011)

E.R. Campbell said:
			
		

> This reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s _Globe and Mail_ web site, illustrates a potential problem for the EU and the world:
> 
> http://www.theglobeandmail.com/report-on-business/economy/euro-in-most-difficult-phase-angela-merkel-says/article1484453/
> 
> ...





The Chinese are making some, limited but still measurable headway in their quest to dethrone the US dollar from its position as _de facto_ global reserve currency according to this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/world-bank-makes-case-for-new-reserve-currency/article1870084/


> World Bank makes case for new reserve currency
> 
> KEVIN CARMICHAEL
> WASHINGTON— Globe and Mail Blog
> ...


----------



## a_majoor (15 Jan 2011)

More areas of concern, fueled by the devaluation of the Greenback:





> Exchequer
> NRO’s eye on debt and deficits . . . by Kevin D. Williamson.
> 
> *The OPEC Bailout Is Not Happening*
> ...


----------



## GAP (20 Jan 2011)

15 Indian companies bid for Afghan iron deposits news  
20 January 2011 	
Article Link 

With the negotiations for the TAPI (Turkmenistan-Afghanistan-Pakistan-India) oil pipeline reaching a successful outcome and the security situation within the country taking a turn for the better over the last quarter of 2010, Afghanistan is now moving ahead on a path of national development. On Wednesday it invited 22 companies, including 15 from India, to bid for the development of its giant Hajigak iron ore deposits.

The country's ministry for mines has set 3 August 2011 as the deadline for bids for what it says is the largest un-mined iron deposit in Asia. It said it expected exploration to begin in 2012.

The Hajigak deposit straddles Bamiyan, Parwan and Wardak provinces.

The ministry estimates the worth of its reserves at as much as $350 billion.

Even as the country opens up its large reservoir of natural resources for commercial exploitation investors feel successful exploitation may well be years if not decades away as the country continues to battle insurgency and virtually non-existent infrastructure.

The ministry said interested companies included India's Jindal Steel and Power Ltd, JSW Steel, Tata Steel, NMDC, Steel Authority of India and Ispat Industries. UK-based Stemcor was also named, as well as Canadian-based Kilo Goldmines Ltd.

"The development of Hajigak will involve major infrastructure improvements and will stimulate the local economy and improve and lives of the citizens of Bamiyan province and beyond," mines minister Wahidullah Shahrani said in a statement.

United Mining and Minerals Co was the only Chinese company on the list, the ministry said.

Inspite of non-existent infrastructure and a raging Taliban-inspired insurgency in the country, China's top integrated copper producer, Jiangxi Copper Co and Metallurgical Corp of China are developing the vast Aynak copper mine south of Kabul after bagging the contract in 2007 through bribes.

Metallurgical Corp considered it wise to pull out of an earlier tender for Hajigak in 2009, following accusations it had won the Aynak contract through bribery. The firm denied the charges.

The ministry for mines cancelled the tender, blaming the cancellation on the global recession and changes in the world market structure for iron.

Strategically Afghanistan is too important a country to be ignored and resource starved countries are always sniffing for opportunities.
More on link


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## a_majoor (20 Jan 2011)

Like most things, the source of the problem (and potential solution) turns out to be quite simple after all. The problem lies in those who profit from the various branches and sequels that fan out from the root cause...

http://www.nationalreview.com/exchequer/257439/contra-kristol-contra-gold



> *Contra Kristol, Contra Gold*
> January 18, 2011 8:32 P.M.
> By Kevin D. Williamson
> 
> ...


----------



## a_majoor (3 Feb 2011)

Devaluing the US dollar and exporting inflation. The fallout is getting ugly:

http://finance.fortune.cnn.com/2011/02/01/egypt-and-the-growing-problem-of-global-inflation/



> *Egypt and the growing problem of global inflation*
> February 1, 2011 11:08 am
> 
> When prices rise faster than economic growth, the outcome is damaging for any population, but especially for a young one like Egypt's. Unfortunately, there are worrying signs that stagflation is spreading around the world.
> ...


----------



## a_majoor (8 Feb 2011)

Here is an example of how domestic political agendas can trump the greater good:

http://keithhennessey.com/2011/02/08/hidden-message/



> *The President’s hidden trade message*
> 
> on FEBRUARY 8, 2011
> 
> ...


----------



## a_majoor (11 Feb 2011)

Chinese drought could cause global waves:

http://www.nytimes.com/2011/02/09/business/global/09food.html?_r=2&pagewanted=print



> *U.N. Food Agency Issues Warning on China Drought*
> By KEITH BRADSHER
> 
> HONG KONG — The United Nations’ food agency issued an alert on Tuesday warning that a severe drought was threatening the wheat crop in China, the world’s largest wheat producer, and resulting in shortages of drinking water for people and livestock.
> ...


----------



## a_majoor (1 Mar 2011)

Something for conspiracy theorists to ponder. While this is inside the bounds of plausibility, the method, motive, opportunities seems weak and no actual players are identified. (You could also pin this on the Illuminati, Al Qaida or George Soros depending on your inclination).

http://pajamasmedia.com/tatler/2011/02/28/pj-tatler-exclusive-was-the-us-a-victim-of-an-economic-911-in-2008/?print=1



> *PJ Tatler Exclusive: Was the U.S. a victim of an economic 9/11 in 2008?*
> 
> Posted By Patrick Poole On February 28, 2011 @ 10:15 pm In Economy,News,Politics | 89 Comments
> 
> ...


----------



## a_majoor (10 Mar 2011)

More warning signs. A similar movement happened in the past, as bonds markets imposed discipline by demanding higher riskl premiums when government debts began getting too out of line. The markets might have chosen not to react so far due to the economic turmoil, but I think everyone is clear now that the huge debt loads ARE the cause of the turmoil, and we are witnessing a deleveraging:

http://www.nationalreview.com/exchequer/261796/biggest-bond-fund-dumps-us-debt



> Exchequer
> 
> NRO’s eye on debt and deficits . . . by Kevin D. Williamson.
> 
> ...


----------



## a_majoor (13 Mar 2011)

Walking on financial eggshells:

http://finance.yahoo.com/banking-budgeting/article/112328/dow-plunge-should-you-be-worried;_ylt=AsLLGtqv3fNxgquMZnfgGdlO7sMF;_ylu=X3oDMTE5N2xpZTRpBHBvcwMyBHNlYwN3ZWVrZW5kRWRpdGlvbgRzbGsDMTByZWFzb25zdG93



> *The Dow's Plunge: Should You Be Worried?*by Brett Arends
> Friday, March 11, 2011
> ShareretweetEmailPrintprovided by
> 
> ...


----------



## a_majoor (10 Apr 2011)

This link has large map graphics:



> [INFOGRAPHICS CODE]
> *A Global History of Debt: National Debts Rise and Fall in the Last 10 Years*
> 
> We all read about the U.S. national debt, and whether we should be concerned that it’s in the $12 trillion range these days. But the United States isn’t the only country carrying a huge amount of debt. In fact, it seems that operating just about any country is a money losing proposition.
> ...


----------



## a_majoor (27 Apr 2011)

Jerry Pournelle looks at the long term:

http://jerrypournelle.com/view/2011/Q2/view672.html#Monday



> Gold and silver prices are up again. There's a fairly cool-headed analysis in the International Business Times http://www.ibtimes.com/articles/
> 137709/20110425/gold-silver-prices
> -inflation-bubble.htm that's worth your reading; do understand that there's no industrial justification for the prices gold and silver have climbed to. To some extent the price of gold depends on the price of oil, and of course the price of the dollar. Don't bet the farm on gold, but if there's a real runaway inflation, having physical possession of gold and silver is one hedge. Note that wheat futures are up around $8 a bushel, which is quite a lot compared to the $3 wheat of last spring. Wheat prices depend on consumption and production. Unlike oil, wheat production depends on a number of factors like drought and climate (as well as oil prices which affect fertilizer and transportation costs) more than on political decisions such as the US decisions on oil production in Iraq and the OPEC production schedules. Speculation oil prices -- futures -- are driven by expectations. An OPEC announcement of greatly increased production would drive spot oil prices down dramatically, as history has shown -- note that Reagan's announcement of increased drilling, which had no immediate effect on oil production, drive down gas prices at the pump within weeks. (_Interpolation, the same thing happend in 2008 when President George W Bush signed an executive order lifting drilling bans. PErhaps he is talking about that event_)
> 
> ...


----------



## a_majoor (8 May 2011)

Governments are discovering markets work far faster than they can. If the Eurozone collapses the consequences will derail our economic recovery at best and overwhelm us at worst:

http://www.weeklystandard.com/print/articles/coming-euro-crack_558504.html



> *The Coming Euro Crack-Up*
> 
> A currency divided against itself cannot stand.
> 
> ...


----------



## Edward Campbell (26 May 2011)

Our news has, recently, been full of the “same old, same old:” America is going broke (true) and must do what Canada did 15 years ago (partially true – but the US federal government cannot recover on the backs of ½ of Americans living in ⅓ of the states, as Chrétien/Martin did here); Europe is going broke (partially true, too); China is living on a giant _Ponzi scheme_ which must, sooner rather than later, collapse (maybe); the global recovery depends upon the BRIC countries (not so – maybe on half a load of bricks: India and China); the G-20 is the saviour of the global economy (well ... not quite).

Here is an interesting take from Timothy Garton Ash, which is reproduced under the fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/news/opinions/opinion/obama-can-take-us-beyond-the-old-west/article2034932/ 


> Obama can take us beyond the old West
> 
> TIMOTHY GARTON ASH
> 
> ...




TGA (as he styles himself) has it partially right. The “old West” - which is only 50 years old, really, is pretty much dead – it just needs to be buried before it starts to stink too badly. It was killed, mainly, by  Anglo-American ineptitude and French greed.  But the “real” West – a smaller thing with, say, ten or 20 members – some of then far Eastern, rather than 30 or 40 (OECD+), is still alive and well and is still 'driving' the underlying streams of innovation and creativity that make the manufacturing, metal bending/weaving economy chug along.

The “new world order” must include everyone and the leadership – which the G-20 might as well become, since it is already here – must represent everyone, which means that some of the existing G-8 and G-20 members need to stand aside.

What is the world: 

1. Asia is number 1 in population and economic dynamism;
2. Europe is tied for number 2; with
3. North-America;
4. South America trails, despite Chile and Brazil; and
5. Africa.

There are, really, three Asias:

1. East or _Sinic_ Asia which is number 1, all by itself;
2. South or _Indo_ Asia, which is number 2, but gaining; and
3. Al the rest of Asia, which, despite lots of oil, ranks down with South America.

So, who are the top 20? We have, _de facto_ eight regions and we need at least two from each (that's 16) plus a few to make 20.

Let's start from the bottom:

20. An African country;
19. Another African country;
18. An “other” Asian country;
17. Egypt;
16. Chile;
15. Brazil;
14. Argentina;
13. A Caribbean country;
12. Canada;
11. USA;
10. Australia;
9.  India;
8.  Singapore;
7.  A Pacific or Indian Ocean island country;
6.  Bahrain, Qatar or UAE;
5.  Germany;
4.  Netherlands;
3.  Ukraine;
2.  Japan; and
1.  China.

Now, we can fiddle, with a few members – including Canada – but that is a pretty fair 'sample' of the world with about 10% in _leading_ roles.

Finally: while I like TGA's idea of moving from _the_ free world to _a_ free world, and while I think it can, should and maybe even will happen, I doubt that my grandchildren will be alive to see it. They will not see _a_ free world, they will not even see progress towards it – not as long as _illiberalism_ (Argentina, Belgium, Croatia ... France ... Russia and so on) rules most of the world.


----------



## a_majoor (26 May 2011)

Interesting observation about the list, Edward, you grouped the "Anglosphere" block together (Canada, USA, Australia, India), and with two "honourary members" based on both their relationships with Anglosphere nations and their proven ability to step up to the plate (Netherlands and Japan) the Anglosphere represents 20% of your grouping and Anglosphere + Honouraries = 30%

The Anglosphere West still has considerable clout, and even outside the G_x_, can still bring massive amounts of resources to any task.


----------



## a_majoor (28 May 2011)

Conrad black on the debt:

http://fullcomment.nationalpost.com/2011/05/28/conrad-black-a-world-of-financial-ruin/



> *Conrad Black: A world of financial ruin*
> 
> Fotolia
> In a world heading to financial ruin, the UK offers hope for the future.
> ...


----------



## a_majoor (28 May 2011)

The Virtual water trade is an interesting idea and worth studying in more detail as potential sources of wealth and conflict in the future:

http://www.newscientist.com/article/mg21028144.100-african-land-grab-could-lead-to-future-water-conflicts.html



> *African land grab could lead to future water conflicts*
> 
> 26 May 2011 by Anil Ananthaswamy
> Magazine issue 2814. Subscribe and save
> ...


----------



## a_majoor (12 Jul 2011)

With most eyes on the ongoing drama of the US debt ceiling, people may have forgotten another huge crisis is brewing across the pond:

http://www.theatlantic.com/business/archive/2011/07/euro-in-crisis-is-the-italian-domino-falling/241760/



> *Euro in Crisis: Is the Italian Domino Falling?*
> JUL 11 2011, 11:17 AM ET183
> 
> There have been some rumbles about Italy for a while.  Italy's budget deficits are relatively modest compared to, say, Ireland, but their debt is about 120% of GDP.  The government has passed a plan that will balance the budget by 2014, but as with most such plans, most of the cutting comes later, while the current cuts are small.  This may well be sensible fiscal policy, given the current economic climate, but it is not reassuring to the markets.  Mike Shedlock estimates that Italy needs to borrow about €356 billion ($500 billion) in 2011 to cover its deficit, and roll over outstanding debt.  Their 10-years are now trading at something north of 5%.  Most of the estimates I've seen say that a debt death spiral becomes likely when rates hit somewhere between 6-7%, because the debt service costs start blowing up the budget deficits.
> ...


----------



## a_majoor (3 Aug 2011)

Now that everyone's eyes are no longer fixated on the US political drama:

http://www.theatlantic.com/business/archive/2011/08/eurocontagion-spreads/242981/



> *After Congress Comes Together, Eurozone Is Still Falling Apart*
> By Megan McArdle
> 
> Aug 2 2011, 4:45 PM ET 229
> ...


----------



## a_majoor (5 Sep 2011)

The PIIGS are still threatening to sink the Euro and the Eurozone:

http://www.businessinsider.com/senior-imf-economist-expects-hard-default-for-greece-soon-2011-9



> *Senior IMF Economist Expects Hard Default For Greece. Soon.*
> 
> According to a senior IMF economist who wasn’t identified, Greece will likely face a “hard default” well before March 2012.
> It could happen during 2011, and perhaps after the current round of negotiations. This acknowledgement from someone very close to the matter in a body that is heavily involved in the bailout, is quite worrying.
> ...


----------



## FoverF (5 Sep 2011)

I am currently living in a PIGS state, and let me tell you, nobody... and I mean... 

NOBODY

is even TALKING about balancing their budgets. 

It's not even in the long-term plans. 

They're talking about maybe someday stabilizing their deficit at 3.5% or so. That's not 3.5% percent of government expenditures mind you, which is what normal people would mean if they were talking about a 3.5% deficit. No, they mean 3.5% of the entire GDP of the country (which is what normal people would call a 17% deficit). That's the long term goal. The current reality (here) is more along the lines of a 10% deficit (which sounds much nicer than saying you're spending twice as much money as you're taking in). 

But there is no talk in Europe of balancing budgets. Just talk about how to use the mechanisms of the Euro and ECB to stabilize bond markets and ensure lower interest rates. 

Just talk about how to borrow more money. 

The Germans are running awfully thin on Nazi-guilt, and that's the only thing keeping the Euro zone afloat. 

But one way or another, they are going to crash hard, and man, oh man, do they ever deserve it.


----------



## Edward Campbell (10 Sep 2011)

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the _Globe and Mail_, is some all to rare good sense, from a likely source:

http://www.theglobeandmail.com/report-on-business/careers/careers-leadership/the-lunch/david-dodge-black-coffee-spiked-with-exasperation/article2160163/


> David Dodge: Black coffee spiked with exasperation
> 
> JACQUIE MCNISH
> TORONTO— From Saturday's Globe and Mail
> ...




Dodge is, in my opinion, pretty much spot on, point by point.

The big problems: _"a lack of global co-operation and “stupid” political theatrics, particularly in the United States."_

Other factors bearing on the current problems: _"China’s currency is artificially low. In Europe and North America, households are bogged down by debts, job growth is stalled and governments are burdened with too much debt."_

For Canada _"Much of_ [Canada's]_ resource-based economy has been stoked by strong commodity prices, which “won’t go on forever” as global economies sputter."_

And _"A more intractable problem is the country’s waning manufacturing base in Ontario. The underpinnings of the province’s core industrial sector have been eroding for decades. Plants here can’t compete with the lower wage markets of the Southern U.S. states and emerging countries. Compounding matters, long-term investment in more efficient plants and equipment has been anemic. The deterioration was masked for years by the competitive advantage of a depressed loonie and overheated demand in the United States, particularly in the past decade."_


----------



## Brad Sallows (11 Sep 2011)

All true, but I estimate the real root cause is that too many governments have overpromised what is deliverable and written too many cheques on behalf of people who are adamantly opposed to paying.  As the wheels fall off in a handful of countries, prudent people try to reduce debt and shore up for the coming storm.  The response of irresponsible governments is to acquire more debt on behalf of people who are trying to shed it, and to despoil the value of assets (inflation).  All that does is encourage deeper entrenchment in anticipation of a more powerful upheaval.  I'm aware of the limitations of intelligent and well-educated people and firmly and reasonably doubt their ability to successfully manage such a decentralized and chaotic entity as "the economy" by dirigiste measures.

Some think the small number of countries in crisis shouldn't be a problem.  Since they literally don't know how sensitive the "system" is to small perturbations (if they could, their predictions might be sane, accurate, and verified by outcomes), their conclusion is unfounded.


----------



## Edward Campbell (11 Sep 2011)

"...  too many governments have overpromised what is deliverable and written too many cheques on behalf of people who are adamantly opposed to paying."

I think you are right. I think the number of "people who are adamantly opposed to paying," including Canada's share, is huge.


----------



## a_majoor (19 Sep 2011)

Greece is finally taking steps to cut spending, but only under increasing pressure from the lenders:

http://www.nytimes.com/2011/09/19/business/global/19iht-euro19.html?_r=2&hp=&pagewanted=print



> *Greeks Discuss Drastic Moves to Receive Aid*
> By JACK EWING and NIKI KITSANTONIS
> 
> FRANKFURT — Greek leaders struggled through the weekend to agree to a set of radical budget reductions that would satisfy foreign lenders’ demands even as they tried to stave off mounting resistance to those cuts at home.
> ...


----------



## a_majoor (24 Sep 2011)

David Frum lays out a scarey set of circumstances:

http://fullcomment.nationalpost.com/2011/09/24/david-frum-how-canadas-economy-came-down/



> *David Frum: How Canada’s economy came down*
> 
> Brendan McDermid/Reuters
> The Canadian economy has had a good run so far, but the party might be coming to an end.
> ...


----------



## Edward Campbell (26 Sep 2011)

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is an inside look at what is coming next: 

http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/financial-times/jpmorgan-boss-rips-mark-carney-over-financial-regulation/article2179981/


> JPMorgan boss rips Mark Carney over financial regulation
> 
> TOM BRAITHWAITE
> WASHINGTON— Financial Times
> ...




Let me put this in public health terms. Jamie Dimon is like a brilliant brain surgeon and Mark Carney is like an equally brilliant engineer. On the surface we might think that the neorosurgeon has more to do with public health than an engineer but Mr. Carney is a public servant, in the best sense of that word, he is like the city engineer. While Mr. Dimon, the brilliant neorosurgeon, saves several hundred lives each year by doing complex, costly and difficult operations, Mr. Carney saves millions of lives by providing clean water and collecting the garbage.

In this case, both Carney and Dimon are tooth and claw, read meat capitalists but Dimon has a fiduciary responsibility, a legal *duty* to his shareholders while Carney has a more general responsibility, a civic *duty* to a much, much larger group. Each is trying to do his duty as best he can but Dimon is showing us the big US bank's next line of attack: anything that might interfere withtheir ability to make profits, regardless of civic duty, is *Anti-American*.

It is a sad, shoddy tactic but it is about the only arrow the failing US financial sector has in its quiver. 

Pay no mind to Mr. Dimon; Mark Carney doesn't give a sh!t and neither should we.







The US financial giants?


----------



## Edward Campbell (26 Sep 2011)

Michael Bliss is a pretty good historian, I'm not saying he is right but his views, expressed in this column which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ deserves a respectful read:

http://www.theglobeandmail.com/news/opinions/opinion/we-took-the-gain-now-weve-got-to-take-the-pain/article2178461/


> We took the gain, now we’ve got to take the pain
> 
> MICHAEL BLISS
> From Monday's Globe and Mail
> ...



Perhaps almost all the stimulus was just political pandering to special interests - big business, big banks and big labour - which just got in the way of allowing the global economy to work its own way through its troubles.


----------



## Journeyman (26 Sep 2011)

E.R. Campbell said:
			
		

>


How appropriate if the "NSF" in the corner stands for "Non-Sufficient Funds"


----------



## Edward Campbell (26 Sep 2011)

More on the Carney-Dimon dustup, reproduced under the Fair Dealing provisions of the Copyright Act, from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/top-business-stories/jamie-dimons-clash-with-mark-carney-highlights-growing-tension/article2180023/


> Jamie Dimon’s clash with Mark Carney highlights growing tension
> 
> MICHAEL BABAD
> Globe and Mail Update
> ...




Like Michael Babad, in a _contest_ between Carney and Dimon I would bet on Careny. Carney  is a seasoned Wall Street veteran, he spent thirteen years with Goldman Sachs in its London, Tokyo, New York and Toronto offices. His progressively more senior positions included co-head of sovereign risk; executive director, emerging debt capital markets; and managing director, investment banking.  Dimon is no amateur, he was a member of the board of directors of the New York Federal Reserve Bank and in that capacity and while being, concurrently, CEO of J.P. Morgan he made decisions in connection with the $55 billion loan to J.P. Morgan to bail out Bear Stearns. He is a favourite of Barak Obama and was rumoured to be in competition (with Timothy Geithner) for the office of Secretary of the Treasury. But, at bottom, Dimon is riding a weak horse and Carney has a strong one.


----------



## Edward Campbell (26 Sep 2011)

Further: we ought to have some sympathy for Jamie Dimon. He led JP Morgan Chase soundly and now he, his bank, his shareholders really, are being asked to forgo legitimate profits in order to capitalize themselves to a level which _might_ be too conservative for such a well managed institution. But there are too few banks that are managed as well as JP Morgan and the revised capitalization levels set forth in Basel III are, really, a sop to socialist European governments who had, still have too lax banking regulations ~ it's a variation of make the rich pay and punish the bankers and brokers for the sins of social engineers, especially those in the USA who decided that the route to eternal prosperity was by having the poor jump into the middle class through the magic of cheap mortgages. There was a Jewish fellow, some time back, who opined that "ye have the poor always with you," something the US Congress and the Clinton administration seemed to have forgotten.


----------



## Kirkhill (26 Sep 2011)

E.R. Campbell said:
			
		

> Further: we ought to have some sympathy for Jamie Dimon. He led JP Morgan Chase soundly and now he, his bank, his shareholders really, are being asked to forgo legitimate profits in order to capitalize themselves to a level which _might_ be too conservative for such a well managed institution. But there are too few banks that are managed as well as JP Morgan and the revised capitalization levels set forth in Basel III are, really, a sop to socialist European governments who had, still have too lax banking regulations ~ it's a variation of make the rich pay and punish the bankers and brokers for the sins of social engineers, especially those in the USA who decided that the route to eternal prosperity was by having the poor jump into the middle class through the magic of cheap mortgages. There was a Jewish fellow, some time back, who opined that "ye have the poor always with you," something the US Congress and the Clinton administration seemed to have forgotten.



Do you suppose there might be some other metric that Dimon and JP Morgan track, other than or in addition to percent capitalization, to keep themselves out of trouble?  Presumably they have no more desire to go bust than the rest of us.


----------



## Edward Campbell (26 Sep 2011)

Kirkhill said:
			
		

> Do you suppose there might be some other metric that Dimon and JP Morgan track, other than or in addition to percent capitalization, to keep themselves out of trouble?  Presumably they have no more desire to go bust than the rest of us.




I don't know how to run a bank; I don't even pretend to know. I couldn't, I am pretty sure, even run a small bank ... but the world? Oh, I could run that all right, and I can and, routinely, do tell you how to run it and even how to run puny little Canada - I could run that, too. But a bank? No, I think not.


----------



## a_majoor (26 Sep 2011)

Running Canada is easy; just ask any NDP candidate.... >

A more pressing long term problem may well lie with demographics; who will be manning the highly productive factories and farm fields of the future, generating the wealth to pay the vast debts of today?

http://www.foreignpolicy.com/articles/2011/08/15/the_world_will_be_more_crowded_with_old_people?page=full



> *The World Will Be More Crowded -- With Old People*
> Actually, the children aren't our future.
> BY PHILLIP LONGMAN | SEPT/OCT 2011
> 
> ...


----------



## Edward Campbell (27 Sep 2011)

More, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, about the rationale for Jamie Dimon's hardline position:

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/dimons-rhetoric-a-killer-of-reasonable-bank-reform/article2180884/


> Dimon’s rhetoric a killer of reasonable bank reform
> 
> BOYD ERMAN
> From Tuesday's Globe and Mail
> ...




I think Dimon _at al_ have a case: Basel III is designed to punish the banks for the sins of the general public; it is scapegoating of the worst sort. That being said, a very, very large share of the global financial 'industry' is poorly managed and even more poorly regulated. Crafting a regulatory 'floor' is almost bound to punish the well managed in order to protect consumers from the poorly run banks. I suppose there is a chance that Dimon will succeed - he is well plugged in to the Obama administration - in turning the USA against Basel III which will be good for JP Morgan Chase but bad for the global financial sector because too many US banks do need to be better capitalized.


----------



## Kirkhill (27 Sep 2011)

E.R. Campbell said:
			
		

> I don't know how to run a bank; I don't even pretend to know. I couldn't, I am pretty sure, even run a small bank ... but the world? Oh, I could run that all right, and I can and, routinely, do tell you how to run it and even how to run puny little Canada - I could run that, too. But a bank? No, I think not.



ERC - you disappoint me.....

I, on the other hand have no trouble at all telling people how to run an army.    ;D


----------



## Kirkhill (27 Sep 2011)

> Mr. Dimon, who famously believes that financial crises roll around every few years no matter what,



Right up there with:

the poor, like war, will always be with us;

everybody talks about the weather but nobody does anything about it;

7 fat years and 7 lean years......

Sometimes it is important to figure out how to prevent crises,  other times it is important to figure out how to reduce the impact of the crisis and I haven't got a clue as to how to figure out when you do which.  But some of these bright people purport to .... for a fee.  And some of them are right most of the time......


----------



## Edward Campbell (27 Sep 2011)

I suspect that Jamie Dimon is, at the very least, half right: financial crises are like the poor, always with us. That doesn't mean that we cannot or should not take steps to mitigate them and to militate their effects, as Carney, _et al_ are trying to do, but they will come, come what may.

It is important to recall, also, that Carney was on Dimon's side in crafting Basel III. Sarkozy and the Europeans are hell bent on punishing the banks to pacify their voters; Carney, and Harper/Flaherty protested that our banks, and a few others, didn't need either the punishment or the (initially) proposed high levels of capitalization. Dimon is unhappy with the compromise Carney crafted - one which is, effectively, neutral for Canadian banks - but he is shooting at one of his few friends (non-enemies, at least).


----------



## Kirkhill (27 Sep 2011)

And if I understand the reports coming out of Britain via the popular press Cameron is looking for allies to protect the "City" while the Continentals are hellbent on reversing the historical error of Louis XV that drove the Huguenots over the water to Threadneedle Street.

I guess they still haven't grasped the fact the money, like water, will inevitably squirt out of your hands if you squeeze too tightly.

Stephen is playing for Fort MacMurray.  David is playing for Threadneedle Street.

Where David's predecessors had a weak hand when confronting the Continentals David has a stronger hand but needs allies.  Canada and Australia, together with BRIC, make an interesting counterpoise to Brussels.


----------



## Edward Campbell (28 Sep 2011)

Still more, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, about the Europeans foundering about trying to avoid paying the piper:

http://www.theglobeandmail.com/news/world/europe/will-the-tobin-tax-make-or-break-europe/article2182936/


> Will the Tobin tax make or break Europe?
> 
> DOUG SAUNDERS
> 
> ...




Now, I must admit that I am opposed to the _Tobin Tax_ on principle: it presumes that trading is, somehow, inherently _evil_ - the idle rich profiting, effortlessly, from the working poor and all that sort of nonsense. If we need to raise more money then it should come as directly as possible - the fewest _middlemen_ - from the greatest possible number of people: a consumption tax a la our HST, but applied to absolutely everything, which would, _de facto_ include stock trades.

John Plender, in the Financial Times makes a case _for_ the Tobin Tax but he acknowledges that _"business might migrate to more favourable tax jurisdictions outside the European Union"_ and _"the tax would impair market efficiency and be passed on to financial institutions’ customers rather than being borne by banks."_

But, mostly, this is Europe trying to avoid calling on its own people to pay their own bills - until they cross that Rubicon they are fiddling while Rome, Madrid, Lisbon and Athens all burn.


----------



## a_majoor (29 Sep 2011)

There are no more resources to throw at the problem. The issue is now what sort of controlled drawdown is possible, and if a reduced version of the Eurozone could survive after Greece and probably the rest of the PIIGS go down:

http://www.washingtontimes.com/news/2011/sep/28/eurozone-debt-debacle/



> *GHEI: Eurozone debt debacle*
> Government spending spree could bring down European Union
> 
> By Nita Ghei
> ...


----------



## Edward Campbell (3 Oct 2011)

Here, in an article reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is another example of a US Government agency proposing to (dishonestly) break their international agreements because they are uncompetitive:

http://www.theglobeandmail.com/news/national/us-mulls-major-levy-on-cargo-coming-from-bc-ports/article2188338/


> U.S. mulls major levy on cargo coming from B.C. ports
> 
> JOHN IBBITSON
> OTTAWA— From Monday's Globe and Mail
> ...




This is not new, and it is not unique to Obama or even Democrat administrations. The _doctrine_ of American exceptionalism gives them, the US Congress and Government, the *right* to lie, cheat and steal if it advances their short term interests.

I am not one to count the Americans out, but they are down and they are unwilling to pull themselves up by their own bootstraps. There are parallels to Rome _circa_ 150  to 450 CE and to Britain in 1850-1950, but America remains rich and powerful - especially in human capital.


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## Edward Campbell (8 Oct 2011)

E.R. Campbell said:
			
		

> There is much excitement in the media, today over Nancy Pelozi’s distaste for fossil fuels and, more broadly, for the Obama administration’s distaste for foreign oil but it is all smoke and mirrors.
> 
> First, only Saskatchewan Premier Brad Wall is is making economic sense. Oil is a fungible commodity, no one cares who buys it. The simple fact (and it is a fact) is that every drop of oil produced, economically, anywhere will be sold at market prices – so long as a profit can be made. The demand for oil will not decline – even if the *rate of growth* of demand might grow less rapidly as (if) suitable alternative fuels become available. If America prefers Saudi or Venezuelan oil to Canadian oil you may be 100% sure that China will not.
> 
> ...




More on Canadian energy and _world_ markets in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/kitimat-bc-ground-zero-in-the-race-to-fuel-asia/article2195213/


> Kitimat, B.C.: Ground zero in the race to fuel Asia
> 
> DAVID EBNER AND  NATHAN VANDERKLIPPE
> KITIMAT, B.C., CALGARY— From Saturday's Globe and Mail
> ...




While the USA is and should remain our _preferred_ market for oil and gas it must never be allowed to be our only market - diverse, global markets ensure we can, always, get the best price for our resources. It is in our interest, broadly, to help the USA ensure a stable and 'friendly' energy supply, at world prices. the only way we can demand world prices is to have a world-wide customer base. This gas port and the new Northern Gateway pipeline are good public policy.


----------



## Edward Campbell (10 Oct 2011)

E.R. Campbell said:
			
		

> More on Canadian energy and _world_ markets in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:
> 
> http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/kitimat-bc-ground-zero-in-the-race-to-fuel-asia/article2195213/
> 
> While the USA is and should remain our _preferred_ market for oil and gas it must never be allowed to be our only market - diverse, global markets ensure we can, always, get the best price for our resources. It is in our interest, broadly, to help the USA ensure a stable and 'friendly' energy supply, at world prices. the only way we can demand world prices is to have a world-wide customer base. This gas port and the new Northern Gateway pipeline are good public policy.




And more, still, in this article, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/sinopec-bids-22-billion-for-alberta-energy-company/article2196041/


> Sinopec bids $2.2-billion for Alberta energy company
> 
> NATHAN VANDERKLIPPE
> CALGARY— Globe and Mail Update
> ...




One key point is in the last sentence: _"They’re buying Daylight for their five and 10-year plan.”_ The Chinese business community does not worry as much as their Western counterparts about  quarter-by-quarter results. They can make _plans_ and investments to accomplish their planning goals - a failure to grow each and every quarter will not lower the company's value.


----------



## Nemo888 (10 Oct 2011)

Perhaps in a decade or so when the Chinese are raping our wilderness for fossil fuels and paying us pennies we will have to nationalize. It's entertaining when a competitor learns your tricks and starts using them against you.


----------



## Edward Campbell (10 Oct 2011)

Nemo888 said:
			
		

> Perhaps in a decade or so when the Chinese are raping our wilderness for fossil fuels and paying us pennies we will have to nationalize. It's entertaining when a competitor learns your tricks and starts using them against you.




If the Chinese will, at some future date, be _"raping our wilderness for fossil fuels and paying us pennies"_ it will be because we are lousy custodians of our resources and our business laws now.


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## Kirkhill (10 Oct 2011)

E.R. Campbell said:
			
		

> If the Chinese will, at some future date, be _"raping our wilderness for fossil fuels and paying us pennies"_ it will be because we are lousy custodians of our resources and our business laws now.



The best defense against that particular Chinese threat is threefold:

1. Secure our native land claim situation so as to deny any "foreigner" a fulcrum on which they can apply leverage to disrupt Her Majesty's / Ottawa's / Provincial sovereign claims;

2. Maintain a useful custodial presence of Police and Military forces to be able to assert suzerainty, maintain order and repel foreign influence;

3. And most importantly, supply the resources to the rest of the world on our terms but at a reasonable market price so that they don't feel the need to have to come here and take it because we are denying them a life-sustaining resource.

Energy is a life-sustaining resource every bit as much as water and perhaps more important than food.  With energy you can create food.


----------



## a_majoor (11 Oct 2011)

Bondholders getting a haircut of up to 60% isn't a good sign, butmay be the wave of the future as heavily indebted polities try to escape the crushing burden (PIIGS, Ontario and Quebec, the "Blue States" are all likely to consider this route):



> CHANGE: Greek Debt Haircut Seen Exceeding 60%. “Greece’s bondholders may have to settle for a cut of more than 60 percent in what Athens owes them, the head of the eurozone’s finance ministers has said, the first open admission that such a drastic move is being considered.”



This line seems to have been redacted from the version on line now...

http://finance.yahoo.com/news/Greek-debt-haircut-seen-apf-3570563102.html?x=0&sec=topStories&pos=main&asset=&ccode=



> *Greece likely to get bailout loans after review*
> Debt inspectors complete review, say payout of next bailout tranche likely in early November
> 
> Elena Becatoros, Associated Press, On Tuesday October 11, 2011, 10:15 am
> ...


----------



## Edward Campbell (11 Oct 2011)

The bond market, bless its cold, little heart, is doing what it is meant to do - giving Greece (and a few others that *will* follow suit) a route to getting its house in order. No need to feel sorry for the bond holders who will take the _"haircuts"_ - they knew the risk going in; the bond market is 100% *honest*: higher risk = higher yields; lower risk = lower yields; you want the high yields you accept the risk and the occasional _haircut_ that goes with it.


Move along, nothing to see here ... :nevermind:


----------



## Edward Campbell (12 Oct 2011)

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ is a clear, concise, simple and, in my opinion accurate assessment of what's wrong:

http://www.theglobeandmail.com/news/opinions/opinion/lets-not-make-a-sloggy-recovery-even-sloggier/article2197629/


> Let’s not make a ‘sloggy’ recovery even sloggier
> 
> KEVIN LYNCH
> From Wednesday's Globe and Mail
> ...



A simple statement of our problems:

1. "We are moving from a financial crisis to an economic crisis to today’s fiscal crisis";

2.  "The great risk is that this could become a crisis of competency and confidence in leadership";

3. "European leadership is in denial on the seriousness of their fiscal problem and the timeline for addressing it";

4. "American leadership is in denial that their fiscal problem needs to be addressed before the next election";

5. American leadership denies "that compromise is needed in how to address it."


An equally simple solution:

1. Competent political leadership in Europe; and

2. Competent political leadership in America.








   
	

	
	
		
		

		
		
	


	



                             Incompetent European leadership                                                                                       Incompetent American leadership


                                           
	

	
	
		
		

		
		
	


	



                                                              And more heat than light from these people, and other GOP contenders, too


               
	

	
	
		
		

		
		
	


	




                                   
	

	
	
		
		

		
		
	


	



                             No hope here, either                                                                                                  Some, small hope?


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## Edward Campbell (13 Oct 2011)

OK, maybe this is Canada's effect on the US/World's economy, but here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ and without further comment from me (a refreshing change for some of you) is Prime Minister Stephen Harper's open letter to the G20:

http://www.theglobeandmail.com/news/opinions/opinion/its-time-for-europe-and-the-g20-to-act-decisively/article2199074/


> It’s time for Europe and the G20 to act decisively
> 
> STEPHEN HARPER
> From Thursday's Globe and Mail
> ...


----------



## Edward Campbell (13 Oct 2011)

Yest more, reproduced under the Fair Dealin provisions of the Copyright Act from the _Globe and Mail_, on the Kitimat LNG terminal:

http://www.theglobeandmail.com/globe-investor/kitimat-lng-terminal-wins-export-licence/article2200412/


> Kitimat LNG terminal wins export licence
> 
> NATHAN VANDERKLIPPE
> CALGARY— Globe and Mail Update
> ...




This is good news for Canada's energy sector and, indeed, for Canada generally.


----------



## a_majoor (14 Oct 2011)

Spain, as the largest of the PIIGS, will cause the most trouble for the Eurozone:

http://finance.yahoo.com/news/SampP-downgrades-Spains-debt-apf-1597200360.html?x=0&sec=topStories&pos=1&asset=&ccode=



> *S&P downgrades Spain's debt rating on weak economy*
> Standard & Poor's downgrades Spain's long-term debt rating, citing weak economy, bank risks
> 
> On Thursday October 13, 2011, 8:52 pm EDT
> ...


----------



## Edward Campbell (18 Oct 2011)

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is a _respectable Marxist's_ (if that's not an oxymoron) view on the global economy:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/milner-economy/why-china-wont-save-the-global-economy/article2204619/


> Why China won't save the global economy
> 
> BRIAN MILNER
> Globe and Mail Blog
> ...




As Loretta Napoleon suggests, Australia, Canada and a few other well managed resource based economies might well be "saved" by the Chinese, maybe Brazil, too - but I have faith in Latin Americans' ability (propensity?) to seize defeat from the jaws of victory. China neither needs nor, especially, wants to "save" the euro, much less Europe. It is likely that China will soften the US apparent decline into a longer recession - it's not a "double dip" recession in the US, rather it is turning from a normal "V" shaped recession into a terribly elongated "U" shaped one: \__________/   .


----------



## Edward Campbell (18 Oct 2011)

And more, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, on the \__Great Recession__/:

http://www.theglobeandmail.com/report-on-business/top-business-stories/great-recession-may-not-yet-be-even-half-over-study-says/article2205039/



> Great Recession may not yet be even half over, study says
> 
> MICHAEL BABAD
> Globe and Mail Update
> ...




We are in the third year now; six to go?


----------



## Haletown (18 Oct 2011)

E.R. Campbell said:
			
		

> And more, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, on the \__Great Recession__/:
> 
> http://www.theglobeandmail.com/report-on-business/top-business-stories/great-recession-may-not-yet-be-even-half-over-study-says/article2205039/
> 
> ...



If the Americans re-elect Obamassiah in 2012, he'll do enough damage in his second 4 years to make that 6 years become 20.


----------



## a_majoor (18 Oct 2011)

The past is very eloquent, you can read how FDR made a normal depression "Great" with this book:

The Forgotten Man: A New History of the Great Depression by Amity Shlaes

Many of the actions by the Obama Admininstrtion and the Democrat controlled House and Senate starting in 2006 (and ending in 2010) read like a replay of the "New Deal", so why should anyone expect a different result this time?


----------



## a_majoor (19 Oct 2011)

Hmmmm

http://www.samizdata.net/blog/archives/2011/10/inflation_on_th_1.html



> *Inflation on the up*
> Brian Micklethwait (London)  Globalization/economics • UK affairs
> Snapped by me earlier this evening:
> 
> ...


----------



## a_majoor (19 Oct 2011)

Defaults are more and more likely, so here is a look at how these things go down:





> The Price of Argentina's Default
> By Megan McArdle
> Oct 18 2011, 4:25 PM ET 121
> 
> ...


----------



## Edward Campbell (20 Oct 2011)

More, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ on the West coast LNG terminal:

http://www.theglobeandmail.com/globe-investor/shell-makes-lng-move-at-kitimat/article2207932/


> Shell makes LNG move at Kitimat
> 
> DAVID EBNER
> Vancouver— Globe and Mail Update
> ...




It's important to remember that there are two projects here: one for LNG and another for bitumen ~ both to supply the Asian markets.


----------



## Edward Campbell (21 Oct 2011)

E.R. Campbell said:
			
		

> The bond market, bless its cold, little heart, is doing what it is meant to do - giving Greece (and a few others that *will* follow suit) a route to getting its house in order. No need to feel sorry for the bond holders who will take the _"haircuts"_ - they knew the risk going in; the bond market is 100% *honest*: higher risk = higher yields; lower risk = lower yields; you want the high yields you accept the risk and the occasional _haircut_ that goes with it.
> 
> 
> Move along, nothing to see here ... :nevermind:




The nature, size of the _haircut_ is discussed in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/eu-ponders-60-haircuts-for-greek-debt/article2209648/


> EU ponders 60% haircuts for Greek debt
> 
> PETER SPIEGEL
> Brussels— Financial Times
> ...




This, 60%, is a fair measure of how far Greeks - the Greek people, collectively - have been living beyond their means; Greeks have been taking 60% more in government services than for which they have been willing (or able) to pay. The fact that the Greeks _quesstimated_ they could raise €66-billion by selling assets but can only, really, raise €45 billion (about a 30% difference) just reinforces the problem. Italy, Portugal, Spain and France are also living beyond their means.

 :witch: Scary!  :vamp:  Especially if you, or your pension plan or mutual funds, are holding € denominated bonds  :raven:  or even stocks.  :franksmonster:


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## a_majoor (22 Oct 2011)

Check your investments and mutual funds for anything denominated in Euros...

http://opinion.financialpost.com/2011/10/20/when-greece-goes/



> *When Greece goes*
> 
> Special to Financial Post  Oct 20, 2011 – 9:35 PM ET
> 
> ...


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## Kirkhill (23 Oct 2011)

If it wasn't my money these idiots were playing with I would be convinced this was being directed by Peter Sellers (Or perhaps Clouseau)

The conference to decide the future of the world (or at least the Eurozone) is called off because Sarkozy and Merkel are on the outs over comments he made about her ability to stick to a diet.

The French President of the IMF, who replaced the French President of the IMF who was caught with his privates on display in New York, explains to the French Finance Minister who replaced her that there is no money..... She explains the situation in words of one syllable.  Unfortunately they were English words and the French Finance Minister doesn't speak English.

The German Finance Minister is accused of being arrogant.  :

The Belgian President of the EU calls for a European Empire ..... based in France and Germany ..... to the chagrin of everyone else.

The Spanish and the Italians tell them all to get stuffed.

The Luxembourg Finance Prime Minister leaves for a smoke out behind the shacks because EU rules and the President wont allow him to smoke inside

And the Belgian Finance Minister books off early to go see TinTin.......

 ;D  ??? : > :crybaby:


Sunday Telegraph



> Eurozone summit - despair and backbiting in the corridors of power
> 
> The ever-worsening eurozone crisis has sent relations between its leaders to an all-time low, reports Bruno Waterfield in Brussels
> 
> ...


----------



## Nemo888 (23 Oct 2011)

We have no good choices in this faltering economy. Many are facing a retirement income 30% less than if they retired 3 years ago. Returns on investment are as low as 1.5% Things are bad.

Do we choose quantitative easing and hyper inflation or stagnation and joblessness mired in debt for decades?  It's like asking where do you want to be shot.

IMO outsourcing  our manufacturing base has wrecked us. I don't think you can have a healthy economy without domestic manufacturing. The West gave away all our ability to create wealth. Then relied on bankers and credit to cover up that fact. No politicians have the guts to fix the fundamental l problems. So I'm guessing a long period of stagnation and joblessness. Followed by lower wages to compete with Asia.


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## Brad Sallows (23 Oct 2011)

Of course the politicians don't have the "guts".  Why would they as long as voters refuse to drive the "entitlement" parties down to single-digit support, let alone allow them to govern?  This only ends when we stop pretending that one of the roles of government is to provide "good paying jobs" instead of to provide basic essential services at the lowest possible cost, or absolutely run out the fiscal freedom of manoeuvre which allows us to pretend.  Collectively, the latter has happened and the music has stopped; all that is happening now is the fight over the remaining chairs.


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## Edward Campbell (23 Oct 2011)

Brad Sallows said:
			
		

> Of course the politicians don't have the "guts".  Why would they as long as voters refuse to drive the "entitlement" parties down to single-digit support, let alone allow them to govern?  This only ends when we stop pretending that one of the roles of government is to provide "good paying jobs" instead of to provide basic essential services at the lowest possible cost, or absolutely run out the fiscal freedom of manoeuvre which allows us to pretend.  Collectively, the latter has happened and the music has stopped; all that is happening now is the fight over the remaining chairs.




 :goodpost:   :+1:

I think Brad has is pretty much exactly right. Neither the "Wall St 1%" nor the politicians are to blame. We certainly cannot blame the Armenian, Brazilian or Chinese, etc workers, nor their governments for that matter. I, at least, refuse to blame corporations who are doing their fiduciary *duty* to their owners (stock holders). Who is left?
.
.
.
.
.
.
.
.
.
.
.
Look here: 
	

	
	
		
		

		
		
	


	




 and consider that:


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## Nemo888 (23 Oct 2011)

So how do you suggest we fix the fact that we don't make anything anymore? Wage parity with 90c an hour foreign workers would fix it,.... 

We don't have many good choices.


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## Kirkhill (23 Oct 2011)

Nemo888 said:
			
		

> ........ No politicians have the guts to fix the fundamental l problems. So I'm guessing a long period of stagnation and joblessness. Followed by lower wages to compete with Asia.



I agree with Brad, Edward AND Nemo.   But I'm guessing that we won't have to rely on the existence of the politicians' guts.  I'm guessing that we won't have a repeat of the '70s, or even the '30s, because this time around there is little appetite for the Big Government solution and such Big Governments as exist are financially broke, politically busted and desparately unpopular.   

Previous efforts at "fixing" the economy were extended because the governments actually had levers to pull.  Now all the levers are broken.  We will be finding out quickly enough how The Market resolves these issues.

And as to Asian Wages:  Asian wages may be low compared to the West's wages, but when I consider what Asia looked like when I was a kid in school 50 years ago Asia looks a whole lot more Western than it did then.  Wages may be low but they suffice to deliver sneakers, jeans and t-shirts; western style apartments; beer, whisk(e)y, Big Macs and KFC; and flat-screens and I-Phones.....  Their market delivers the same goods that our market does but generally at a fraction of the cost .... often due to competition (illegal knock offs) .... and always due to low taxes.


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## Nemo888 (23 Oct 2011)

Perhaps we should start a cold war with China. Push human rights and liberalism like mad leftists in the media. While sending in agents to organize unions and start making their workers lazy and demanding.

 ;D Remember it was my idea.


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## Fishbone Jones (23 Oct 2011)

Nemo888 said:
			
		

> Perhaps we should start a cold war with China. Push human rights and liberalism like mad leftists in the media. While sending in agents to organize unions and start making their workers lazy and demanding.
> 
> ;D Remember it was my idea.



A true and tested method, to be sure


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## Brad Sallows (23 Oct 2011)

>So how do you suggest we fix the fact that we don't make anything anymore?

Get out of the way and remove impediments to starting and running a business.  Is it the role of the higher HQ staff to make life awkward or easier for the lower commanders?  Bureaucrats should have much less inherent power to say "no" and should be at risk of losing their jobs if they fail to expedite the needs of entrepreneurs and citizens in general.  They must serve, not rule.


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## Kirkhill (23 Oct 2011)

Nemo888 said:
			
		

> So how do you suggest we fix the fact that we don't make anything anymore? Wage parity with 90c an hour foreign workers would fix it,....
> 
> We don't have many good choices.



I'll try and find an article I saw recently that highlights a drum ERC has been beating for a very long time, AND addresses your point.

The article described how despite the abysmal employment numbers American output was increasing.  American pre-recession manufacturing capacity was been fully utilized and industry was investing in both more capacity AND more inventory.  What they weren't investing in was labour.  

They would rather spend their money on electric motors and PLCs than attempting to train and maintain employees from a pool that to a greater and greater extent are harder to please and harder to train, that can't speak the language of the workplace, and that impose a massive regulatory burden.

As a business owner confronting "environmental regulation" and "labour regulation" I have a much greater chance of being able to afford to meet the technical challenge of the environmental laws than the byzantine and ever shifting challenges of labour laws.  This situation is compounded by the fact that building a new factory that doesn't employ people will result in a smaller, cleaner, more efficient operation whose operating costs are more predictable.

As ERC says above... Pogo wuz right..... the unions especially should take note.

As to the future..... I would suggest that those advocating a future of increased leisure time and Robert Heinlein were both right.   Citizens will work two hours a day.   The rest will get drunk.... or join the Army.  

Edit:  This wasn't the article I was thinking of but it supports the case I was making 

http://www.msnbc.msn.com/id/42349181/ns/business-world_business/t/unlike-competition-us-values-profits-over-jobs/


----------



## Nemo888 (23 Oct 2011)

Brad Sallows said:
			
		

> >So how do you suggest we fix the fact that we don't make anything anymore?
> 
> Get out of the way and remove impediments to starting and running a business.  Is it the role of the higher HQ staff to make life awkward or easier for the lower commanders?  Bureaucrats should have much less inherent power to say "no" and should be at risk of losing their jobs if they fail to expedite the needs of entrepreneurs and citizens in general.  They must serve, not rule.



We need domestic manufacturing. During the last ramp up for an iPhone release 17 Foxconn workers committed suicide. They worked for 90c and hour and only got 1 day off a month. (they did get a 20% raise after some illegal protests) How do we compete with that? When I worked in tech I was outsourced to a computer engineering graduate from one of India's best universities. He was glad to make 24k(over 1 million rupees) a year. That cured me of the we are smarter exceptionalism that I harboured. He was a fricking genius. So much so that I quit tech and joined the Army. Reducing wages, not deregulation will make us competitive. 

I suppose automation is to blame as well. Maybe there are just not enough jobs to go around.  What do we do then?  :dunno:


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## Kirkhill (23 Oct 2011)

Nemo888 said:
			
		

> .....I suppose automation is to blame as well. Maybe there are just not enough jobs to go around.  What do we do then?  :dunno:




See my last



> As to the future..... I would suggest that those advocating a future of increased leisure time and Robert Heinlein were both right.   Citizens will work two hours a day.   The rest will get drunk.... or join the Army.





			
				Nemo888 said:
			
		

> ...... I quit tech and joined the Army........



I rest my case. ;D


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## Nemo888 (23 Oct 2011)

"The rest will get drunk.... or join the Army. "

You can do both.


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## Edward Campbell (23 Oct 2011)

We are not going to repatriate low skill/high wage metal bending jobs because we cannot compete on wages.

We need to build whole new industries that require the sorts of people we have in abundance: not too well educated (even if they have university degrees) but trainable. _"Innovation"_ is the word we use to describe the process of building those new industries - _innovation_ ought not to be punished by governments. (But nor are governments able to "pick winners." The best governments, the ones of countries in which innovation thrives, get out of the way. The USA doesn't need another _Solyndra_ style fiasco but it needs a tax code that allows capitalists to make money by betting on innovators.)


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## a_majoor (23 Oct 2011)

Nemo888 said:
			
		

> Reducing wages, not deregulation will make us competitive.



Do you really believe that there is no cost to regulatory expansion? Prior to this election, I was told that the average small busines person in Ontario needs to spend 30 hr/month dealing with regulatory paperwork (taxes, labour, environment, etc. etc.).

That is almost 25% of the working month devoted to dealing with government imposed regulations rather than doing productive work like marketing, R&D, refining work process, education of workers or self....

IF you had to spend 25% of your time being pulled from your primary task, then it would take a lot longer to get things done, and you wil have less time and resources avalable to invest, make changes or perform other innovations. Clear the regulatory forest and you will increase the productive time and energy available to invest and grow.


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## Fishbone Jones (23 Oct 2011)

Thucydides said:
			
		

> Do you really believe that there is no cost to regulatory expansion? Prior to this election, I was told that the average small busines person in Ontario needs to spend 30 hr/month dealing with regulatory paperwork (taxes, labour, environment, etc. etc.).
> 
> That is almost 25% of the working month devoted to dealing with government imposed regulations rather than doing productive work like marketing, R&D, refining work process, education of workers or self....
> 
> IF you had to spend 25% of your time being pulled from your primary task, then it would take a lot longer to get things done, and you wil have less time and resources avalable to invest, make changes or perform other innovations. Clear the regulatory forest and you will increase the productive time and energy available to invest and grow.



Let's talk about Labour regulations for a minute, since you keep throwing it up. If a company is complaining that they have to spend thousands of dollars and tons of time (more dollars) complying, it's because they were running unsafe and dangerous operations. We can't get to every workplace in the province, but my peers and myself do what we can. Most of the time, I get called in on a complaint, critical injury or a fatality. If the employer is complying with the Act and Regulations, I'm not there long. If they aren't, they get orders or charged with offences. In this day and age, there is no excuse for not being cognizant of the Occupational Health & Safety Act or it's related Regulations. If they are out of compliance and it costs them time and money, it is simply no one's fault but their own. Trying to blame government is a straw man. If you can't run a safe operation, you shouldn't be in business. Non compliant, unsafe, killer employers cost the Ontario taxpayer many millions of dollars a year. They deserve no one's pity. The same goes for Employment Standards, if they go after an employer, it's because it's been cheating the workers from their just wage.


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## Kirkhill (23 Oct 2011)

recceguy: while I have sympathy for your position, and fully agree there are more than a few ba****ds in this world, there are also those who have been running legitimate businesses for generations and find themselves trying to accomodate modern, and ever-changing, labour law in substandard facilities - some of which were top of the line for their era.

The period of the low dollar, when Canadian business wasn't investing in new, productivity enhancing equipment, they also weren't  it also wasn't investing in new premises and new employee welfare facilities.

Now, my experience is that large employers are more willing to build new premises, with fewer employees, but those employees they do employ are more likely to be catered to.  At least out here in Alberta.

On the other hand, sorry to say, the small businesses present another picture entirely.....


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## Fishbone Jones (23 Oct 2011)

Kirkhill said:
			
		

> recceguy: while I have sympathy for your position, and fully agree there are more than a few ba****ds in this world, there are also those who have been running legitimate businesses for generations and find themselves trying to accomodate modern, and ever-changing, labour law in substandard facilities - some of which were top of the line for their era.
> 
> The period of the low dollar, when Canadian business wasn't investing in new, productivity enhancing equipment, they also weren't investing in new premises and new employee welfare facilities.
> 
> ...


Acts and Regulations evolve along with industry. They are not enacted for spite and to make things difficult for no reason. It may not always be obvious, but in my neck of the woods anything new is almost always a result of a new industry process or standard. We are the cart to their horse. I am not unsympathetic to employers that truly endeavour to comply. New premises are very seldom required. Just more safe practices, worker education and cooperation between management and workers. Large employers, especially unionized shops, are seldom the problem.  I say seldom because they have their own special problems. It's small places that lets safety be the first thing to fall off the table when things ($) get tough. What they don't realize is that they are probably taking the biggest gamble they can with their business. Take a chance, in a small place, with worker safety, kill a worker and it'll probably end up costing you more than you ever thought possible. Your initial fine (maybe imprisonment) is just the start. I, and my colleagues, don't endeavour to shut people down or make them spend money needlessly. We are more than willing to help the employer out, but the worker needs to be safe, above all else. If the employer can't do that, they shouldn't be in business. I have no hesitation in prosecuting unsafe employers to the fullest extent the law allows me to. I'll caveat that to include unsafe workers also. It's not a one sided deal about government against employers. Workers found at fault get prosecuted also.

I can only speak to my small bailiwick within the bureaucracy. Bottom line, blaming us for low productivity and tough financial positions is simply a ludicrous farce.


----------



## Kirkhill (23 Oct 2011)

I agree there is no malice involved from your side of the table, and I agree with you on your assessment of "mom and pop" establishments.  But Thuc has a point:  as the rule book gets thicker the harder it is to convince yourself to take on the challenge of starting a new enterprise.  

And, in the case of older plants: agreed that each individual investigation, with its concomittent, sensible recommendations, seldom require new facilities.  But after a decade or two of sensible recommendations the barnacles are starting to grow on the barnacles and it becomes difficult to find the original purpose.

In the meantime - an upbeat article on US Productivity from today's Telegraph



> ...."A surprising amount of work that rushed to China over the past decade could soon start to come back," said BCG's Harold Sirkin.
> 
> The gap in "productivity-adjusted wages" will narrow from 22pc of US levels in 2005 to 43pc (61pc for the US South) by 2015. Add in shipping costs, reliability woes, technology piracy, and the advantage shifts back to the US.
> 
> ...


----------



## Brad Sallows (23 Oct 2011)

>We need domestic manufacturing.

How do you know what we need?  If this were 30 years ago, do you believe you would just know that we "need" a personal computer in every house to juice the economy?

Most of us, and in particular most people in government - because they are so absorbed by process - do not know and can not know what is needed.  They need to sideline themselves so that people who do have ideas can quickly bring them to fruition.


----------



## Brad Sallows (23 Oct 2011)

We can have strict workplace safety and environmental and fiscal propriety regulations.  They are all costs of doing business.  Absent some tariffs levied to negate the cost advantage of producers in nations which have no such laws, the point is irrelevant - no industry, no safety/environmental/fiscal problems.

Accept some risks, charge tariffs, or be importers.  We have the choice; let us not whine after we choose option #3.


----------



## Edward Campbell (24 Oct 2011)

Europe stumbles towards the brink, according to this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/next-summit-could-make-or-break-euro-zone/article2211023/


> Next summit could make or break euro zone
> 
> ERIC REGULY
> ROME— Globe and Mail Update
> ...




I'm with Zhou Enlai, who famously answered Henry Kissinger's question about the historical importance of the French Revolution by saying, "It's too soon to tell." It is still too soon to tell if the European Union was one of those once a century French strategic wins or one of those twice a century French strategic blunders; it's too soon to tell if the _Euro_ is a Franco-German strategic win or another blunder; but we may not need Zhou's 'length of view' to tell - this week might do it.

I agree with Gilles Moec and the other unnamed economists: Germany wins this squabble and there is a two-tiered debt market denominated in:

1. Insured (*real* Euros) - think e.g. Denmark, Germany, Netherlands and so on; and

2. Uninsured (*junk* Euros) - think e.g. Italy, Portugal, Spain, etc.

That will, _de facto_, spell the end of the current, big, 17 member Eurozone.


----------



## Brad Sallows (24 Oct 2011)

From Sarkozy's temper tantrum, I gather France is close to having to absorb its own losses - which is not the way France intended the EU to work at all (power without risk).


----------



## Edward Campbell (24 Oct 2011)

Brad Sallows said:
			
		

> From Sarkozy's temper tantrum, I gather France is close to having to absorb its own losses - which is not the way France intended the EU to work at all (power without risk).




That would be my guess, too.


----------



## Kirkhill (24 Oct 2011)

Just a minor correction: Denmark is not part of the Eurozone.  It still uses the Krone.

But your point is still clear.  :nod:


----------



## Edward Campbell (24 Oct 2011)

Kirkhill said:
			
		

> Just a minor correction: Denmark is not part of the Eurozone.  It still uses the Krone.
> 
> But your point is still clear.  :nod:




Oops  :-[

In that case the *real* Euro zone might be smaller. 

I seem to recall that back when the Euro was established the agreement included inflation and or deficit rules (the _snake_ in the tunnel) that limited the financial freedom of members. My sense is that few members felt bound by the rules and that, in any event, there was (is) no way to enforce the rules. My guess is that France and Belgium and many of the newer members (Cyprus, Solvakia, Slovenia, etc) are unable to obey the rules and will end up with *junk* Euros.


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## Kirkhill (24 Oct 2011)

*Euro Members of the EU*

Germany
France

Belgium
Netherlands
Luxembourg

Portugal
Ireland, Republic of (EIRE)
Italy
Greece
Spain

Austria
Estonia
Finland
Slovakia
Slovenia

Cyprus (Member of the Commonwealth)
Malta (Member of the Commonwealth)

*Non-Euro Members of the EU*

Bulgaria
Czech Republic
Denmark
Hungary
Latvia
Lithuania
Poland
Romania
Sweden
United Kingdom

*EFTA Members (Independent of EU) *  

Switzerland
Norway
Iceland
Liechtenstein

The real crisis is for France and Germany.

The rest of the Eurozone can only watch those two have at it.

Those outside of the Eurozone are in much the same boat as Canada, waiting to see how much damage they will cause.

Curiously Britain and the Non-Euro members of the EU may be best placed.   They share the same (reduced but significant) risk as the Rest Of The World when compared to the Eurozone countries BUT they actually have a voice of influence at the discussions..... Much to the chagrin of Sarkozy



> ”We’re sick of you criticising us and telling us what to do. You say you hate the euro, you didn’t want to join and now you want to interfere in our meetings,” the French leader told Mr Cameron, according to diplomats.


----------



## ModlrMike (24 Oct 2011)

It was just for a situation such as this that Britain never signed onto the Euro.


----------



## a_majoor (24 Oct 2011)

Estonia is the state economic refugees aspire to? Who knew. Valuable lessons for us in Canada:

http://www.spiegel.de/international/0,1518,790293,00.html



> *Estonia Lives the European Dream*
> 
> By Ralf Hoppe and Jan Puhl
> 
> ...


----------



## a_majoor (24 Oct 2011)

Part 2:

http://www.spiegel.de/international/0,1518,790293,00.html



> *Estonia Lives the European Dream*
> 
> By Ralf Hoppe and Jan Puhl
> 
> ...


----------



## Edward Campbell (25 Oct 2011)

The sad realities of the US' situation are evident from this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/news/politics/loss-of-tax-break-raises-cost-of-travel-strains-us-relations/article2212196/


> Loss of tax break raises cost of travel, strains U.S. relations
> 
> JOHN IBBITSON
> OTTAWA— From Tuesday's Globe and Mail
> ...




I am not opposed to user fees, no matter who imposes them nor why. I will pay this pittance when I travel to the USA, my only thought will be from 2 Samuel 1:25: _"How are the mighty fallen ..."_

But there is another issue: the _Buy America_ Act, which requires a Canadian response. I am very, very conscious that Canada led the counters to _Smoot-Hawley_ (1930) and, thereby, made a major _contribution_ to making a "great recession" into "The Great Depression," but we should consider passing tit-for-tat legislation which will deny American companies the right to profit from e.g. the oil sands development or pipeline construction in Canada. Such an act will slow and even stop some projects while alternate sources of supply (for machinery and people) are found but the loss of American jobs should be sufficient to bring them to their senses.


----------



## GAP (25 Oct 2011)

User charges work two ways....weak response, but a response......

Getting into a trade war with the US is not in our best interest, but I agree...at some point someone has to bit**slap them upside the head and tell them to play their political games down home...


----------



## Edward Campbell (25 Oct 2011)

I don't think we need to implement a "tit-for-tat" law, just pass it. American industry should do the rest for us.


----------



## Edward Campbell (25 Oct 2011)

And here, reproduced under the Fair Dealing provision of the Copyright Act from the _Ottawa Citizen_, is Canada's position on the Eurozone crisis:

http://www.ottawacitizen.com/business/Harper+urges+comprehensive+solution+European+debt+crisis/5599799/story.html


> Harper urges comprehensive solution to European debt crisis
> 
> By Mark Kennedy, Postmedia News
> 
> ...



So, we want, soon:

1. Clear and concrete deficit and debt reduction plans;

2. Meaningful action from some large export surplus countries — such as China — to adopt more flexible exchange rates;

3. Structural reforms to boost economic growth;

4. Implementation of financial-sector reform agreed to in previous summits; and

5. A commitment to resist trade protectionist measures.


----------



## Nemo888 (25 Oct 2011)

It really looks like we have wandered into crony capitalism or oligarchical monopolism. We would need to smash the too big too fail to even start addressing what is wrong with the economy.

"In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,"

http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html?DCMP=OTC-rss&nsref=online-news


----------



## Edward Campbell (25 Oct 2011)

I would not presume to debate economics with Joseph Stiglitz, but I think his prescription, reproduced in the article below under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, might be more applicable to a few large, diverse economies than to a medium sized, resource based economy like Canada's:

http://www.theglobeandmail.com/report-on-business/economy/government-stimulus-measures-too-feeble-stiglitz/article2213385/


> Government stimulus measures too feeble: Stiglitz
> 
> JANET MCFARLAND
> Toronto— Globe and Mail Update
> ...




I agree with him that some small, weak economies cannot grow - must, I suppose, actually shrink and deprive citizens of both services and savings before they can "turn around." While I, personally think stimulus, for stimulus sake, is the wrong choice for Canada - but we should be ready, willing and able to take advantage of new stimulus spending if it occurs in the USA - I do believe that we can and should be spending, right now, on our crumbling infrastructure.







The infrastructure problem in Canada is that those with most of the responsibilities, the cities and town, have too little tax money. The cities, towns and villages - the ones with the biggest problems - are, constitutionally, "creatures of the provinces" so we should expect the provinces to chip in with the necessary money. But provinces can't because _social services_, especially health care, eat up an increasingly too large share of budgets leaving too little for _productive_ spending on e.g. education and infrastructure.*

_____
* There is evidence to suggest, strongly, that infrastructure is tied, closely, to _productivity_ both in extent and state of repair.


----------



## Edward Campbell (25 Oct 2011)

And just in case you thought things in Europe weren't bad enough, look at this, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/european/berlusconi-government-on-verge-of-collapse-over-eu-economic-reforms/article2212779/


> Berlusconi government on verge of collapse over EU economic reforms
> 
> ERIC REGULY
> ROME— Globe and Mail Update
> ...




My guess is that Greece defaults first, followed shortly by Portugal and Spain and then, after a few weeks of mixed rioting, lies and hand wringing, Italy.






After Italy I suspect that we will be able to see that the French economy rests on feet of clay.


----------



## a_majoor (25 Oct 2011)

I will call BS on this.

There is plenty of historical evidence that "stimulus" spending is ineffective or counterproductive (and many examples have been posted here, just scroll upthread on any of the economic threads), and some of us have memories of the last bout of stagflation at the end of the 1970's, when similar economic  voodoo was being practiced. (We also remember the implementation of Reaganomics and the vast sea changes that occurred as well).

As for infrastructure, I can give you a personal example. London ON has a massive crumbling infrastructure problem, caused by over a decade of neglect by successive city councils, which jacked up taxes by 30% and user fees (water, sewage etc.) by 60% in the same time period. The flood of tax dollars went to civic "monuments" like a convention center (subsidized for between $1.5 million to a low figure of @ $500,000/year each year it has been in operation; a downtown arena that costs taxpayers 4.5 million/year in interest charges and multiple other"investments" which have resulted in a *lowering* of the property value of the downtown core despite a cumulative $100 million in downtown "revitalization". Add a 200+ % increase in the number of civic employees making more than $100,000/year and you know where the money is actually going.

As for infrastructure, the City Engineer says he needs $30 million/year simply to hold the line on deteriorating roads, sewers, water pipes etc. Council votes him $8 million.

No, cities don't need more money, they need to spend the money they have on the things that cities are responsible for....


----------



## Edward Campbell (25 Oct 2011)

Thucydides said:
			
		

> I will call BS on this.
> 
> There is plenty of historical evidence that "stimulus" spending is ineffective or counterproductive (and many examples have been posted here, just scroll upthread on any of the economic threads), and some of us have memories of the last bout of stagflation at the end of the 1970's, when similar economic  voodoo was being practiced. (We also remember the implementation of Reaganomics and the vast sea changes that occurred as well).
> 
> ...




Except, Thucydides, that cities, unlike political partisans, must deal with reality. Thanks to years and years decade upon decade of neglect it would not matter if every city council in Canada devoted every red cent to infrastructure - to hell with schools and welfare - there isn't enough money; and, thanks to the insatiable maw of health care, there isn't enough money in the provincial coffers, either.

So, enough theorizing - there is plenty of time to cast blame. How do you propose to solve the infrastructure problem? And remember, Thucydides there is plenty of evidence, from right wing, conservative economists to demonstrate that well maintained infrastructure is important to productivity.


----------



## Redeye (26 Oct 2011)

E.R. Campbell said:
			
		

> Except, Thucydides, that cities, unlike political partisans, must deal with reality. Thanks to years and years decade upon decade of neglect it would not matter if every city council in Canada devoted every red cent to infrastructure - to hell with schools and welfare - there isn't enough money; and, thanks to the insatiable maw of health care, there isn't enough money in the provincial coffers, either.
> 
> So, enough theorizing - there is plenty of time to cast blame. How do you propose to solve the infrastructure problem? And remember, Thucydides there is plenty of evidence, from right wing, conservative economists to demonstrate that well maintained infrastructure is important to productivity.



Exactly. And there's no shortage of work to be done in Canada or the United States that would be excellent investments. That could take up some slack in employment numbers, which in turn would create demand in the economy. People who've been putting off purchases for a long time will probably start again with the prospect of good stable work, and there is, of course, a multiplier effect. Spending money on things which don't improve productivity in the long run is wasteful, but fixing roads, bridges, rail lines, etc is both a good way to spur economic activity AND a good investment in the future.


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## Brad Sallows (26 Oct 2011)

From where I sit in BC there are plenty of municipal councils that waste time and money on initiatives and pet schemes far from the core services they should be providing.  And, some of the infrastructure rainbows they chase are poor opportunity cost choices.  Since they could have made better choices, I assume the problem lies with their egos and acumen, not with a lack of funding.  Given infinite funding we could solve all problems; but we don't have infinite funding so the obvious course is to eliminate the white elephants.  Once there is solid evidence of prudence, we can discuss whether there is still a shortfall of money.


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## Edward Campbell (27 Oct 2011)

Brad Sallows said:
			
		

> From where I sit in BC there are plenty of municipal councils that waste time and money on initiatives and pet schemes far from the core services they should be providing.  And, some of the infrastructure rainbows they chase are poor opportunity cost choices.  Since they could have made better choices, I assume the problem lies with their egos and acumen, not with a lack of funding.  Given infinite funding we could solve all problems; but we don't have infinite funding so the obvious course is to eliminate the white elephants.  Once there is solid evidence of prudence, we can discuss whether there is still a shortfall of money.




The problem is that infrastructure deteriorates (at fairly predictable rates) whether the "white elephants" are eliminated or not. So long as large numbers of humans elect small numbers of humans to political office "solid evidence of prudence" will be hard to find, meanwhile the infrastructure will continue to deteriorate, with concomitant damage being done to productivity. Political purity, fiscal responsibility and the like a pipe dreams. Most people, being people, will "sell" their votes, maybe not for a pint or two of beer anymore, but, rather, for subsidized day care; meanwhile infrastructure deteriorates more quickly due to lack of maintenance.


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## Brad Sallows (27 Oct 2011)

Yes, but what makes you think the next dollar - or the next one after that - will be spent on maintenance?  I have noticed they like to cut ribbons, but never seem to realize they need to look after whatever was left from the ribbons cut before they arrived.


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## Edward Campbell (27 Oct 2011)

No argument from me, Brad, but doing nothing about crumbling, productivity sapping infrastructure is not a useful course of action. 

We must accept that public policy is, finally, a _political_ thing and will always reflect the political realities. Heinlein's _Starship Troopers_ was published in a _fantasy and science fiction_ magazine for a very good reason.


----------



## Edward Campbell (29 Oct 2011)

E.R. Campbell said:
			
		

> And here is another "middle class" warning in an article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:
> 
> http://www.theglobeandmail.com/news/world/konrad-yakabuski/battle-rages-over-ohios-union-limiting-law/article2218168/
> 
> ...




Two rather different approaches to "public services:"

1. In Canada, this year, the Minister of Labour has, twice, intervened to ensure that Air Canada's schedule was not interrupted by potential strikes; and

2. This, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/news/world/asia-pacific/qantas-airline-fleet-grounded-over-labour-dispute/article2218639/


> Qantas airline fleet grounded over labour dispute
> 
> NARAYANAN SOMASUNDARAM
> SYDNEY— Reuters
> ...




Now, there are some differences: the main reason the Canadian Minister of Labour cited for throttling free collective bargaining was that Air Canada provides *essential* (access) service to many smaller communities. QANTAS is, primarily, a long haul/international carrier. There is a pretty complete and competitive domestic air network in Australia. While this strike/lockout will hurt many travelers and the Australian economy and while Prime Minister Gillard has asked for immediate, urgent arbitration, the Aussie government is not claiming "national interest."

In fact the air transport business in Canada is so heavily regulated - generally in favour of Air Canada - that Air Canada has become a _necessary_ monster. If we had a more competitive market it is likely that Air Canada would have a much smaller market share (and even worse service, if you can imagine) but a strike would not constitute a national emergency.


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## Brad Sallows (29 Oct 2011)

I like this remark quoted in the G&M article:

“Once you have a debt, you have to figure out how to pay it. The conservative way is to take away collective bargaining. The middle-class way is to take the top 1 per cent that has most of the profits and increase their taxes.”

Most governmental debt below a federal level can be tracked back to unsustainable public payrolls.  What the guy is effectively saying is that "Once you have a good pay package, you have to figure out how to pay it...".  Basically, he is trying to hijack the entire middle class as a "popular front" for his particular pet pony.


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## a_majoor (29 Oct 2011)

It has been said that sometimes your only choice is to choose the "least worst" option. While option one (massive bond haircuts and dissolution of the Euro) would be bad in the short run, option two is even worse....

http://fullcomment.nationalpost.com/2011/10/29/david-frum-europe-is-down-to-two-choices-if-it-wants-to-save-the-euro/



> *David Frum: Europe is down to two choices if it wants to save the euro*
> To escape its financial crisis, the continent must abandon the euro or impose a new, unelected super-government.
> 
> David Frum  Oct 29, 2011 – 10:00 AM ET | Last Updated: Oct 28, 2011 6:18 PM ET
> ...


----------



## mariomike (29 Oct 2011)

E.R. Campbell said:
			
		

> 2. Why are there so (relatively) few strikes in the private sector garbage collection business compared to the public sector garbage workers?



I was in the ( Toronto City / Metro ) municipal garbagemen's union* for almost 37 years. During that time,_ there was only one strike_. It lasted 16 days. 
( Although officially on strike, paramedics were kept on the job. )



Whatever they lost in wages, the workers made up in over-time O.T. during the after strike cleanup:
http://www.toronto.ca/legdocs/2002/agendas/committees/pof/pof021114/it014.pdf
"There was a net tax supported cost of approximately $3.3 million incurred as a result of the 2002 labour disruption."

This was the so called "jobs for life" strike:
"Thanks to a little divine intervention in the form of a looming Papal visit, Queen’s Park legislated workers back and punted the contract to an arbitrator who strengthened the job-security language."
Globe and Mail

"The union eventually won a ruling on job security during arbitration."
CBC

It began in 1999 when Mayor Lastman first agreed to job security for members with 10 years of seniority or more.
In 2005, Mayor Miller extended the guarantee to all permanent employees, _regardless of seniority_.

"We tried to take it away from them because they had us by the balls. We fought like hell but couldn’t get rid of it. You don’t know what we had to go through." “Try and fire them, you can’t," “It’s jobs for life.” 
Former Toronto Mayor Lastman:
http://www.thestar.com/news/article/940244--james-jobs-for-life-still-haunts-lastman

*Includes: Arborists, Arena-Pool Operators, Asphalt-Concrete workers,  Mechanics, Bricklayers, Carpenters, Bridgeworkers, Electricians, Heavy Equipment Operators, Stationary Engineers, Operating Engineers, Marine Engineers, Refrigeration and A/C Mechanics, Millwrights, Gardeners, Plumbers, Welders, Water and Filtration workers, Machinists, Electronic and Instrument Control Technicians, etc, etc...any job that is classified as "Outside".


----------



## Edward Campbell (29 Oct 2011)

More about pipelines and oil sands reproduced under the Fair Dealing provisions of the Copyright Act from the _Financial Post_:

http://business.financialpost.com/2011/10/29/the-stranded-oil-sands-a-worst-case-scenario/


> The stranded oil sands: A worst-case scenario
> 
> Claudia Cattaneo
> 
> ...




There is a very, very good chance that a politically weakened Obama will refuse to permit the _Keystone_ pipeline in order to placate the environmentalists.





Protesters against the construction of the Keystone XL oil pipeline hold signs and stand on a
Keith Haring sculpture as they demonstrate outside of the W Hotel before the arrival of U.S.
President Barack Obama on October 25, 2011 in San Francisco, California.

But, and it is a big *BUT* for Canada, IF the USA shoots itself in the foot and prefers Saudi oil to Canadian oil we have a HUGE and growing market in Asia - mainly in China.

I am confident that Government of Canada will pull out all the stops to *guarantee* regulatory approval of _Northern Gateway_ and the LNG pipeline and port if _Keystone_ is blocked by the Obama administration.

But we want both: _Keystone_ for quick, easy profits and _Northern Gateway_ to secure competitive world markets (and prices) for our commodities.


----------



## Infanteer (29 Oct 2011)

Ship it to Prince Rupert and send it east....


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## Edward Campbell (29 Oct 2011)

Infanteer said:
			
		

> Ship it to Prince Rupert and send it east....




That's always puzzled me a bit, too ... I guess Kitimat makes for a shorter, cheaper pipeline, but I don't really know. Bueller? Anyone?


----------



## Brad Sallows (29 Oct 2011)

This is a good time to have another look at energy flows in the US (2009).

Please to note relative contributions of "renewables" to understand the magnitude of the problem.  Please to note relative separation of "transportation" from "electricity generation".

As John McCarthy, a notable man who recently passed away, wrote: "He who refuses to do arithmetic is doomed to talk nonsense."


----------



## Brad Sallows (29 Oct 2011)

>This first escape route will be an economic disaster, and not only for the poorer countries of southern Europe.

I find it amusing that if any forward step by statism is revoked, the outcome must always be "disaster".  The Germans are already screwed; the question is only one of duration: their choice is to take it up the chute once (break the euro), or take it up the chute for all time.


----------



## Kirkhill (29 Oct 2011)

Good info Brad.

Thanks for finding and posting it.

Isn't it curious how efficient the residential, commercial and industrial sectors are?  The two biggest wasters of energy are - transportation - not a real surprise - and electricity generation by the Public Utilities

How much of that waste heat could be put to use if the coal, oil and gas fired electrical generator plants were relocated back down town and the heat re-applied as district heating systems?

Honda has a nice little Freewatt generator system that takes in 5 kW of natural gas, generates 1 kW of electricity and 3.25 kw of usable heat for your home.  There is only 15% waste.

Imagine that on an industrial scale.  

NIMBY fails.


----------



## a_majoor (30 Oct 2011)

> This first escape route will be an economic disaster, and not only for the poorer countries of southern Europe.



I think what David Frum was getting at is the disaster will also affect anyone who has securities denominated in Euros, anyone who trades with Europe and the downline effect on people who are dependent on those directly affected.

The Europeans are not only well and truely screwed; they have screwed most of the West as well, and the contagion will affect Russia (which depends on natural gas sales to Europe), the Middle East (which depends on oil sales to Europe), China (which depends on sales of manufactured goods to Europe) with ever increasing ripple effects that will wash over to the rest of Asia, Africa and South America as well.

So while the poor nations of Europe like Estonia and Slovenia will pay to bail out Greece (despite havig far lower GDP's and personal incomes), the rest of us will be trying to find our footings as the economic landscape changes at dizzying speeds. The global deleveraging will not be in the form of a controlled drawdown....


----------



## a_majoor (30 Oct 2011)

While I understand what you are saying Edward, Brad has backed up my point. In London, there is aprox $1 billion in infrastructure maintainence to be done due to decades of neglect; by odd coincidence, the civic budget is standing at about $1 billion, of which council votes $8 million for infrastructure. Just so you all know what the magnitude of spending really is, London also has @ $450 million dollars in long term debt, most of which was racked up in the last decade to pay for the pet projects and "investments" which cost the taxpayer so dearly.

London could probably rationalize its budget and make major savings by eliinating the white elephants and "investments", privitize a great deal of its portfolio of properties and services (like garbage collection), cut taxes, and STILL have enough in its budget to provide the City Engineer with the $30 million/year needed to carry out routine maintainence. If the routine maintainence is done and (say) an extra $20-30 million/year is thrown in for repair and replacement, then we should be just fine. (Obviously it will be impossible to carry out a $1 billion infrastructure replacement at once; the city would have to be evacuated...)

The problem is (as at all levels of government) out of control spending on non priority items.


----------



## Edward Campbell (30 Oct 2011)

Thucydides said:
			
		

> While I understand what you are saying Edward, Brad has backed up my point. In London, there is aprox $1 billion in infrastructure maintainence to be done due to decades of neglect; by odd coincidence, the civic budget is standing at about $1 billion, of which council votes $8 million for infrastructure. Just so you all know what the magnitude of spending really is, London also has @ $450 million dollars in long term debt, most of which was racked up in the last decade to pay for the pet projects and "investments" which cost the taxpayer so dearly.
> 
> London could probably rationalize its budget and make major savings by eliinating the white elephants and "investments", privitize a great deal of its portfolio of properties and services (like garbage collection), cut taxes, and STILL have enough in its budget to provide the City Engineer with the $30 million/year needed to carry out routine maintainence. If the routine maintainence is done and (say) an extra $20-30 million/year is thrown in for repair and replacement, then we should be just fine. (Obviously it will be impossible to carry out a $1 billion infrastructure replacement at once; the city would have to be evacuated...)
> 
> The problem is (as at all levels of government) out of control spending on non priority items.




OK, so Brad and Thucydides vote for talking about the problem and assigning blame (to those unwilling to accept it) while the infrastructure continues to crumble ... is that it?

Is that all there is?


----------



## Edward Campbell (30 Oct 2011)

Thucydides said:
			
		

> I think what David Frum was getting at is the disaster will also affect anyone who has securities denominated in Euros, anyone who trades with Europe and the downline effect on people who are dependent on those directly affected.
> 
> The Europeans are not only well and truely screwed; they have screwed most of the West as well, and the contagion will affect Russia (which depends on natural gas sales to Europe), the Middle East (which depends on oil sales to Europe), China (which depends on sales of manufactured goods to Europe) with ever increasing ripple effects that will wash over to the rest of Asia, Africa and South America as well.
> 
> So while the poor nations of Europe like Estonia and Slovenia will pay to bail out Greece (despite havig far lower GDP's and personal incomes), the rest of us will be trying to find our footings as the economic landscape changes at dizzying speeds. The global deleveraging will not be in the form of a controlled drawdown....




The Europeans didn't screw America and Japan: America, Europe and Japan, and others, all in tandem, screwed themselves. _Globalization_ is working itself out, painfully.

I am a believer in tooth and claw capitalism; unpleasant though it is, it is _utilitarian_: it produces the greatest good for the greatest number. Unfortunately the "greatest number" is not always a really large number and those who pay the price in being less well off, having less "good" produced for them are, often a very large minority. We have decided that we should have the almost "greatest good" without suffering for much of anyone. We are discovering that is not possible.


----------



## a_majoor (30 Oct 2011)

No, I am talking about reordering priorities to reflect financial reality. If London City Council refuses to drop the white elephant funding or redirect budget money to the infrastructure, then they are condemming the city to slow death. There is no "new" source of money to repair the damage; we live in Ontario which is already swiming in $200 billion in debt. London's taxes and fees are already punishing enough (either the highest or second highest in all Ontario), so to say there should be "more" money devoted to infrastructure repair is to either suggest the tax burden becomes unsustainable (driving busines and people out of the city at greater rates), or that reality needs to set in.

Since there are powerful entrenched interests who will fight to the last taxpayer for their perques at the expense of infrastructure or basic services, the battle liines are pretty clear.

The end results are either a controlled drawdown of spending and realignment with basic priorities, or a catastrophic collapse as taxpayers flee and the money runs out.


----------



## Brad Sallows (30 Oct 2011)

In both my time with the reserves and my profession, I have noticed that nothing gets fixed (ie. receives adequate resources) until it breaks.  It is an admirable ethic to "make it happen" no matter how short the shoestring gets cut, but as long as "it happens" there is unlikely to be any constructive reform.  The cost of making it happen is generally the well-being of people willing to repeatedly work themselves to exhaustion.  Whenever my stress mitigation bank gets unreasonably depleted, I quit plugging the dyke, stand back, and let things break.  Then the broken things get fixed.

Not all cities suffer from abysmal infrastructure.  Clearly, some cities are spending what money they do have more prudently than others.  Clearly, there is enough funding out there, provided needs are correctly ranked.  What is needed is to motivate the imprudent to become prudent - to "fix" the underlying problem (allocation of funds) and stop paying for frills, or paying too much for what they do have.

If I reach into my pocket now to deliver the imprudent municipalities from the consequences of their own self-indulgent wanking, then I expect they will just keep right on wanking and asking for more money.  The choice on the menu is not "give money to fix infrastructure for poor hard done-by cities now"; it is "give money to fix infrastructure indefinitely so that cities can continue spending their entirely fungible dollars on whatever else it is that turns their crank".  No.


----------



## Kirkhill (30 Oct 2011)

Brad Sallows said:
			
		

> If I reach into my pocket now to deliver the imprudent municipalities from the consequences of their own self-indulgent wanking, then I expect they will just keep right on wanking and asking for more money.  The choice on the menu is not "give money to fix infrastructure for poor hard done-by cities now"; it is "give money to fix infrastructure indefinitely so that cities can continue spending their entirely fungible dollars on whatever else it is that turns their crank".  No.



Third option:

Bugger off into the countryside and leave the cities to their own devices......


----------



## Edward Campbell (30 Oct 2011)

I agree with you, Brad: cities have to make better choices.

Way back when Premier Mike Harris asked the critical question: "who does what?" Cities and their provincial "masters" and the feds are all intruding into one another's areas of responsibility. Ralph Klein, when he was mayor of Calgary also boasted about and got reelected because he paid attention to core city responsibilities like sewers, garbage collection, safe streets and so on.

Look at these two web sites: http://www.ottawa.ca/social_com/index_en.html and http://www.mcss.gov.on.ca/en/mcss/index.aspx . Now ask Mike Harris' question again: "who does what?"

Provinces, including Ontario, have downloaded both too many and the wrong services to cities, without giving them the tax base. City politicians, and it's hard to blame them, insist that they *must* provide e.g. social services or else people will freeze or starve to death in our cold, cruel streets - I'm not so sure. I think the province and charity can and should look after low income housing, which might even require people to move to places where they might have better opportunities, employment and financial assistance, immigration assistance, daycare and seniors services and so on. I think the city should look after road and sidewalks, sewers, water, garbage, police, fire and so on. I think cities should look after school buildings and provinces should look after teachers, including paying them, and curiccula. I could go on, but you get the idea.

All of cities, provinces and the feds have important infrastructure responsibilities but maintenance is never sexy and social services always are.


Edit: typo


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## mariomike (30 Oct 2011)

Regarding tax revenue. Perhaps it is time to consider a change.
This month:
"We’re getting stiffed by two levels of government on a regular basis. It may be time for us to start thinking about acting on our own and becoming a province.”
http://www.torontosun.com/2011/10/04/mammoliti-floats-province-of-toronto-idea

Also suggested this month in another thread:
http://forums.army.ca/forums/threads/102361/post-1081025#msg1081025
"<snip> (and Toronto actually needs to become its own province so it can start raising its own taxes)."

It might be good for rural Ontario too:
"He recently told farmers in his riding that a "Toronto mentality" dominates provincial politics, to the detriment of Ontario's rural areas. And he suggested one way to fix that would be to make Toronto Canada's 11th province.":
http://www.thestar.com/opinion/editorials/article/781385--should-toronto-be-a-province


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## Edward Campbell (31 Oct 2011)

More and more bad news from Europe in this report which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/top-business-stories/george-papandreou-opens-a-euro-can-of-worms-with-referendum/article2220106/


> *TOP BUSINESS STORIES*
> 
> George Papandreou opens a euro can of worms with referendum
> 
> ...




The very existence of the Euro could be in doubt and if it falls another, deeper, global recession will be in the offing.


----------



## Kirkhill (31 Oct 2011)

> The official Xinhua news agency, used to communicate Communist Party policy, said Europe must address its own financial woes. "China can neither take up the role as a saviour to the Europeans, nor provide a 'cure' for the European malaise," it stated. "Obviously, it is up to European countries themselves to tackle their financial problems."



Daily Telegraph



> Barclays reported a healthy increase in profits today as it continues to reduce its exposure to debt-ridden Eurozone countries.
> .....
> A spokesman said the bank's sovereign exposure to Spain, Italy, Portugal, Ireland and Greece reduced in the third quarter by 31 per cent to £8 billion.



Daily Mail

Meanwhile Societe Generale is not impressed by Barclay's book-keeping



> ..."Tricks and treats drove the adjusted results, in our view," said Hank Calenti, a banks analyst at Societe Generale. "Despite the liquidity and sovereign periphery treats, Barclays Q3 results fail to inspire....



Daily Telegraph

And meanwhile the Jerries lose track of 55 Billion Euros



> ...The German government tried to deflect responsibility on Monday for a 55-billion euro accounting blunder that has exposed it to charges of ridicule for being inept and hypocritical after its steady criticism of Greek bookkeeping practices...



Reuters

Quoth the Jerry:



> ....The German media nevertheless mocked Schaeuble, saying the 55-billion euro accounting error put Berlin in the same category as the Greek government for failing to report accurate figures. Inaccurate reporting of Greek deficits contributed to the euro zone sovereign debt crisis that has hit Europe hard.
> 
> "Incredible but true," wrote the Rheinische Post newspaper. "The nationalized bank HRE made a staggering 55-billion euro miscalculation. It's scandalous that bank managers, certified public accountants and government supervisors made an error of this dimension. This kind of sloppiness reminds us of Greece.....



Time for a nice bowl of Scotch Broth, two aspirins and a wee dram.  I'm  sure it will have all sorted itself out by the morning........


----------



## Edward Campbell (31 Oct 2011)

Kirkhill said:
			
		

> ...
> Time for a nice bowl of Scotch Broth, two aspirins and a wee dram.  I'm  sure it will have all sorted itself out by the morning........




Of course, m'boy, a bit of whisky puts (almost) everything right!  :cheers:


----------



## a_majoor (31 Oct 2011)

He who has no understanding of history....

Page Printed from: http://www.americanthinker.com/articles/../2011/10/slouching_toward_the_1930s.html



> *Slouching toward the 1930s* (American Thinker)
> 
> Return to the Article
> 
> ...


----------



## Nemo888 (31 Oct 2011)

From the Star Tribune. Chance is one of the most relevant factors in wealth accumulation. 
http://www.startribune.com/opinion/132819963.html?page=all&prepage=1&c=y#continue
The 1 percent: How lucky they are

 Article by: GREG BREINING
 Updated: October 29, 2011 - 3:31 PM

The top 1 percent of Americans control about 40 percent of the nation's wealth.


As a stagnant economy and the Occupy Wall Street protests ignite debate over the disparity of wealth in America, a little noticed economic study provides mathematical support for a radical idea. The rich get richer and the poor get poorer. You knew that. But you may not have known that according to a mathematical model developed at the University of Minnesota, the fabulously rich get as rich as they do by chance alone. In a capitalist society, extreme concentration of wealth does not arise from extreme differences in work ethic, skills, investment smarts or other virtues. Nor does it come from connections, cronyism or crookedness. Well, it does, but only some. Mostly, extreme wealth comes from luck. In a laissez faire economy, within a few generations, a handful of players walk away with all the marbles. Because they're lucky.

The policy implications should be alarming, especially if you're a Paul Ryan conservative or Ron Paul libertarian who has been saying that economic liberty gives everyone a chance to grab the golden ring. It's a vanishingly small chance. Indeed, if the model is accurate, the inevitable outcome of unfettered capitalism is oligarchy.

"That's the conclusion I came to, too," says Joseph Fargione, lead author of the paper, published this summer in the peer-reviewed journal PLoS ONE. "I was quite surprised by that."

Fargione first became intrigued by this question not as an economist, but as an ecologist. Fargione is lead scientist for the Nature Conservancy's North America conservation region and an adjunct professor of ecology, evolution and behavior in the University of Minnesota's College of Biological Sciences. Fargione noticed "interesting mathematical parallels" between exponential increases in populations and wealth accumulation. "It is something that ecologists think a lot about," he says.

The link between ecology and economics is not as far-fetched as it might sound. Ecologists had long thought that environmental factors and the characteristics of species would determine the evolutionary outcome of an ecosystem (just as many people insist that talent, hard work, and good decisions determine wealth). Put the same species together under the same conditions, the thinking went, and you'd get a similar result -- again and again.

But in the 1980s, James Drake, an ecologist at the University of Tennessee, repeatedly assembled "microecosystems" in five-gallon aquariums. He found he could add the same pond species in the same numbers under identical conditions -- and get a different result each time. Different species would gain ascendency and dominate the ecosystem -- as if by chance alone.

The wealth project took shape as Fargione read Kevin Phillips' "Wealth and Democracy: A Political History of the American Rich." As Phillips notes, Alexis de Tocqueville in 1837 warned the young American republic that its industrial class, "one of the harshest that ever existed," could create "permanent inequality of conditions and aristocracy." And so it did. Despite the interruptions of the Populist and Progressive eras and the New Deal, writes Phillips, by 2000 "the United States was not only the world's wealthiest nation and leading economic power, but also the Western industrial nation with the greatest percentage of the world's rich and greatest gap between rich and poor."

Fargione discovered that other mathematical models of wealth have failed to account fully for its concentration. Some economists blamed wealth concentration on political factors such as cronyism, or on differences in the sharpness of investors.

"What would you expect would happen on its own without a lot of intervention for redistribution of wealth?" Fargione wondered.

He began his research with a simple question: Can chance alone account for wealth concentration?

Fargione focused on entrepreneurs (who make up one in nine Americans) because, contrary to all advice to diversify portfolios, they typically plow their earnings back into their businesses. "Twenty years ago, Bill Gates didn't say, 'Well, I made some money -- I think I'm going to diversify my investment.'" The all-in strategy is risky, but when it works it leads to rapid accumulation of wealth.

He assumed that all entrepreneurs began with equal wealth. Returns varied, solely by chance. (Past performance is not an indicator of future success -- you've heard that before.) Earnings were reinvested. And for the purposes of the study, the investors seamlessly passed their wealth on to heirs. Says Fargione, "I started out with an Excel spreadsheet and just did some simulations that ran out over time."
Winner take all

I'll spare you the calculus, but according to Fargione's model, by the "inexorable effect of chance," and chance alone, "a small proportion of entrepreneurs come to possess essentially all of the wealth. ... The concentration of wealth occurs merely because some individuals are lucky by randomly receiving a series of high growth rates, and once they are ahead with exponentially growing capital, they tend to stay ahead."

According to Fargione, greater variation in rates of return hastened the concentration of wealth. Inequality grows with time. Wealth concentration continues despite periods of recession and depression. And splitting estates among heirs does not appreciably slow concentration.

In the real world, of course, some people are more skilled at making money than others. And business owners who are making a high rate of return, by operating highly successful companies, tend to continue earning high rates of return. And the rich have connections and other means to increase their wealth that most folks lack. "Those other factors would exacerbate the underlying pattern," says Fargione.

That underlying pattern is the inexorable concentration of wealth and the inevitable result -- winner takes all. Says Fargione, "If you play long enough, someone will end up with all the money."

Indeed, that is what has been happening in the United States, where the top 1 percent owns about 40 percent of total wealth.

As Ian Dew-Becker of Harvard University and Robert Gordon of Northwestern University have shown, between 1972 and 2001, the wage and salary income of Americans at the 90th percentile of income distribution climbed 34 percent. Income at the 99th percentile increased 87 percent; at the 99.9th percentile, 181 percent, and at the 99.99th percentile, 497 percent. Economists have paid "too little attention to the sources of increased skewness at the very top, within the top 1 percent of the income distribution," they write.

It's an entirely different story among the lower 90 percent. According to U.S. census figures released this fall, an additional 2.6 million Americans slipped below the poverty line last year. The 15.1 percent in poverty was the highest level since 1993. Among the middle class, median household incomes fell last year to levels last seen in 1996.

What would it take to arrest the growing divide between rich and poor? Not much, says Fargione. A tax on large inherited fortunes -- a "death tax" in Republican parlance -- aimed at the very wealthiest would interrupt the cycle of wealth concentration. (The current estate tax of 35 percent exempts the first $5 million in assets.) The estate tax has been a favorite target of Republicans and in fact was suspended in 2010.
Inevitable plutocracy

The greatest potential impact of Fargione's model is on our attitude toward accumulated wealth.

For if you are to believe Fargione's model, the result of Republicans' infatuation with conservative economics and laissez faire libertarianism is inevitable and permanent plutocracy.

That is intolerable for several reasons. Great disparity of wealth -- "the development of a race of the idle rich," in Winston Churchill's words -- violates our sense of justice and breeds social instability. U.S. Supreme Court Justice Louis Brandeis observed, "We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we cannot have both."

Inequality may also be bad business in the long run. According to economists Andrew G. Berg and Jonathan D. Ostry of the International Monetary Fund, "In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality."

But perhaps the greatest conceptual contribution of Fargione's model is that it relieves wealth of much of its moral baggage. Extreme wealth is not a reward for virtue. Nor is it the ill-gotten gains of collusion. It is the inexorable outcome of dumb luck, the giant cardboard check of a national lotto.

As beneficiaries of a system that paid them way out of proportion to any effort or virtue of their own, the superrich are entitled to some of their wealth, but not all.

They should give a lot of it back.

Greg Breining writes about science, nature and travel. He is the author of "Paddle North: Canoeing the Boundary Waters-Quetico Wilderness" and "Wild Shore: Exploring Lake Superior by Kayak."


----------



## ModlrMike (31 Oct 2011)

> Greg Breining writes about science, nature and travel. He is the author of "Paddle North: Canoeing the Boundary Waters-Quetico Wilderness" and "Wild Shore: Exploring Lake Superior by Kayak."



Which makes him qualified to write about finance and politics? Not meant to be particularly ad hominem, but I think a reasonable question.


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## GAP (31 Oct 2011)

ModlrMike said:
			
		

> Which makes him qualified to write about finance and politics? Not meant to be particularly ad hominem, but I think a reasonable question.



Of Course!!  It came to him one quiet night on the "boundary".....


----------



## Bam_dice (31 Oct 2011)

As me growing up attending elementary school along with high school. The brain is the most important part of the body it helps us move and think. Without it we would be able to make decisions. Decisions govern everyone today even politics. Through out the years there been alot decisions about we should pump money in here... "No there". As the world today Canada is struggling and the only thing keeping it together is world peace. In years time there going to be another down fall in the economic. As the Mayans predict a end of world and begin of new era. You guess it... Where in the new generation where people need strong leaders and I don't see are prime minister or president doing anything about the economy. With great power comes great responsibility. I say we bring more people and unite Canada with more jobs. Put alot more money into education for the youth along with tap into are oil system. Through that we are able to grow like china. Literally are prime minister should cut the bs and doing something about it.  Along with up north once that ice melts it's going to be a race against territory.


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## Bruce Monkhouse (31 Oct 2011)

MY HEAD HURTS


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## Bam_dice (31 Oct 2011)

You got that my head just can't shut up about this stuff. It's screwed..


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## GAP (31 Oct 2011)

What's that saying about being thought a *&*^ but open your mouth and removing all doubt........ :


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## Good2Golf (1 Nov 2011)

Bam_dice said:
			
		

> ...Through that we are able to grow like china...



China isn't grown, it's actually a mineral also known as kaolinite...alumina octahedral silicate, Al2Si2O5(OH)4.


----------



## RangerRay (1 Nov 2011)

Bam_dice said:
			
		

> As me growing up attending elementary school along with high school. The brain is the most important part of the body it helps us move and think. Without it we would be able to make decisions. Decisions govern everyone today even politics. Through out the years there been alot decisions about we should pump money in here... "No there". As the world today Canada is struggling and the only thing keeping it together is world peace. In years time there going to be another down fall in the economic. As the Mayans predict a end of world and begin of new era. You guess it... Where in the new generation where people need strong leaders and I don't see are prime minister or president doing anything about the economy. With great power comes great responsibility. I say we bring more people and unite Canada with more jobs. Put alot more money into education for the youth along with tap into are oil system. Through that we are able to grow like china. Literally are prime minister should cut the bs and doing something about it.  Along with up north once that ice melts it's going to be a race against territory.



That makes absolutely no sense...


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## GAP (1 Nov 2011)

That's the stated reason, but I will bet N.A. production is expendable in tough times....

Honda cuts N. American auto output by 50 per cent
Article Link
 The Canadian Press

Date: Monday Oct. 31, 2011 1:03 PM ET

TORONTO — Honda's assembly plants in Canada will be part of a dramatic international slowdown by the Japanese automaker.

The company says it will cut output at its six North American factories by 50 per cent, starting Wednesday.

The big Japanese carmaker is suffering from a parts shortage due to flooding in Thailand.

In Canada, Honda has major assembly and parts operations in the central Ontario community of Alliston, near Barrie.
end


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## Edward Campbell (3 Nov 2011)

Greece is spiraling downwards from tragedy to comedy to farce.

Italy, Portugal and Spain (not necessarily in that order) are set to follow suit.

The Euro is, probably, unsustainable, in its current form; the problem now is to plan for its orderly demise - for the return of the poor but musical Greeks, Italians, Portuguese and Spaniards to their accustomed poverty. Austria, Denmark, Finland, Germany, Netherlands and Sweden may be rich enough and productive enough to prevent the EU from unraveling and, thereby, may prevent a new (just longer and deeper?) global Great Recession.


Edit: punctuation


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## Kirkhill (3 Nov 2011)

E.R. Campbell said:
			
		

> Greece is spiraling downwards from tragedy to comedy to farce.
> 
> Italy, Portugal and Spain (not necessarily in that order) are set to follow suit.
> 
> The Euro is, probably, unsustainable, in its current form; the problem now is to plan for its orderly demise - for the return of the poor but musical Greeks, Italians, Portuguese and Spaniards to their accustomed poverty. Austria, Denmark, Finland, Germany, Netherlands and Sweden may be rich enough and productive enough to prevent the EU from unraveling and, thereby, may prevent a new Just longer and deeper?) global Great Recession.



Fascinating: this "End of Days" stuff.

 :argument: op:

Can't wait to see how it all works out.

The Franco-German argument seems to be: "We gave you Charlemagne, the Bourbons, Frederick the Great and Bismark - and topped it off with a couple of corporals from Corsica and Austria. We've agreed to split the difference. Fall in line or else we'll each find another chap with a penchant for white horses."  

Democracy in the abstract.


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## Brad Sallows (3 Nov 2011)

My rule of thumb: I expect any country with deeply embedded social welfare institutions (ie. culture of dependency) which has more than a 5% primary surplus is going to default on all its outstanding debt.


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## Edward Campbell (4 Nov 2011)

At least, and despite some European objections (they are used to having a European in the post) one global agency is in safe hands according to this article which is reprodyced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/carney-takes-reins-of-global-banking-watchdog/article2225184/


> Carney takes reins of global banking watchdog
> 
> ERIC REGULY
> CANNES— Globe and Mail Update
> ...




Although it is, as the article says, a "part time job," a _secondary duty_ in military terms, given the global banking situation, Carney will be busy as will be, I predict, Senior Deputy Governor of the Bank of Canada Tiff Macklem.

Canadians should get used to seeing Mr. Macklem's face on their TV screens as he takes a more public role in setting Canada's monetary policy.





Tiff Macklem
University of Western Ontario photo


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## Edward Campbell (4 Nov 2011)

A bit more, in an article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, re: what Carney is likely to do to help stave off a global financial disaster:

My edits
http://www.theglobeandmail.com/report-on-business/international-news/carney-expected-to-impose-tougher-rules-on-top-global-banks/article2224790/


> Carney expected to impose tougher rules on top global banks
> 
> JEREMY TOROBIN  AND GRANT ROBERTSON
> OTTAWA AND TORONTO— From Friday's Globe and Mail
> ...




Canada appears to be losing the battle to force European countries to take full responsibility for Europe's problems - the emerging consensus seems to be that Europe, alone, is too weak to take responsibility for its own problems. Applying more stringent _stress tests_ to all banks and then requiring American and European banks to look more and more like Canadian banks will not make Carney (or Canada) popular, but it has to be done. And, as the article mentions, Canada is not "out of the woods:" our household debt levels are far too high.


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## Edward Campbell (4 Nov 2011)

This report, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is a bit technical but it highlights part of the global problem - lax accounting standards:

http://www.theglobeandmail.com/globe-investor/how-a-canadian-address-turned-manulifes-22-billion-profit-into-a-128-billion-loss/article2223793/


> How a Canadian address turned Manulife’s $2.2-billion profit into a $1.28-billion loss
> 
> TARA PERKINS — FINANCIAL SERVICES REPORTER
> From Friday's Globe and Mail
> ...




Just look at the fourth paragraph: the differences between American and Canadian accounting rules are "worth" nearly $3.5 Billion on over $25 Billion worth of revenues.* Does that mean we, Canada, are too strict or that American insurance companies are badly (10-15%) overvalued?

It matters, and the differences in standards are a global phenomenon.



__________
* http://manulife.com/public/files/202/1/MFC_3Q11_SIP.pdf


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## Kirkhill (4 Nov 2011)

E.R. Campbell said:
			
		

> ......
> 
> Just look at the fourth paragraph: the differences between American and Canadian accounting rules are "worth" nearly $3.5 Billion on over $25 Billion worth of revenues.* Does that mean we, Canada, are too strict or that American insurance companies are badly (10-15%) overvalued?
> 
> It matters, and the differences in standards are a global phenomenon.



Or should Canada be trumpeting the fact that its standards result in a more secure investment?  I believe that strategy has worked for Switzerland and (historically) the Bank of England.  People invested there for safety.  If Canada could develop the reputation of Switzerland.......

As to the earlier comment about Canada losing the argument about Europe being forced to "heal themselves" I would suggest that that is not the message being heard in Britain: G20 summit leaders: in their own words.

My read of that list of comments suggests that Canada, the US and the BRICS, and (to whatever extent you can trust Cameron's words) Britain - are all telling the EU in general, the Eurozone in particular and France and Germany especially - there is no help coming.  The "Haves" will shore up the system by plunking money into the IMF but they won't be placing any bets on the Euro any time soon.

Now Europe may go looking for IMF relief, and many folks expect/fear that they will be granted such relief, but would the IMF be more inclined to be more generous with Italy than it was with Argentina when its exposure will be manifold greater?


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## a_majoor (4 Nov 2011)

Option 3 might be to sip the oil to Eastern Canada:

http://news.investors.com/Article/590518/201111031841/Obamas-Keystone-Dilemma.htm



> *Keystone Pipeline Delay Puts Energy Future On Hold*
> 
> Posted 11/03/2011 06:41 PM ET
> Energy Policy: The president who often lets policy decisions be driven by others now says the pipeline to bring Canada's tar sands oil to America is his decision to make. So make it already, Mr. President.
> ...


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## Brad Sallows (4 Nov 2011)

>My rule of thumb: I expect any country with deeply embedded social welfare institutions (ie. culture of dependency) which has more than a 5% primary surplus is going to default on all its outstanding debt.

That makes no sense at all... "primary surplus" should be "primary deficit".


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## FoverF (4 Nov 2011)

E.R. Campbell said:
			
		

> This report, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is a bit technical but it highlights part of the global problem - lax accounting standards:
> 
> http://www.theglobeandmail.com/globe-investor/how-a-canadian-address-turned-manulifes-22-billion-profit-into-a-128-billion-loss/article2223793/
> 
> ...



I am obviously no technical expert on the matter, but I am scepitcal. It seems to me that if there were a legitimate $3.5 billion difference, these companies would be operating from the USA. Or paying a large team of lawyers and accountants a lot of money to find ways around this. Or bribing _lobbying_ some politicians/bureaucrats to the tune of hundreds of millions of dollars to change these laws. That is just too much money to let it walk away. 

I appreciate what a billion dollars means. I also understand that there are an almost infinite number of ways of counting money. So while I have no doubt that Canadian regulations result in increased difficulties for big business here, I think that a) it is wildly exaggerated in this article, and b) our performance in the recent financial slowdown has proven that these regulations are prudent and benefcial. 

If we were treading on their toes to the tune of billions of dollars, they would be investing elsewhere. They're not investing their money in this market because of charity.


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## FoverF (4 Nov 2011)

Kirkhill said:
			
		

> Or should Canada be trumpeting the fact that its standards result in a more secure investment?  I believe that strategy has worked for Switzerland and (historically) the Bank of England.  People invested there for safety.



Exactly.


----------



## Kirkhill (4 Nov 2011)

Further to the thought of Canada as Switzerland:



> .....Mario Draghi, the outgoing FSB chairman who has just started as President of the European Central Bank, said the capital surcharges should not affect global growth. "We have done several impact studies and they don't show any significant economic effects," he said.
> 
> *Mr Draghi will be replaced by Mark Carney, Bank of Canada's Governor. Swiss National Bank chairman Philipp Hildebrand will become vice-chairman*.....





Edit: Source - Daily Telegraph


----------



## a_majoor (5 Nov 2011)

The Greek situation is changing rapidly (apparently the referendum has now been caled off) but the situation is still quite tense; the unstable equilibrium is coming to an end:

http://pjmedia.com/richardfernandez/2011/11/01/nemesis/?print=1



> *Nemesis*
> Posted By Richard Fernandez On November 1, 2011 @ 12:05 pm In Uncategorized | Comments Disabled
> 
> Beware of Greeks returning gifts. This could be the moral of a new Eurozone crisis [1] caused by Prime Minister George Papandreou’s decision to call a referendum on the proposed bailout package for that country. The fear in Brussels is that the Greeks will reject the austerity measures that come with it, leading to a ‘disorderly’ default and bringing financial Armageddon in its wake.
> ...


----------



## Edward Campbell (5 Nov 2011)

FoverF said:
			
		

> I am obviously no technical expert on the matter, but I am scepitcal. It seems to me that if there were a legitimate $3.5 billion difference, these companies would be operating from the USA. Or paying a large team of lawyers and accountants a lot of money to find ways around this. Or bribing _lobbying_ some politicians/bureaucrats to the tune of hundreds of millions of dollars to change these laws. That is just too much money to let it walk away.
> 
> I appreciate what a billion dollars means. I also understand that there are an almost infinite number of ways of counting money. So while I have no doubt that Canadian regulations result in increased difficulties for big business here, I think that a) it is wildly exaggerated in this article, and b) our performance in the recent financial slowdown has proven that these regulations are prudent and benefcial.
> 
> If we were treading on their toes to the tune of billions of dollars, they would be investing elsewhere. They're not investing their money in this market because of charity.




I'm not suggesting that Canada's standards are too low, in fact my worry is quite the reverse: it is that the US insurance business, the largest in the world, is overvalued by 10-15% and is filled with "too big to fail" institutions that are fraudulently incorrectly reporting their results.


----------



## Edward Campbell (5 Nov 2011)

Those who follow my ramblings will know that I, generally, favour Niall Ferguson's view of things. Here he is, on a range of topics, in an interview reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/news/arts/books/niall-ferguson-on-europe-and-the-collapse-of-the-west/article2226258/


> Niall Ferguson on Europe and the collapse of the West
> 
> MICHAEL POSNER
> From Saturday's Globe and Mail
> ...


_


I think that both Michael Posner, in his question about the Chinese "illiberal form of capitalism" and Niall Ferguson, in his answer, mistake Chinese conservatism, of the Confucian variety, for illiberal tendencies. But, beyond that (and the review question - because I haven't read the review) I agree with most of what Ferguson says.

Amazon just delivered  Civilization: The West and the Rest yesterday so it will be a few days before I can comment on it.
_


----------



## a_majoor (7 Nov 2011)

China shows the EU the back of its hand (although given the Chinese economic bubble, this may be a prudent move for the Chinese)

http://www.telegraph.co.uk/finance/financialcrisis/8872380/Goldman-euro-could-split-apart.html



> *Goldman: euro could split apart*
> 
> The chairman of Goldman Sachs Asset Management has said that the need for a German-led fiscal integration in the eurozone would make it increasingly unattractive for all the countries who joined to stay in the single currency.
> 
> ...


----------



## Good2Golf (7 Nov 2011)

Well, I don't think the Chinese are too far off the mark.  :nod:  The only word they didn't use in their statement was "entitlement", but they got the (relative) laziness ("sloth") part right about many of the EU problem children.

 :2c:

Regards
G2G


----------



## Kirkhill (7 Nov 2011)

Maybe ERC's "Red Dynasty" won't be so hard to live with after all.  >


----------



## Kirkhill (7 Nov 2011)

From the Globe and Mail - France has a new austerity budget.

This final paragraph stood out.....




> “Our economic, financial and social sovereignty demand collective and prolonged efforts and also sacrifices,” Mr. Fillon said. “Our country must never be condemned to following a policy imposed by others.”



Unlike Greece, Ireland, Italy, Portugal...... France does the imposing.  France is never imposed upon.  Germany is of a similar mindset.  Both heirs of the Belgian Bastaards of Charlemagne.  And there you have Europe in a nutshell.


----------



## Edward Campbell (7 Nov 2011)

Kirkhill said:
			
		

> From the Globe and Mail - France has a new austerity budget.
> 
> This final paragraph stood out.....
> 
> ...




Germany can afford to be of a "don't tread on me" mindset, France cannot. French public debt (measured as a % of GDP) is (slightly) higher than the UK's and the economy is growing more slowly than Germany's, the UK's, Italy's, the Netherlands' etc, etc for about a dozen other EU members states. It is past time the French took some of the UK's medicine but I suspect this is too little and too late.


----------



## Edward Campbell (7 Nov 2011)

And speaking of Italy, this report, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, says that the ever wise bond market has declared it to be bankrupt:

http://www.theglobeandmail.com/report-on-business/international-news/european/italian-bond-yields-jump-to-euro-era-high/article2228582/


> Italian bond yields jump to euro-era high
> 
> BRIAN MILNER
> From Tuesday's Globe and Mail
> ...




By way of comparison, the yield on Canadian 10 year bonds is 1.86%.


----------



## Edward Campbell (8 Nov 2011)

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is a brief, timely and accurate explanation of the latest crisis:

http://www.theglobeandmail.com/news/opinions/cartoon/editorial-cartoons-november-2011/article2220178/





Anthony Jenkins
The Globe and Mail


----------



## Edward Campbell (9 Nov 2011)

Unlike Greece and Portugal and even Spain, Italy matters and the news is not good, in this article, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/european/berlusconi-rally-short-lived/article2230271/


> Berlusconi rally short lived
> 
> JEREMY GAUNT
> London— Reuters
> ...




The bond market, one of those invisible hands and one which does not lie, has decided that Italy cannot continue on its current course - living beyond its means - for ten more years. No country can sustain a 7% yield on its long term debt; Greece and Portugal are already in _de facto_ default; Spain will follow then Italy and then, the French banks will likely crash.






Goodbye Euro?


----------



## Edward Campbell (17 Nov 2011)

More, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ on the real threat - France:

http://www.theglobeandmail.com/report-on-business/top-business-stories/europe-a-tinderbox-today-france-next-domino-to-fall/article2239236/


> Europe a tinderbox today, France next ‘domino’ to fall
> 
> MICHAEL BABAD
> Globe and Mail Update
> ...




When, not if, Southern Europe (Greece, Italy, Spain, Portugal) defaults - mainly in slow motion - it is French banks that will begin to collapse. French financial regulation is weak and French politics is irredeemably corrupt, most (all?) political factions being "in bed" with the banks.

My guess is that the Croatian, *French*, Greek, *Italian*, Portuguese, Serbian and *Spanish* governments will all fall and all will be replaced with _populist_ movements - left or right wing, it doesn't matter - that will, fairly quickly _morph_ into _national-socialist_ regimes. I also suspect that Turkey, relieved at being rejected by the EU, will _leave_ Europe, by leaving NATO, and challenge Iran and Egypt for the role of leader of the Muslims.

The result will be a global financial depression that will, I further suspect, drive Americans into a new fit of massive _isolationism_ which will, in turn, drive Australia, Canada, New Zealand and Singapore closer and closer to China.


----------



## Kirkhill (17 Nov 2011)

Did you see these articles?

Daily Mail



> Europe speaks German now! Controversial claim from Merkel ally that EU countries all follow Berlin's lead - and Britain should fall into line
> ‘Only going after their [Britain's] own benefit, and refusing to contribute, is not the message we’re letting the British get away with'
> Tory MP: ‘British people will be horrified by what is going on in Europe'
> Gap between French and German government bond yields reaches record levels – revealing fears about Paris’s exposure debt
> ...





> French and Germans clash over European Central Bank intervention as borrowing costs threaten triple-A rated economies
> 
> France and Germany, Europe's two central powers, clashed today over whether the European Central Bank should intervene to halt the eurozone's accelerating debt crisis - as modest bond purchases failed to stop the rout.
> 
> ...



And 

Daily Telegraph



> Latin showdown with Germany over ECB
> Germany is facing a moment of strategic truth. The sacred union with France that has held together through thick and thin for half a century is in growing danger as contagion spreads North, engulfing the French bond market.
> 
> By Ambrose Evans-Pritchard, International business editor
> ...



I do think that the Eurozone will change (contract - possibly all the way back to Germany).   I do think that the EU will change (ideally disappear - unlikely given the litter of bureaucrats that are scattered over the continent and have survived every emperor and church known to man).  I do think that there will be an unholy mess to accomodate and that that will take some time.

I don't think (or perhaps hope is a better word) that we will see as dire an outcome as you posit (although it is not an impossible outcome).

But on the bright side of things:

Investors are running for safety which is driving yields down on UK, US and Swiss bonds (the Swiss are being paid 0.3% to take foreign investments).  

Japan, despite its tidal wave clean up and massive debt (two to three times Italy) is showing signs of growth.

In the middle east Turkey and Israel seem to be making common cause against Assad (the Kurds may get their homeland yet).  The reformed Arab League (reformed by revolution) is also openly anti-Assad and is requesting that the British and French intervene in a non-military military fashion (nudge, nudge, wink, wink).

Personally I think the time of crisis is upon us.  It is January 1942.  It is going to get a whole lot messier on the financial markets but I don't think it will las for more than another couple of years.  Once markets can see their way through to the new rules, whatever they may be, they have a history of accomodating fairly rapidly.

The best thing that can happen is that the public and the politicians learn the limits of the politicians' real powers.  And that education is progressing fairly quickly.......unfortunately Democracy is getting a blackeye in the process and that is a real worry.


----------



## Kirkhill (17 Nov 2011)

But on the subject of the alternative (technocracy vs democracy):

A sterling example of the capabilities of your average technocrat (Courtesy of Michael Burleigh at the Daily Telegraph)



> As a young man, the utopian socialist Claude Henri de Rouvroy, comte de Saint-Simon (1760-1825) insisted that his valet wake him each morning with the exhortation: “Remember, monsieur le comte, that you have great things to do.”
> 
> .......
> 
> ...Saint-Simon, in the pitiful penury of his last years. He eventually shot himself repeatedly, and survived, asking his doctor: “Explain this… my dear Salandière, a man with seven bullets in his head can live and think.” Sympathetic French bankers maintained his grave in Père Lachaise and the Soviet Union put up a memorial to him....


----------



## Brad Sallows (17 Nov 2011)

I am surprised the socialists are not actively fanning the flames.  Surely the collapse of financial institutions under the weight of default will serve as an excuse to socialize most of the holdings of the citizens (covering the losses) and to take the banks firmly under national control to prevent a recurrence; surely the impoverishment of the citizens would solidify their dependence on the state.


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## Kirkhill (18 Nov 2011)

Perhaps it is just that even socialists recognize that capitalists are necessary, even if only to supply the hanging rope. Apparently they can't even make rope themselves.


----------



## a_majoor (18 Nov 2011)

Brad Sallows said:
			
		

> I am surprised the socialists are not actively fanning the flames.  Surely the collapse of financial institutions under the weight of default will serve as an excuse to socialize most of the holdings of the citizens (covering the losses) and to take the banks firmly under national control to prevent a recurrence; surely the impoverishment of the citizens would solidify their dependence on the state.



This probably is/was the plan ("socializing" the IRA accounts of US citizens would net about $2 trillion dollars, for example), but much of the wealth isn't in the form of seizable assets (what are you going to do with unsellable houses?) and there is no more money to pay the dependents, so the ability to "execute" the plan no longer exists....


----------



## Edward Campbell (18 Nov 2011)

Brad Sallows said:
			
		

> I am surprised the socialists are not actively fanning the flames.  Surely the collapse of financial institutions under the weight of default will serve as an excuse to socialize most of the holdings of the citizens (covering the losses) and to take the banks firmly under national control to prevent a recurrence; surely the impoverishment of the citizens would solidify their dependence on the state.




Even the socialists can see the _populists_ gathering strength and it is only 80 years since the last batch of _populists_ 'captured' one of the world's great nations and sent the socialists, amongst others, to the ovens.


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## a_majoor (21 Nov 2011)

Capital contols reimposed by Brussels?

http://brucekrasting.blogspot.com/2011/11/on-capital-flight-and-forced.html



> *On Capital Flight and Forced Repatriation*
> 
> There are some folks in America who will wake up this morning and read that Jefferies has been sued for its role in a bond deal with MF Global and they will vote with their feet (Zero hedge Link). They will close their accounts with JEF and move to a safer address. That’s an example of capital flight.
> 
> ...


----------



## 57Chevy (21 Nov 2011)

I see global debt as a balloon with many nations poised on the stretch marks.

Thought I'd throw that in there.


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## Kirkhill (21 Nov 2011)

The Eurocrats really don't understand the "markets".  They think the "Market" is an institution like all the institutions with which they are familiar - institutions that serve the whim of one individivual.  They are convinced that there is an evil oligarchy of Anglo-Saxons actively engaged in undermining their attempts to perfect society.

Everywhere we find the Eurocrats and their fellow travellers parroting the line that capitalism is killing democracy as they resort to ever more authoritarian measures to impose their own version of l'Orangerie.

They seek to control the markets and the movement of gold just as they seek to control people and their movements.  Of course, for people that believe the control of CO2 is possible, I suppose it is unrealistic to be able to convince them of their limitations.


----------



## Kirkhill (21 Nov 2011)

Further to the last and reflective of T6s (admittedly) curt commentary -

Amid all the discussion of the Frankfurt Group (France, Germany, IMF and the ECB) aiming to secure Europe in their image, I offer this - from Frankfurt - 1951.

This is still the opposition - a vast "left wing conspiracy" - that operates in the open.  They are constantly looking for crises, real or imagined, to stampede the herd towards Utopia.



> I Congress of the Socialist International, Frankfurt
> 
> 30 June-03 July 1951
> 
> ...


----------



## a_majoor (22 Nov 2011)

it is the small things which we don't notice which will change the world:

http://www.foreignpolicy.com/articles/2011/10/28/black_market_global_economy



> *The Shadow Superpower*
> Forget China: the $10 trillion global black market is the world's fastest growing economy -- and its future.
> 
> BY ROBERT NEUWIRTH | OCTOBER 28, 2011
> ...


----------



## a_majoor (24 Nov 2011)

Long essay by Naill Ferguson on the possible future of the Euro:

http://online.wsj.com/article/SB10001424052970203699404577044172754446162.html



> *2021: The New Europe*
> Niall Ferguson peers into Europe's future and sees Greek gardeners, German sunbathers—and a new fiscal union. Welcome to the other United States.
> 
> By NIALL FERGUSON
> ...


----------



## Edward Campbell (24 Nov 2011)

I *hope* Ferguson is right but I fear that I am. My prediction remains that Greece, Italy, Spain, Portugal and France all end up, within the next five years, being governed by _populist_ movements and that all those _populist_ movements become fascist/national socialist dictatorships within a decade.

I agree with Ferguson re:

1. The fate of North Africa, the Middle East and Iran - including an Israeli attack on Iran, the American response thereto, and Turkey leaving Europe (withdrawing from NATO) and challenging Egypt and Iran for leadership of the new _caliphate_;

2. Britain and Ireland leaving the EU;

3. The creation of some sort of Scandinavian league;

4. The disintegration of Belgium; and, being only slightly disagreeable

5. The fascist "Latin tier" of Europe being, _de facto_ a colony of the frugal, hard working, quasi-democratic Northerners.


----------



## Kirkhill (24 Nov 2011)

Who knew that Niall Ferguson was a Buddhist? He must be, given his belief in reincarnation.  

I don't know if his future is any more or less probable than any other but there are elements there that I like.

Given that it all seems to hinge on Mario Draghi defying Angela Merkel and (loosely paraphrasing the advice of the Duke of Wellington) deciding to print and be damned I suppose we will find out in the very near future if his prediction has any chance of success.

I can see the Scandinavians deciding to depart the EU.  I hope my fellow Scots see sense, decide to stick with the UK and that the UK departs the EU.  It would be Christmas in July if the Irish decided to Rejoin the UK (although perhaps not impossible if Scotland, England, Ireland, Ulster and Wales (not to mention Man and the Channel Islands) became federated members of a new UK).

It might even be possible that the UK join the Scandinavians (And Canada?????) in a recreation of Canute's hegemony, or possibly the Hanseatic League.

It is still curious to me that Europe divides itself between the "Latin" South and the North (I prefer to think of the Roman South and the Hanseatic or Viking North).  We have become so used to the Russian Discussion that we think only in terms of East West, especially as it applies to Germany.  But historically the lands of the Germans have been divided North South between the Catholic Bavarians of the Southern Mountains, culturally allied with France, Portugal, Italy, Greece and Spain and the Protestant Hansans of the Baltic Coast.  Niall's German dichotomy (the unhappy Germans) I think must reflect that.

Also curious to me is the role of the third group of Germans, those of the Valley of the Main, in the Middle, that have been historically torn North South and East West. In the East it is bounded by Bohemia (Czech Republic).  In the West it is bounded by Mainz, Koeln, Trier, Koblenz, Aachen, Luxembourg, The Ardennes, The Saarland, Alsass, Lorraine, The Palatinate of the Rhine, Westphalia and the Fulda Gap...... Its Capital is Francfurt.  It used to be known as Francia......

Culture matters.


----------



## FoverF (24 Nov 2011)

E.R. Campbell said:
			
		

> I *hope* Ferguson is right but I fear that I am. My prediction remains that Greece, Italy, Spain, Portugal and France all end up, within the next five years, being governed by _populist_ movements and that all those _populist_ movements become fascist/national socialist dictatorships within a decade.



In Ireland's presidential election mere weeks ago, Sinn Fein won 14% of the popular vote. With a candidate (Martin McGuiness) who had been convicted and imprisoned for possession of a car full of 250kg of explosives and 5000 rds, and is known to have been one of 5 members of the IRA council. 

Imagine what will happen next time around, when they run with a candidate who is not a known murderer.


----------



## a_majoor (25 Nov 2011)

The Global bomd market gives it s verdict on Europe. I predict interest rates will start rising everywhere despite the efforts of central bankers (even ours) to keep the interest rates low. F.A. Hayek will not be denied:

http://pointsandfigures.com/2011/11/25/death-spiral-in-euroland/



> *Death Spiral in Euroland*
> 
> Posted by Jeff Carter
> on November 25th, 2011
> ...


----------



## Kirkhill (25 Nov 2011)

I think what the market is doing just now is starting to discount the Euro and the Eurozone as future players and instead focusing on the national economies to determine what the risk is going forward.  

With Angela holding fast to getting re-elected by not perturbing the 70-80% of her voters that werden keinen Eurobonden haben there is an increasing risk that Euro paper will blow away in the breeze.  Conversely Italy, as an example, has a track record of paying its debts even when it was carrying  money over 7% previously.

Eurozone Italy is weak.  Italy is not weak.

You just need to look at the UK.  Its finances are not better than those of Spain, and is about on par with the Eurozone average.... but investors are preferring the risk there to the risk in the Eurozone.

Edit:



> From Kamal Ahmed, Sunday Telegraph Business Editor:
> 
> @kamalahmed1So, that's why Angela Merkel has set her face against eurobonds - ZDF poll: 79% of Germans against eurobonds via @OpenEurope


----------



## a_majoor (27 Nov 2011)

This article suggests there may be an optimistic outcome in the end, but the greater danger is during the chaos created by the collapse of the Welfare State and the rest of the Progressive project, citizens will call for stability and look to "The Man on the White Horse" to provide it. (Edward Campbell puts it a bit differently; States will be captured by populist movements, which work in effectively the same manner and result in the same outcome; the establishment of illiberal, authoritarian States). Perhaps with some judicious stick handling we may reach this desired outcome, but I think the fortunate few who achieve this end state will have to fight like hell to get there.

http://metanoodle.blogspot.com/2011/11/normal-0-false-false-false.html



> *The Second Great Depression is coming to town.*
> 
> Remember “The Great War” was renamed “World War One” after 1939?   Next up, the "Great Depression” will be renamed the "First Great Depression”.
> 
> ...



The highlighted paragraph hints at the outlines of a post progressive state; while the details may not be as described (I am skeptical of "cold fusion", for example), the undermining of centralized, bureaucratic institutions and "gatekeepers" continues apace, and effective distributed energy, manufacturing and information is coming in the near term, maybe near enough to make the changes suggested and needed.


----------



## a_majoor (29 Nov 2011)

This describes the situation not only i the US, but most of the West in general (and other parts of the world have similar issues). The breakdown and collapse of these structures could lead to chaos and "popular" movements (The man on the white horse scenario); or the evolution of a post progressive society:

http://www.zerohedge.com/news/guest-post-future-jobs



> *Guest Post: The Future Of Jobs*
> Tyler Durden's picture
> Submitted by Tyler Durden on 11/28/2011 17:54 -0500
> 
> ...



The TEA Party movement is in response to this (and the Libertarianism as a social movement as well), correctly identifying the growth of State power as the issue; break the power of the State and roll it back to its natural areas (protecting liberty, property rights and the rule of law) and the "elites" will have little to capture.


----------



## Kirkhill (29 Nov 2011)

Thucydides said:
			
		

> This describes the situation not only i the US, but most of the West in general (and other parts of the world have similar issues). The breakdown and collapse of these structures could lead to chaos and "popular" movements (The man on the white horse scenario); or the evolution of a post progressive society:
> 
> http://www.zerohedge.com/news/guest-post-future-jobs
> 
> The TEA Party movement is in response to this (and the Libertarianism as a social movement as well), correctly identifying the growth of State power as the issue; break the power of the State and roll it back to its natural areas (protecting liberty, property rights and the rule of law) and the "elites" will have little to capture.



The OWS movement is ALSO in response to this......although they seek the "Right" institution when the existing institutions are failing them.  Libertarians (and I count myself among them) seem more inclined towards NO institutions and a greater reliance on the person.........which starts to sound an awful lot like Anarchy.

Maybe the only difference between me on the right and them on the left is that I keep running the circle clockwise and they run it counter-clockwise.


----------



## a_majoor (29 Nov 2011)

The OWS movement seeks to capture the State and control the redistribution of wealth to whatever ends they deem fit; "They're bastards, but they're our bastards". Exchanging one group of crony's or oligarchs for a different groups realy does not change the game or the outcomes, just the deck chairs on the Titanic (how's that for a mixed metaphor?  )

Most Libertarians (and even Randian Objectivists) believe in a very limited set of roles for the State (most disagreements come from where the limits lie) which excludes places where crony capitalists and oligarchs can capture and direct the flow of tax dollars and shut out competition. It is still possible to rig the Police, the Military and the Courts of Law in order to capture the wealth, but it is harder to do and more obvious, and the competition will be much fiercer since there are fewer targets for the cronys and would be oligarchs to capture. There would be a "churn" of new people and ideas as a minimum, and political and economic dynasties would be minimized.


----------



## a_majoor (30 Nov 2011)

The UK makes preparations:

http://www.guardian.co.uk/politics/wintour-and-watt/2011/nov/29/georgeosborne-autumn-statement-20111



> *George Osborne prepares for run on banks in troubled eurozone countries*
> 
> Tories warn of collapse of eurozone and danger of a depression as Germany is criticised for slow response
> 
> ...


----------



## 57Chevy (4 Dec 2011)

Shared with provisions of The Copyright Act

Why Canadians should care about a euro collapse
Mark Gollom, CBC News  01Dec
http://www.cbc.ca/news/canada/story/2011/11/30/euro-impact-canada.html

The demise of the euro would deliver a significant blow to the Canadian economy, leading to less trade, higher unemployment and a possible recession, financial experts say.

"The situation in Europe would create a tsunami that would reach our shores very very quickly," Louis Gagnon, finance professor at Queen’s University School of Business in Kingston, Ont., told CBC News.

"We would be collateral damage and this collateral damage would be very, very significant."

With some European countries seemingly unable to control their spiralling debt crises, and with uncertainty over the type of financial relief the European Central Bank may contribute, there are fears the end of the euro is near.

Gagnon explained that if the euro dissolved as a currency, a number of countries with their debt denominated in euros would immediately have to default since they would adapt their own domestic currencies and those would be devalued from anywhere between 50 to 70 per cent.

As the marketplace establishes the exchange rates, Gagnon said, you would see a "fire sale" on the exchange rates because investors would have very little confidence in these new currencies.

"These countries would be forced to pay back debt holders in euros which they don't have. As well, financial institutions, all the banks have euro obligations," he said.

Banks' failure may affect the world

As some European governments would default, banks holding those bonds would not have money to lend, drying up liquidity, sparking a severe global economic contraction and causing a major economic crisis.

"It's one banking system, when we look at it. If it fails in Europe, the rest of the world would be affected," Gagnon said. 
But what does that mean for the average Canadian?

"This would cause panic, fear, remove all the confidence in the financial system," Gagnon said. "The global financial system would become paralyzed … in this way Canadians would be affected."

Canadians would stop spending, which could lead to a possible recession in Canada.

Walid Hejazi, associate professor of international business at the University of Toronto's Rotman School of Management, said that being part of an integrated global economy means what happens elsewhere could affect us.

"Much of our prosperity is driven by our linkages into the global economy and much of the risks are driven by our linkages to the global economy, so you have to deal with both."

Hejazi said employment numbers, income growth, value of our assets, our homes and the assets of financial markets would all be put at risk.

"So it can actually impact the average Canadian quite significantly. So we do have to worry. It's not something the average Canadian can say, 'It's over there in Europe, who cares?'"

'When they do well, we do well'

Hejazi said he worked with the Department of Foreign Affairs on the first study on deepening the economic relationship between Canada and EU in 2008.

"There was tremendous goodwill about the benefits that come between Canada and the EU," he said. "I found that people really wanted to deepen the relationship because of the economic opportunity, but also because of the history.

"On the business side, we want the Europeans to get out of this. We want them to do well. One thing that's really clear is when they do well, we do well. When they're worse off, we're worse off."

Matthias Kipping, professor of policy and chair in business history at Schulich School of Business, said the euro collapse would mean countries would become more protectionist, which would have a major effect on a country like Canada that relies on exports.

While Canada’s direct share of global trade with Europe is relatively small, it would be indirectly affected by those countries, in particular the United States, which are heavily exposed to the European market and which Canada trades with.

But Kipping said the crisis would take a little while for it to work its way through Canada.

"People won't get fired immediately tomorrow, but it will work its way through."

The "doomsday scenario," he said, is the credit flows stop, meaning economic activity and trade stop or get severely curtailed.

"The next thing is if trade stops, who are you going to sell to? People who make things, they eventually have nothing to do, and they'll be out of a job. It may not happen next week, but could happen next year."

While Canadian banks don't have much direct exposure to Europe, they would be affected by the "calamity raging in the credit marketplace," Gagnon said, meaning they would have to stop lending to other banks.

But Gagnon said Canada, with its relatively healthier banks and deficit containment, is in a better position than other countries to deal with the crisis.

"Things aren’t looking all that great, but I think we would weather the storm to a better degree than our trading partners and especially Europe."


----------



## Nemo888 (8 Dec 2011)

Looks like  the EURO collapsing is nothing compared to what is happening behind the scenes. If I understand this correctly here is what happens;

CIBC buys 500$ worth of a stock or security in London from Broker A.  250$ cash and 250$ on margin for which they have “collateral” which may in itself be of dubious value. CIBC then has 500$ worth of assets on paper. But the 250$ they borrowed is ALSO considered an asset by Broker A and they can use that as collateral to buy securities on margin from Broker B. Who can then buy on margin from Broker C, etc.  So 250$ of notional assets which may have little real world value to begin with turns into thousands of dollars on the market. This is what is keeping the system afloat and Canadian banks are highly exposed.  And the kicker,.... They invested the fake money in sovereign AA Bonds. So if one country defaults the entire world banking system could be dead. 

More at the link if you wish to read. Merrry Christmas. >
http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe

Most annoying is that these brokerage houses are on welfare. They buy bonds with fictitious money that suck taxpayers money in the form of bond yields to pay themselves multimillion dollar bonuses. Why can't we all use pretend money to invest millions in Canada Savings Bonds and live off the interest? Douche bags. Armani f%@#ing welfare bums. 


P.S. CIBC has 72 billion and the Royal Bank 54 billion in assets invested in this pyramid scheme. Canadian banks are DIRECTLY exposed.


----------



## a_majoor (8 Dec 2011)

The Tragedy of the Commons as applied to the Euro:

http://www.hoover.org/publications/defining-ideas/article/102281



> *The Euro & The Tragedy of the Commons*
> by Gary D. Libecap (Sherm and Marge Telleen Research Fellow and Cochair, Property Rights, Freedom, and Prosperity Task Force)
> Is it any wonder that the currency zone encouraged profligate debt?
> 
> ...


----------



## Nemo888 (8 Dec 2011)

China's experiment with bubble economics looks to be feeling the strain. Their stimulus package is ending and the strain is visible everywhere. Der Speigel has a good story on it.
http://www.spiegel.de/international/europe/0,1518,802308,00.html


----------



## Kirkhill (8 Dec 2011)

> Some businesses might have started drawing up contingency plans to deal with a collapse of the euro, but David Newlands, chairman of Kesa Electricals, was remarkably unruffled about the crisis. He said that Kesa had modelled for no such collapse, adding:
> 
> *If you turn a Frenchman upside down, he has plenty of money, and if you look down the back of an Italian's sofa, there's plenty of money there. Europeans are going to carry on spending on white goods, whether it is in euros, or francs or lira. All we would have to do is change the tills, which would be a bit of a bugger  *



http://www.telegraph.co.uk/finance/debt-crisis-live/8939634/Debt-crisis-as-it-happened-December-7-2011.html

The real impact of the financial crisis:

Politicians and Bureaucrats being exposed as totally ineffectual and deprived of alms to distribute.

Bankers not much further behind.

With the internet, in the absence of cash, how long would it take for David Newlands to decide that he would accept a new Mercedes in exchange for 10 stoves?  Means of exchange?  Store loyalty points?  Clubs?  Visa/Master Charge Credits (undenominated).  People are already swapping goods and services effectively internationally without money.....

Roll on default..... Death's too late.


----------



## Edward Campbell (9 Dec 2011)

A pretty fair assessment, I think of what has just transpired in Brussels, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/international-news/eus-vicious-circle-economics-dooms-it-to-failure/article2265562/


> EU’s vicious-circle economics dooms it to failure
> 
> ERIC REGULY
> 
> ...




I thinks Reguly is right: slow to no growth in Euirope and the USA (and parts of Asia, too) is making this the _Great Recession_. One result of the German's disciplinary theme will be slower growth - just what Europe doesn't need.

I also think Cameron got it right, albeit probably for the wrong reasons. The best way to avoid the train wreck is to not get on the train.


----------



## camouflauge (10 Dec 2011)

I don't believe in endless growth, it doesn't make any sense at all in a World of finite resources. However, Reguly is correct that stimulus is needed if only to halt the shrinkage in economies and to get them over the short-term woes. Cutting to reduce deficits when economies are weak is simply stupid.


----------



## SeaKingTacco (10 Dec 2011)

camouflage said:
			
		

> I don't believe in endless growth, it doesn't make any sense at all in a World of finite resources. However, Reguly is correct that stimulus is needed if only to halt the shrinkage in economies and to get them over the short-term woes. Cutting to reduce deficits when economies are weak is simply stupid.



I think that you are committing the error of under-estimating just how large the resources of the planet are.  Additionally, not all economic growth springs from physical things.  I give you the example of the computer software, which alone is worth billions of dollars of economic activity.  Finally, do not under- estimate the human ability to adapt quickly to shortages and create new ways of creating things.


----------



## Edward Campbell (10 Dec 2011)

E.R. Campbell said:
			
		

> A pretty fair assessment, I think of what has just transpired in Brussels, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:
> 
> http://www.theglobeandmail.com/report-on-business/international-news/eus-vicious-circle-economics-dooms-it-to-failure/article2265562/
> 
> ...




Here, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, is a counter-opinion regarding the impact and import of Prime Minister Cameron's decision to isolate Britain from its EU partners:

http://www.theglobeandmail.com/news/world/doug-saunders/the-day-britains-prime-minister-failed/article2266489/


> The day Britain’s Prime Minister failed
> 
> DOUG SAUNDERS
> 
> ...




For the very reasons Saunders gives in the 2nd paragraph I remain convinced David Cameron was right to isolate Britain. Yes, there are risks; yes, it will make European recovery more difficult, but, on balance, given the pernicious nature of Merkel's _diktats_, Britain is better off "out." Not "out" of Europe, just out of the € mess and the even messier repair job.


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## a_majoor (11 Dec 2011)

A British look at how things might unfold:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100013758/europes-blithering-idiots-and-their-flim-flam-treaty/



> *Europe's blithering idiots and their flim-flam treaty*
> 
> By Ambrose Evans-Pritchard Economics Last updated: December 9th, 2011
> 
> ...


----------



## Good2Golf (11 Dec 2011)

I think Evans-Pritchard is heading in the right direction: the opportunity (looked at as a good thing) for Britain to strengthen diversification of economical ties elsewhere, while the big teeter-tottering of Franco-Germanic (lack of) stewardship of punitive economic policy and their symbiotically-reinforce strong-arming of the other 24 (25) "zoners" continues.  Yup, Scandanavian-Neutrals-Chinese-Indian-North American strengthening of ties really couldn't hurt Britain as this point - small short-term pain to "invest" in the non-Eurozone economies for the longer-term gain of a more resilient economy, less vulnerable to the Champs Élyssé and the Fifth Reich.

Regards,
G2G

p.s.  What the heck is Croatia thinking?  ???


----------



## Edward Campbell (11 Dec 2011)

Good2Golf said:
			
		

> I think Evans-Pritchard is heading in the right direction: the opportunity (looked at as a good thing) for Britain to strengthen diversification of economical ties elsewhere, while the big teeter-tottering of Franco-Germanic (lack of) stewardship of punitive economic policy and their symbiotically-reinforce strong-arming of the other 24 (25) "zoners" continues.  Yup, Scandanavian-Neutrals-Chinese-Indian-North American strengthening of ties really couldn't hurt Britain as this point - small short-term pain to "invest" in the non-Eurozone economies for the longer-term gain of a more resilient economy, less vulnerable to the Champs Élyssé and the Fifth Reich.
> 
> Regards,
> G2G
> ...




Croatia? Thinking?







My guess is that they have visions fo DMs German largesse dancing in their heads.


----------



## Kirkhill (11 Dec 2011)

Nicholas Sarkozy is what I used to know as a "Chancer":  a man without principle who will accept any deal so long as it keeps him out of the frying pan for a while longer.   Also he is French.

Angela Merkel is German - raised in a Lutheran household - where "Ordnung muss sein" and  in a Communist environment of Five Year Plans.  She believes in her bones that it is possible to create a New Jerusalem if only people will obey.

Both of them have imbued 2000 years of antipathy amongst Franks, Saxons and Angles.

Neither of them have yet learned that despite the best efforts of the following leaders, centralized government in Europe is unsustainable:

Clovis
Charlemagne
Barbarossa
Charles Hapsburg
Louis XIII to XV
Bonaparte
Schickelgruber

And yet they persist....

Insanity.


----------



## a_majoor (13 Dec 2011)

They might not want our oil, but they are making it easy for the TSX to poach international capital if we work fast and offer much more attractive tax rates and transaction fees:

http://pointsandfigures.com/2011/12/12/doing-business-with-the-simpsons/



> *Doing Business With The Simpsons*
> 
> Posted by Jeff Carter on December 12th, 2011
> 
> ...


----------



## camouflauge (13 Dec 2011)

SeaKingTacco said:
			
		

> I think that you are committing the error of under-estimating just how large the resources of the planet are.  Additionally, not all economic growth springs from physical things.  I give you the example of the computer software, which alone is worth billions of dollars of economic activity.  Finally, do not under- estimate the human ability to adapt quickly to shortages and create new ways of creating things.



Okay, you have a good point and examples there. I think I maybe wrong on my viewpoint


----------



## Edward Campbell (13 Dec 2011)

Here, from the _Globe and Mail's_ website is an interesting talk by historian Niall Ferguson. He lists six "killer apps" (ideas) that made Western civilization the ruler of all the world:

1. Competition;
2. Science;
3. The rule of law;
4. Modern medicine;
5. The consumer society; and
6. The work ethic.

Now Ferguson is a "celebrity academic," who makes a lot of money going from podium to podium (for many thousands of dollars per talk) saying interesting and somewhat provocative things. But he is a good historian, especially where economic matters are concerned and he is, also, what the great liberal philosopher Isaiah Berlin would have called a fox - a thinker who jumps, quickly, from idea to idea (as opposed to a hedgehog who sticks to one "big" idea). His fox like thinking means that he can, often - not always, connect seemingly random dots and get a picture.

The video is worth four minutes of your life. Is his conclusion, in his new book _Civilization_, that we are the last generation of Westerners who will be "on top of the world" correct? I don't know but I don't think so - we may have to share the pinnacle with China and India but they are unlikely to push us off until most of you - who are twenty or thirty somethings - are much older than I am, now and, heaven forbid, even older than Old Sweat   .


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## Brad Sallows (13 Dec 2011)

Perhaps it is subsumed by "rule of law", but I would add "7. Trust beyond the family/tribe/ethnic community."

I expect China to do what it always does when its internally derived "empire" (ie. China) becomes unmanageable: dissolve into civil war.

I have no idea whether India has established a sense of collective identity sufficient to damp the strains of its historic divisions.


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## a_majoor (13 Dec 2011)

More for anyone who believes that low taxes and regulations don't create economic growth (lots of interactive graphics at link:

http://www.telegraph.co.uk/news/interactive-graphics/graphic-of-the-day/8903077/Graphic-How-bureaucracy-is-slowing-Europes-recovery.html



> *Graphic: How bureaucracy is slowing Europe's recovery*
> Regulations and poor administration have held back Portugal, Ireland, Italy, Greece and Spain's economies, illustrated here using Doing Business data.
> 
> By Conrad Quilty-Harper
> ...


----------



## Kirkhill (14 Dec 2011)

Britain Isolated:

Angela wants Britain back
http://www.telegraph.co.uk/news/worldnews/europe/eu/8956074/Angela-Merkel-regrets-Britains-veto-of-EU-treaty.html
Guessing that she doesn't like the idea of being left alone in the room with Nicholas Sarkozy.... 

As well the Bundesbank, her own coalition partners and her constitution are saying she can't do what she signed on for.

Michel Barnier wants Britain back
http://www.telegraph.co.uk/finance/comment/8954542/Michel-Barnier-we-want-just-one-single-market-in-Europe-including-the-UK.html
Short form: Please don't run away.  We need you to protect us from the Latin spendthrifts.  I'll protect you.  Haven't I always?

Ireland wants Britain back (both Fine Gael and Fianna Fail - and that's good for a laugh).
http://www.ft.com/intl/cms/s/0/c663af18-24ac-11e1-bfb3-00144feabdc0.html#axzz1gOMtsvIH

Sweden, Finland, Hungary, Poland and the Czechs are unclear as to the routes they will follow and thus no safe bets for Merkozy.  They are going to hang on until:
a) there are words on the treaty and not just a blank sheet of paper
b) March 2012 when those magic words are due to appear.

The EU (Merkozy) want/need Britain to pony up another 30 Billion Quid to save the Euro (And why not? All 26 other people at the meeting agreed that Britain should kick in, even as Cameron walked out the door.  : )
http://www.telegraph.co.uk/news/8956313/Britain-resisting-EU-pressure-to-contribute-30bn-to-IMF.html

And Britain has a veto on whether or not the other lads get the keys to the clubhouse to have meetings at which Britain is excluded.
http://www.independent.co.uk/opinion/commentators/john-lichfield/john-lichfield-if-cameron-ups-ante-on-the-euro-things-will-get-very-nasty-6276629.html

And even Wee Eck, Alec Salmon, Leader of the Scottish Nationalist Party, is having to pull a Party Quebecois stunt and tell the Scots that if they go independent they will get to keep the Pound....  ;D
http://www.guardian.co.uk/commentisfree/2011/dec/14/alex-salmond-snp-europe

Meanwhile Nick Clegg has admitted that he can't quit the Coalition - It would be the death of the Liberal Democrats.
The voters like what Cameron did.
http://www.telegraph.co.uk/news/worldnews/europe/8956748/Europe-Voters-liked-the-veto-now-they-want-more.html


All in all David Cameron's isolating veto is looking a lot better now than it did last week.

Now then all you Continentals......about that Transaction Tax and Human Rights Opt Outs.......



Meanwhile the Eurocrisis continues, Sarkozy is behind in the polls with a May 2012 election ahead of him and Angela is looking at solving the problem some years down the line.



More to follow.


----------



## Good2Golf (14 Dec 2011)

Talk about 'double-speak'!   Bernier takes the cake with this one:



> ...Above all, we should realise that *a single European market needs a single rule book*. This is not just my personal view: it is the stated policy of all EU countries, including the UK. In fact, the UK led the call for a single rule book. We should *create the basic same rules for banks and financial institutions*. This will make our financial system safer, and make it easier for institutions to operate across the EU and benefit from the size and scale of the single market. This is clearly in the interests of the UK's financial sector.
> 
> This cannot mean that one size fits all. The *principle proposed by the Commission is to implement banking rules for all, but to allow considerable discretion for national supervisors*. We have said it before: we believe our proposed rules means the UK can fully implement Vickers. What we don't understand is what more the UK wants. But, *as long as the outcome maintains the single rule book, we are ready to find flexibilities*.
> ...



WTF?  ???

[We [EU] all must follow the same rule book, but we'll give you [considerable] flexibility in which rules you have to follow.]


Oh, you mean like 'exceptions', those things that the UK was looking to secure to ensure greater security of the monies that the UK would contribute to ECB activities?  :


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## Kirkhill (14 Dec 2011)

They go to school to learn to speak like that - specifically "The College of Europe" - one of Nick Clegg's Alma Maters.

Nick's a very modern Brit.

Dutch Mother.  Spanish Wife.  Home in France.  School in Brussels.  Member of the European Parliament.  Aristocratic connections.  And Dad's half-Russian.

In fact he would make an excellent leader of the Liberal Party of Canada.


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## Edward Campbell (14 Dec 2011)

Kirkhill said:
			
		

> They go to school to learn to speak like that - specifically "The College of Europe" - one of Nick Clegg's Alma Maters.
> 
> Nick's a very modern Brit.
> 
> ...




You weren't paying attention    they tried that ... look at where they are now.


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## a_majoor (14 Dec 2011)

Third times the charm?  >


----------



## GAP (14 Dec 2011)

E.R. Campbell said:
			
		

> You weren't paying attention    they tried that ... look at where they are now.



Nah.....they just picked the wrong one....they should try the same pattern again.......right away....


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## a_majoor (15 Dec 2011)

Say it ain't so:

http://www.marketwatch.com/story/this-slump-wont-end-until-2031-2011-12-14?reflink=MW_GoogleNews&google_editors_picks=true



> *This slump won’t end until 2031*
> Commentary: Our predicament parallels Long Depression of 1870s
> By Matthew Lynn
> 
> ...



The checksum is the popping of the Japanese property value bubble at the end of the 1980's. One moment the Japanese were supposed to take over the world, then the bubble popped, but the Japanese government tried to prop up the banking system. Banks saddled with billions in non performing loans and property assets worth a fraction of the purchase value stumbled along for two lost decades while the central bank manipulated interest rates trying to goose the economy...sounds familiar?

Canada is in a unique position, our debt is alarming but still small enough we could actually pay it off, through a combination of spending cuts and tax cuts to power the economy into a higher economic growth mode. Cutting subsidies to business will save $30 billion a year, even just eliminating Crown Corporation would save over $8 billion; twice what the Government is looking for in austerity cuts today. Tax cuts provided Ontario with an additional $20 billion in revenue by the end of the Mike Harris era, and Saskatchewan today is growing rapidly now that the dead hand of the NDP government is gone (the resource boom helps, but remember Sask did not benefit from the oil boom of the 1980's like Alberta did, despite having a similar basket of resources. Saskatchewan's oil stayed in the ground while Alberta's flowed). If each province could generate an average of $3 billion/year extra in revenues that would pretty much eliminate the deficit; spending cuts would take care of the debt...


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## Kirkhill (15 Dec 2011)

Good2Golf said:
			
		

> Talk about 'double-speak'!   Bernier takes the cake with this one:
> 
> WTF?  ???
> 
> ...




You know G2G, on re-reading that I think I finally get it.

It goes to the heart of something I suspected a long time ago.

Consider:  The National Electrical Code.  There is one rule book.  There are many inspectors.  Just because you follow the rule book to the best of your understanding, and one inspector in Ontario agrees with you, there is no guarantee that other inspectors will also agree with you in BC, for example.

This is normal.

But.

In Europe there is a cultural divide based on this.  

The Northerners expect rules to be followed.  Therefore they make few rules and tie themselves to them.  Inspectors have a limited role.

The Southerners, like M. Michel Barnier, consider rules to be totems.  They are evidence of civilised thought.  There should be lots of them thereby demonstrating how civilised the organization is.  

Now, as to following the rules, that is another matter.  The rules are so complex that nobody can understand them let alone follow them. Trying to unravel and interpret them is a job best left to the professionals.

And so professionals spend their days perusing books of rules and adding to them.

Meanwhile, your average southerner, on discovering that he can't predict when he will run afoul of the rules, and the local inspector, reverts to Plan B.

He goes directly to the inspector, and finds out how much it will cost to allow him to do what he wants to do.  Everything is negotiable.

Meanwhile bureaucrats occupy themselves talking to each other and generating more rule books that nobody ever reads and nobody in the real world ever pays attention to.

M. Barnier should be complimented for being so clear.  :


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## Nemo888 (15 Dec 2011)

Europe is on borrowed time. Most of their money supply is artificial. Merely rehypothecated credit with negligible assets backing up these phantom Euros. The West stopped _*making*_ wealth in the Reagan/Thatcher era. We chose to let bankers _*invent*_ wealth instead. We cut the root of long term economic success and sought to exploit third world countries to do our work for us paying them with money our bankers invented.  How can you have a wealthy nation if you have no manufacturing? It will never work for long because the only way is to game the system and exploit another nation. Eventually they get wise and start charging you more and what usually happens is either financial collapse or invasion and colonization. We are not safe at all. Our banks have hundreds of billions of dollars tied up in this Ponzi scheme and no manufacturing base to fall back on.

Fixing the system now or later are the two choices. Shoring up a corrupt and self serving elite with more fractional reserve banking and shoveling taxpayer money onto their plates will not fix the structural problems. It will only make things harder to solve later.


----------



## Kirkhill (15 Dec 2011)

Nemo888 said:
			
		

> Fixing the system now or later are the two choices. *Shoring up a corrupt and self serving elite* with more fractional reserve banking and shoveling taxpayer money onto their plates will not fix the structural problems. It will only make things harder to solve later.



Will you give the Class Warrior rhetoric a rest, man?
Karl Marx is dead and buried and so is Das Kapital.

Those banks that you resent so much are holding my retirement.  I certainly have no interest in seeing them go titsup.  On the other hand, it would be true to say that I'm not overly thrilled when I see my Banker driving a better car than I can afford....but it was ever thus.  Just ask the Pharisees.


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## Nemo888 (15 Dec 2011)

The bank holding most of my retirement funds, CIBC, used my money as an asset to gamble 72 billion in the European market using _*fractional reserve*_ banking practices(off balance sheet, thanks lax London Exchange filing regulations) that are neither safe nor sustainable. For taking huge risks with my money they gave themselves huge bonuses and retained great profitability during the worst recession in 80 years. If they lost the bet  _*taxpayers*_ would have to bail them out. When that happens words like plutocracy become important. A word invented by the same people who invented democracy as a cure for this social illness, not Karl Marx. I want to vote against retail banks being able to rehypothcate funds(Multiple parties using the same sketchy collateral to obtain credit.) in a near endless fashion to _*invent*_ profitability. All the political parties are afraid of telling retail banks to be the safe, boring, risk averse ventures they were designed to be after the Great Depression. How many bubbles will it take before people get tired of this? A bit of belt tightening will not help when half of Europe's money supply evaporates. Retail banks need to be split off from commercial and investment banks or taxpayers will be left holding the bag for these rich douche bags yet again. 

If you know that if you gamble and win you make millions in bonuses and if you lose taxpayers pay the bill (and you get millions in bonuses) what incentive is their to make sure people keep their investments? Looking good on paper for the next quarterly bonus is all that matters. Perverse incentives at their worst. If we split off retail baking they are no longer too big to fail and will, without further regulation, reduce their risky practices. Demanding Greece stay afloat so the entire system does not collapse is a temporary measure. The Greeks will not put up with this for for long. Best to regulate now before it is too late.


----------



## ModlrMike (15 Dec 2011)

Canadian banks were not bailed out. They did not receive taxpayer monies for bad loans. The government bought loans that it was on the hook for under CMHC anyways, in the process injecting cash into a system that was cash starved.


----------



## Nemo888 (15 Dec 2011)

If the billions on margin in the LSE are not deleveraged and Greece defaults it is very likely they would have to be bailed out. That is my point.  LSE's off balance sheet rehypotecation is a ticking bomb similar to sub-prime. Some estimate 75% of the funds are without paper to back them. A conservative estimate could see 100 billion in Canadian assets evaporating if the LSE fell apart in a Euro bond crisis. I don't think the Canadian economy could come back from that. It would be nice to have retail banking fire walled from that eventuality. The idea of letting banks play the stock market was always a bad idea IMO. It did make investing so much more convenient though. Even I am tied up in this fiasco now.


----------



## SeaKingTacco (15 Dec 2011)

Nemo888 said:
			
		

> If the billions on margin in the LSE are not deleveraged and Greece defaults it is very likely they would have to be bailed out. That is my point.  LSE's off balance sheet rehypotecation is a ticking bomb similar to sub-prime. Some estimate 75% of the funds are without paper to back them. A conservative estimate could see 100 billion in Canadian assets evaporating if the LSE fell apart in a Euro bond crisis. I don't think the Canadian economy could come back from that. It would be nice to have retail banking fire walled from that eventuality. The idea of letting banks play the stock market was always a bad idea IMO. It did make investing so much more convenient though. Even I am tied up in this fiasco now.



Nemo,

You had a good point. Fractional banking bad. Over leveraging bad.  We get it. Reposting the same thing, over and over and over again does not make your point stronger or contribute much to the discussion.


----------



## Fishbone Jones (15 Dec 2011)

Nemo888 said:
			
		

> If the billions on margin in the LSE are not deleveraged and Greece defaults it is very likely they would have to be bailed out. That is my point.  LSE's off balance sheet rehypotecation is a ticking bomb similar to sub-prime. Some estimate 75% of the funds are without paper to back them. A conservative estimate could see 100 billion in Canadian assets evaporating if the LSE fell apart in a Euro bond crisis. I don't think the Canadian economy could come back from that. It would be nice to have retail banking fire walled from that eventuality. The idea of letting banks play the stock market was always a bad idea IMO. It did make investing so much more convenient though. Even I am tied up in this fiasco now.



Have you closed your accounts?

One can't be a true revolutionary (insert your favorite communist\ socialist here) and condemn "The Man" and it's "Institutions" while supporting it at the same time.


----------



## a_majoor (15 Dec 2011)

Nemo:

Transfer your banking, investments and RRSP to the local credit union.

Problem solved


----------



## Edward Campbell (15 Dec 2011)

More, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ on the potential benefits of a pipeline to West Coast ports - or the cost to Canada of obstructing such a pipeline:

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/blocking-pipelines-to-bc-would-entail-loss-of-billions-study/article2272388/


> Blocking pipelines to B.C. would entail loss of billions: study
> 
> CARRIE TAIT
> 
> ...




That, $131 Billion over 14 years or nearly $9.5 Billion *new* dollars of income every year, is a fair chunk of change. It does not seem reasonable that a few thousand people in isolated, welfare dependent first nations should be allowed to stand in the way of 650,000 person years of employment - many of them for first nation members. But I don't think they, the first nations, will stand in the way for too long. I am confident that their leadership is venal and can be bought.


----------



## Retired AF Guy (15 Dec 2011)

E.R. Campbell said:
			
		

> More, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ on the potential benefits of a pipeline to West Coast ports - or the cost to Canada of obstructing such a pipeline:
> 
> http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/blocking-pipelines-to-bc-would-entail-loss-of-billions-study/article2272388/
> 
> ...


----------



## Nemo888 (15 Dec 2011)

Even better build a refinery on the coast and ship fractionated product. I always wonder why we don't upsell our natural resources more. It is also possible to use nuclear power to extract the oil from the tar sands.  Make a liquid heavy metal thorium reactor to boil water. Not a huge technological hurdle. Solves so many problems. Nuclear weapons proliferation, CO2 emissions, the waste material decays very quickly so it is very safe by comparison, etc. We need to be bold IMO.


----------



## Nemo888 (15 Dec 2011)

I am pretty pissed still. I only found out about this level of risk a few days ago. Still in shock. Not retiring like some of those Nortel employees sounds like a nightmare. Did they ever get screwed.  I am wondering where to find a safe place to invest. Gold is already out of reach IMO. The best things I could come up with is stock in something recession proof like Walmart, corporate bonds, or in something to do with repossession/bankruptcy agents if things start to go south again. The worse things get the more people will shop at Walmart. So much depends on the government's reaction to the other shoe dropping it is  hard to decide. Investing in independence is looking attractive. An antenna instead of cable, solar panels, a wood stove and perhaps going in with a neighbor on a rototiller. A few people need to take a risk averse path just in case.


----------



## a_majoor (15 Dec 2011)

1. Invest in things like a "Victory Garden" and rain barrels
2. Try to avoid debt instruments as investments. Exception, if you are directly lending money to a mortgage where you can assess the risk. (Note, even the Canadian housing market is considered by some experts to be overvalued by as much as 25%)
3. Commodities will still have value, but not as much as before if the economy crunches and demand falls
4. People with nerves of steel might consider taking short positions on vulnerable stocks
5. Get marketable skills or stockpile marketable "stuff"; during the hyperinflation of the 1970's in Argentina, people would stockpile anything they could get their hands on on payday, houses full of shoes, appliances and cars parked in the yard to trade with.

Other ideas are in many of the "economy" threads.


----------



## Good2Golf (16 Dec 2011)

Nemo888 said:
			
		

> ...I am wondering where to find a safe place to invest. Gold is already out of reach IMO...



You mean you don't have at least $1600 in savings?


----------



## Nemo888 (16 Dec 2011)

Gold may already be in bubble territory IMO. Even the prices on gold mining and production companies have already spiked. Though you could easily see 2000$ an ounce if things crashed I don't think it is the best thing to invest in right now. If that reaches 3000$/oz I have another back up plan. My dad still has a claim on some gold producing land in BC. But with only about 2 grams of flake for a days work it's not worth working. Gold only sells for 50$ a gram right now. At 100$ a gram that could be a nice semi retirement.


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## Kirkhill (16 Dec 2011)

On the subject of gold: My education continues.

I have come out in favour of a return to the Gold Standard.  I have changed my mind.  And not for the first time.   

Watching what is going on in Europe has been my education.

What Germany is doing to the Eurozone is effectively holding the Eurozone to a Fixed Standard of Exchange, roughly equivalent in effect to a Gold Standard.

This morning France is moaning that their economy is in better shape than the UK's and that the UK's credit rating should be cut before France's is cut.   Arguably they have a point.  (But they are wrong.....They are French.  > )  

The difference is that Britain can continue to write IOUs to the world denominated in their own tender.  In some sense each Pound Sterling could be looked at as a stock option in UK PLC.  People will continue to put their money into Pounds just so long as they believe their money is safe there.

On the other hand the Euro is a stock option issued by the Eurozone.....whoever and whatever that entity is, whatever their rules might be and if it continues.  Right now 300 years of the Bank of England looks better than 10 years of the ECB as a bet.   (And the Swiss Franc continues on unperturbed).

If Germany has its way then the Euro will become as good as  gold.  But that will only happen if Hungarians decide they are Italians, Lombards decide they are Danes and Hessians decide they are Lyonnais and accept one federal government as we do here in Canada.  (The Scots seem in danger of shooting themselves in the foot if they continue to play Silly Bugger and follow the PQ line.... but that's another story.  The Bank of England predated the Union and I have no doubt it will survive the Union).

In the absence of a European Federal Government, or in the event of a Bundesbank Federal Government, the Europeans might as well revert to the Gold Standard, or the Rimbi, or the Beloved Yankee Dollar.   They will have comparable control over their economies.

The difference, as I see it, between being on a Fiat Currency or being tied to the Gold Standard (or the Euro) is the difference between being able to write cheques and sign mortgages versus being held to Cash on the Barrelhead payments.

The Canadian Dollar may have swung from 105 Yankee Pesos to 65 and back again during my time in Canada, and some years life looked better than others, but all things considered I'd prefer to relive the last 40 years with the same decisions Canadian Governments have made (good and bad) than face the future most Europeans are looking at.

When it comes done to it - decentralization and trust win the day.  

That is true whether you are betting on your neighbour to repay the mortgage that you personally hold, whether you are looking at outfits like Walmart or Electrical Appliance manufacturers because people always need "stuff" regardless of the denomination of the currency (a 1000 dollar stove is a 100,000 penny stove and a penny used to buy you 4 farthings back when a farthing bought you 4 lbs of brown bread - ca 1256 London), or whether you are looking at investing in a country.

Canada, as a country, has good neighbours internally, has lots of stuff to sell, has an ability to convert that stuff into other stuff that sells better, has great institutions like the Government and the Bank of Canada - and still has the ability to write its own IOUs and have them accepted internationally.

Ultimately, for all those reasons, I am standing pat.

As Bruce Bairnsfather's "Old Bill" said: "If you know a better 'ole, go to it!"

I don't know a better hole right now.

 ;D


----------



## Brad Sallows (16 Dec 2011)

That's why the blocks go up - money, "squeeze".


----------



## Kirkhill (16 Dec 2011)

I'm not an economist but I'm enjoying learning how to play one just now....  
The Daily Telegraph posted this comparison between France and the UK

Graphic Comparison   Scroll Down to 15.15


Re-Edit:  Third time's the charm.


Problem		

	France 	UK
Income = GDP BUSD	2676	2480
Assets	7500	11485
Assets at Risk	24.3%	14.4%
Risk	1823	1654

Debt	2285	2083
GDP at Risk	80%	79%

GDP Growth	1.60%	0.90%
2011 Income	2719	2502
GDP if Default	2718	2502
Impact on GDP	67%	66%

Impact on Economy Roughly Equal		




Solution 1 - Sell More		

Exports Current	509	665
Export Growth	-0.30%	1.50%
Exports Future	507	675

Years of Export Income  to Offset Risk	3.6	2.5

UK can offset the Impact with Export Revenues in only 66% of the time (decreasing) 		
France will take 50% more time than Britain (increasing)		




Solution 2 - Work Harder		



Labour	28.21	31.45
Hours per Year	8,760	8,760
Labour Hours Per Year	247,120	275,502

Unemployment	9.70%	8.30%
Workers	25.5	28.8
Hours per Worker	1533	1674
Hours Worked	39,051	48,278

Average Taxes	49.80%	33.80%
State Hours	19,447	16,318
Personal Hours	19,604	31,960
Leisure Hours	208,069	227,224

Controlled Work Hours	46,405	Unlimited
Opportunity Hours	7,354	227,224


The French Government already demands 689 hours of labour from every employable citizen compared to 519 demanded by the British Government (or 33% more)		

The French Government limits the number of hours a citizen works to 1645 per year meaning the  citizen is limited to only 956 productive hours for personal consumption	

Of the 956 hours of personal consumption 695 are already being worked.

That leaves only 261 hours per citizen of additional capacity or 7,354,000,000 Labour Hours.


By contrast the British economy has 227,224,000,000 untapped hours of labour as there is nothing to prevent every British citizen working all their leisure hours if they so choose.		
That means Britain has 31 times more untapped capacity than France. 		

Of course France could change its laws - but the Unions won't have it.  And to be fair, you'll never get all those Brits working that hard -  But Britain has a much higher level of available capacity.

Hiring Hurdle (Min Wage)	1365	1139
Workers Hired	              100	120		

In addition, with the Minimum Wage provisions, France's being higher, business men in Britain can afford to engage 120 workers for every 100 workers that French business men can engage... If they can find people willing to accept the minimum wage.		

Summary		

Britain has equivalent exposure to risk but greater opportunity to sell or work its way out of the crisis.


----------



## a_majoor (18 Dec 2011)

The UK MOD starts making plans for the Eurozone meltdown:

http://www.telegraph.co.uk/news/uknews/defence/8957513/Eurozone-crisis-poses-military-risk-warns-defence-chief-General-Sir-David-Richards.html



> *Eurozone crisis poses military risk, warns defence chief General Sir David Richards*
> Defence chiefs are drawing up plans to cope with the potential military fallout from the eurozone crisis, according to General Sir David Richards.
> 
> General Sir David Richards, the Chief of the Defence Staff
> ...


----------



## a_majoor (18 Dec 2011)

Rebuild the Anglosphere? Aye!

http://blogs.telegraph.co.uk/news/danielhannan/100124393/a-generational-chance-to-recast-britains-foreign-policy/



> Daniel Hannan is a writer and journalist, and has been Conservative MEP for South East England since 1999. He speaks French and Spanish and loves Europe, but believes that the European Union is making its constituent nations poorer, less democratic and less free.
> 
> *A generational chance to recast Britain's foreign policy*
> By Daniel Hannan Politics Last updated: December 16th, 2011
> ...


----------



## Edward Campbell (18 Dec 2011)

Thucydides said:
			
		

> Rebuild the Anglosphere? Aye!
> 
> http://blogs.telegraph.co.uk/news/danielhannan/100124393/a-generational-chance-to-recast-britains-foreign-policy/




Daniel Hannan forgets, as people often do, two important Asian _Anglosphere_ candidates: Singapore and Malaysia; the latter is a much better candidate than Pakistan, at this time anyway.

Hannan does mention the _Nordic_ nations, as he should; Denmark, Iceland and Norway are NATO allies and non-Euro (€) countries. Ireland and Finland are both € members, now - one weak and the other economically strong; Sweden is non-€ and reasonably solid.


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## a_majoor (19 Dec 2011)

The Angosphere does not have to be 100% "anglo" so long as the members share most of the basic values of Classical Liberalism as invented in England back in the 1700's (Life, Liberty, free speech and association, unfettered use of property and the Rule of Law would be the biggest ones), along with a willingness to take action.

The 2004 Tsunami made me think that Japan should be one of the "honourary" members of the Anglosphere, and the Netherlands also has a claim. I agree with the Nordic states as "honouaries", and maybe the Asian Tigers (but there will be much more cultural "friction" there).

Many Commonwealth nations are really no longer proper members of the Anglosphere; having shed a lot of the cultural inheritance of the Empire/Commonwealth, so I would not go out of my way to include them.


----------



## Kirkhill (19 Dec 2011)

If Germany, France, Belgium and Luxembourg are the heirs of Charlemagne.  The Baltic States, Britain and Ireland, and all of Britain's spawn could fairly be described as the heirs of Canute...

Britain has been a Danish country since Clovis left the German Confederation and cosied up to the Romans.


----------



## Edward Campbell (19 Dec 2011)

More on the _Anglosphere_ in this column which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/the-anglosphere-yet-reigns-supreme/article2274566/


> The anglosphere yet reigns supreme
> 
> NEIL REYNOLDS
> 
> ...




The problem for the _Anglosphere_, for the past generation or so, has been failing American leadership - the _Anglosphere_ began to fall into disrepair when John F Kennedy came to power; he was very much a _Europhile_ and, consequentially, a bit of an _Anglophobe_ - more important he was an instinctive _unilateralist_, as were most of his successors, including Reagan and  Clinton. America has come far, far away from the constructive, enthusiastic _internationalism_ of the Truman/Acheson and Eisenhower/Dulles era; given the state of the world we, the world, need more Truman/Eisenhower and less, far less, Bush/Obama/(Gingrich? Romney? Perry? Bachman?).


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## a_majoor (20 Dec 2011)

Given the relative size and power of the "Indiasphere", and the fact that it should actually be considered part of the Anglosphere, I think we may see real Anglospheric leadeship emerge from that part of the world.  Since India is in an "intersting" position, needing global maritime trade and being situated next door to two competing "civilizations" (the Sinosphere and the Islamic civilization), there are enough challenges to make Indian leaders look for wide ranging solutions and to link up with other maritime powers (who are mostly part of the Anglosphere) there are lots of reasons to believe they will have to rise to the challenge. They have the human resources to do so as well, India, after all, has an amazing educational system and now counts 300 milion people in the middle class; similar in number to the entire population of the United States.


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## Edward Campbell (20 Dec 2011)

Going all Mackinder_ish_, both China and India lack the great, resource and agriculture rich "heartlands," which America and Russia have and which Britain had (in the form of Australia, Canada and South Africa). China has some, limited, "heartland" and it is willing to pay Russia for all the resources East of the Yenisei River - a region China regards as _Asian_ and therefore, 'open' for exploitation by _Asians_. India is less well positioned ... except that it is close to resource rich Africa, which also has considerable agricultural lands. Of course, China is already in Africa but there is always room for one more when it comes exploiting those who are unable (or unwilling) to fend for themselves.






Sir Halford Mackinder, (15 February 1861 – 6 March 1947)


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## a_majoor (3 Jan 2012)

I agree with some of the premise that we are into the conditions of a global restructuring, especially with the need for massive deleveraging, the migration of global manufacturing and the abolition of traditional "gatekeepers" due to the communications revolution. The length of time may not be as prolonged as projected, since one of the other ongoing revolutions is the rescaling of things away from large centralized units (be it factories or power plants) to smaller decentralized units that are far more responsive to local markets. Even education will undergo a revolution as people will be able to access lessons and knowledge directly over the internet (such as the Khan academy www.khanacademy.org/).

This still has implications for Canada, since a large portion of our economic power does derive from the large scale export of resources such as minerals, timber and agriculture; economic activities which do benefit from the economies of scale. Will we be able to restructure, or will we see fast moving "Tiger" economies overtake us? (Tiger economies may even be regional in nature, as the example of Texas demonstrates).

http://www.nationalreview.com/articles/286877/long-long-depression-matthew-lynn



> *The Long, Long Depression*
> Better days are ahead — in the 2030s.
> 
> By Matthew Lynn
> ...


----------



## a_majoor (4 Jan 2012)

Since food has recently become a topic, here is an interesting look at the market volatility of food. Since food is "officially" not part of the CPI for the purposes of calculating inflation (as is fuel), we all see part of the disconnect when going to the grocery store. Investing in a garden looks more and more promising:

http://www.zerohedge.com/news/guest-post-punch-mouth-food-price-volatility-hits-world



> *Guest Post: A Punch to the Mouth - Food Price Volatility Hits the World*
> 
> Submitted by ChrisMartenson.com contributing editor Gregor Macdonald
> 
> ...



Oddly, one solution may come from the space colonization movement. When the idea of building huge space colonies was popular back in the 80's, much attention was paid to high intensity farming methods to feed people from a small resource base. Techniques such as intercropping (growing different crops in the rows between the corn) and multi cropping (planting new crops befor the old crop was harvested), and experimenting with different species of food plants all showed promise. As an aside, intercropping has been adopted by marijuana growers in SW Ontario, demonstrating that it does work as advertized...


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## Edward Campbell (4 Jan 2012)

Here is the StatsCan Weighting Diagram for the CPI.

While food and gas, being _volatile_, are excluded from some calculations they are measured and reported and are used in many indices.

Gross data:

Food:                      16  %
Shelter:                  25.5%
Household:             11.5%
Clothing:                  5.5%
Transportation:      20.5% - of which gas is nearly 1/3 or 6% of the total
Health:                    5   %
Recreation:            11   %
Alcohol & Tobacco:   3   %


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## Old Sweat (4 Jan 2012)

There is nothing new about intercropping. It was used by both aboriginal peoples and settlers in the colonial era. For example, corn would be planted in hills with  a few squash. As there was some space between the individual corn plants, the squash, which spread out on the ground, would fill in the spaces and prosper.


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## Fishbone Jones (4 Jan 2012)

Old Sweat said:
			
		

> There is nothing new about intercropping. It was used by both aboriginal peoples and settlers in the colonial era. For example, corn would be planted in hills with  a few squash. As there was some space between the individual corn plants, the squash, which spread out on the ground, would fill in the spaces and prosper.



To amplify Old Sweat's post, it was called 'The Three Sisters'. Corn was planted first. Then beans. The beans would use the cornstalks as uprights to climb. Squash was planted third. The squash plant spread out providing ground cover which prevented evaporation of water from the three root systems.


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## Kirkhill (4 Jan 2012)

And to build on Old Sweat's and recceguy's commentary, if I remember correctly, the full recipe called for first planting one fish.  The decomposing carcasse supplied the Nitrogen, Phosphorus and Potassium, as well as some water, that nourished the plants.

If, as has been reported, this system improves yields and trims costs, the biggest hurdle would be redesigning the harvesting system to sort the squash, corn and beans, assuming that they all came to maturity at the same time.  It might be possible to devise something to harvest the beans and corn simultaneously while leaving the squash undamaged (open lanes, a straddling harvester and leaving a long stalk on the corn), but the beans and the corn would be so inter-twined they would have to be harvested concurrently.   Separating mature corn from beans would be a relatively trivial mechanical problem.

The industry is always on the look out for good, workable ideas and adopts them as the economics justify.  Part of the economics is government regulation.  For good or ill.


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## Redeye (4 Jan 2012)

Kirkhill said:
			
		

> And to build on Old Sweat's and recceguy's commentary, if I remember correctly, the full recipe called for first planting one fish.  The decomposing carcasse supplied the Nitrogen, Phosphorus and Potassium, as well as some water, that nourished the plants.
> 
> If, as has been reported, this system improves yields and trims costs, the biggest hurdle would be redesigning the harvesting system to sort the squash, corn and beans, assuming that they all came to maturity at the same time.  It might be possible to devise something to harvest the beans and corn simultaneously while leaving the squash undamaged (open lanes, a straddling harvester and leaving a long stalk on the corn), but the beans and the corn would be so inter-twined they would have to be harvested concurrently.   Separating mature corn from beans would be a relatively trivial mechanical problem.
> 
> The industry is always on the look out for good, workable ideas and adopts them as the economics justify.  Part of the economics is government regulation.  For good or ill.



They didn't understand it, but the beans also provided another vital function - fixing nitrogen. Modern intensive monocultures don't do that anymore, they just rely on massive amounts of artificial fertilizers to provide nitrogen.

Interesting about regulations. I'm reading a lot on Joel Salatin, who is one of the most interesting farmers I've ever read about. He describes himself as a "Christian conservative libertarian" and he is interesting because his main argument against a lot of regulations is that they're basically set up to favour deep-pocketed industry. The rules essentially protect the interests of ADM, Cargill, Tyson, Purdue, ConAgra, etc and make it difficult for him to really expand and do business. Most of the rules are labelled as "food security" issues, but they're actually basically barriers to entry to the market for small producers like him. While some regulations when it comes to food are probably justifiable and important, many aren't, and are a symptom of the bigger problem of what happens when lobbyists and businesses simply buy the legislation they want to protect themselves.


----------



## Infanteer (4 Jan 2012)

I found that guy's website a few months ago - although he comes off as a bit of an eccentric, he definitely has a lot of interesting things to say about food and the way it works in our society.


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## Redeye (4 Jan 2012)

Infanteer said:
			
		

> I found that guy's website a few months ago - although he comes off as a bit of an eccentric, he definitely has a lot of interesting things to say about food and the way it works in our society.



Eccentric is an understatement, but he has a lot of really insightful things to say, and it's hard to disagree with him. I first heard of him while listening to Ideas on Radio One, then read the Omnivore's Dilemma in which he features prominently. When I was in the area in September I really wanted to go viist the farm, but I didn't have the chance.


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## a_majoor (6 Jan 2012)

Inflexible Europe. We are still much closer to the European model, with predictable results:

http://www.nytimes.com/2012/01/08/magazine/the-other-reason-europe-is-going-broke.html?_r=3&ref=global-home&pagewanted=print



> *The Other Reason Europe Is Going Broke*
> By ADAM DAVIDSON
> 
> One great way to start a bar fight during an American Economic Association conference is to claim that the U.S. economy is preferable to Europe’s. Someone will undoubtedly start quarreling about how G.D.P. per capita doesn’t measure a person’s happiness. Someone else may point out that if you look at income inequality and entitlements, the average European is doing much better.
> ...


----------



## a_majoor (18 Jan 2012)

The Economist and their "Big Mac" PPP chart on this link:

http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3



> *The Big Mac index*
> Jan 12th 2012, 16:53 by The Economist online
> 
> Burgernomics shows Switzerland has the most overvalued currency
> ...


----------



## Edward Campbell (18 Jan 2012)

E.R. Campbell said:
			
		

> More about pipelines and oil sands reproduced under the Fair Dealing provisions of the Copyright Act from the _Financial Post_:
> 
> http://business.financialpost.com/2011/10/29/the-stranded-oil-sands-a-worst-case-scenario/
> 
> ...




The US has, for the moment, at least, nixed _Keystone_. I expect:

1. Obama to pay a political price for making America more dependent on Arab/Iranian oil; and

2. Harper to do everything in his (considerable) political, legislative and regulatory power to make _Northern Gateway_ a reality ... soon.


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## GAP (18 Jan 2012)

I think the lost jobs argument, if done right, will cost Obama the election come November. All people see is massive unemployment and it's quite visual, especially with a little help for people to SEE 20,000 lost jobs......


----------



## RangerRay (18 Jan 2012)

I can appreciate the economic and strategic importance of a pipeline to the west coast, especially now in light of the Americans turning down Keystone.

However, I remain unconvinced that these benefits outweigh the environmental risks of this particular pipeline project, as proposed.  In this part of the world, it's a matter of when, not if, a disaster occurs.

From the BC Wildlife Federation:

http://www.bcwf.net/index.php?option=com_content&view=article&id=284%3Aannouncements&catid=58%3Alinks&Itemid=716



> *Enbridge Project Threatens BC's Fragile Ecosystem*
> 
> 
> The BC Wildlife Federation has submitted a detailed brief to the Judicial Review Panel investigating the proposed Enbridge Northern Gateway pipeline proposal to construct and operate two pipelines that will carry oil from Alberta to a marine export terminal at Kitimat, BC. The proposal also includes the construction and operation of an integrated marine infrastructure that will facilitate the transportation of oil and condensate.
> ...



Full report here:
http://www.bcwf.net/images/stories/pdf/enbridge_brief.pdf


Being BC's oldest conservation group representing hunters and anglers, I doubt that they would be under the influence of foreign radical *greenies*.


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## Kirkhill (18 Jan 2012)

> An oil spill in a remote northwestern corner of Alberta has turned out to be the province’s largest in 36 years, according to regulators.
> 
> Approximately 28,000 barrels of oil were spilled in the Rainbow pipeline rupture, which was discovered April 29, the Energy Resources Conservation Board said Tuesday.
> 
> A spill of that magnitude on a provincial pipeline hasn’t happened since 1975 when the Bow Valley line leaked 40,000 barrels of oil, said board spokesman Davis Sheremata.



Calgary Herald Link:

28,000 Barrels = 4451 m3

With an average depth of the spill of 4 inches - 0.1m (this stuff is thick, or so I understand) that equates to an area 210m x 210m.

And that is, apparently, a large spill.

When the pressure drops, the pipeline stops.  Nothing at all like a blowout in a well, let alone a blowout in a well under the sea.  

Edit:  Further to the above - this report on Enbridge's US Record - Typically about 15 leaks a year, of a few gallons with larger ones in the 5000-10,000 barrel range (28m x 28m to 40m x 40m)



> At a speech in 2010, company CEO Patrick Daniel said Enbridge pipelines spilled only about 4.2 barrels of oil for every billion barrel-miles, compared to the industry average of more than 10.7 barrels spilled. A barrel-mile is defined as one barrel of liquid moving one mile.
> 
> 
> Projecting Enbridge's figure of 4.2 barrels spilled per BBM onto the Gateway pipeline would result in about 588 barrels spilled each year — about 94,000 litres.
> ...



Ottawa Citizen Link

I admit the containment problem changes when the oil hits water - but we're talking about the impact on the land around the pipeline.


----------



## Fishbone Jones (18 Jan 2012)

RangerRay said:
			
		

> I can appreciate the economic and strategic importance of a pipeline to the west coast, especially now in light of the Americans turning down Keystone.
> 
> However, I remain unconvinced that these benefits outweigh the environmental risks of this particular pipeline project, as proposed.  In this part of the world, it's a matter of when, not if, a disaster occurs.
> 
> ...



To me, here's the bottom line.

You're not going to stop progress. You can stand in it's way, if you wish, it will either go over you or around you, but you won't stop it. This is way too important for Canada and it's economy.

So, if we have a spill, we'll lose some fish, listen to the naysayers bray, clean it up and go back to work pumping oil. The Gulf has had a massive spill, that we could not even begin to expect, a cleanup and a miraculous recovery. Oh, and they're still pumping out oil offshore there like nothing happened.

I almost prefer to see our oil go to Asia. It puts us on global footing and removes us just a tad bit more from US dependency.

Let's not forget, the US has done us no favours when it comes to taking our energy exports, whether they be oil or electricity. Our rates here are high because Uncle Sam makes them that way through bad agreements made when we were asleep at the wheel.

We're wide awake and moving back into the driver's seat.

:2c:


----------



## Edward Campbell (22 Jan 2012)

An interesting perspective from Bank of Canada Governor Mark Carney, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/us-economy-may-never-fully-recover-carney/article2310768/


> US economy may never fully recover: Carney
> 
> OTTAWA— The Canadian Press
> 
> ...




I am repeating myself, but:

1. We cannot and must not try to "detach" ourselves from the USA, we are joined, physically, on our great, rich continent and, for better or worse, richer or poorer, they, the Americans, are our best friends, biggest trading partners and guarantors of our security; but

2. We must diversify our trade, especially with Asia, in order to "buffer" the problems in our more traditional European and American markets.


----------



## a_majoor (22 Jan 2012)

Loss of US manufacturing jobs will hurt our exports as the market contracts. We will also be fighting the same battles with our manufcturing industries. Caterpiller is showing what might happen if we don't get our costs and workers competative with the rest of the world (see what is happening with the Electromotive plant in London ON); it is not only wages but increasing energy costs, higher WISB premiums and taxes as well that make Ontario uncompetative.

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=4&hp=&pagewanted=print



> *How the U.S. Lost Out on iPhone Work*
> By CHARLES DUHIGG and KEITH BRADSHER
> 
> When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.
> ...


----------



## a_majoor (22 Jan 2012)

Part 2

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=4&hp=&pagewanted=print



> Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
> 
> In China, it took 15 days.
> 
> ...


----------



## a_majoor (23 Jan 2012)

Oil, gasoline and refineries, oh my!

We will be paying more for gasoline as well (and given the lead time for construction and the efforts of the greenies to block new or expanded refineries, there is little hope of ramping up production to offset increasing demand):

http://pjmedia.com/blog/get-ready-for-higher-gas-prices/?print=1



> *Get Ready for Higher Gas Prices*
> 
> Posted By Dan Miller On January 22, 2012 @ 12:00 am In "Green" tech,Canada,China,economy,India,Latin America,Middle East,Science & Technology,US News | 33 Comments
> 
> ...


----------



## a_majoor (28 Jan 2012)

A new tool to examine credit ratings: http://www.wikirating.org/wiki/Main_Page

http://metanoodle.blogspot.com/2012/01/aaa-outlook-for-canada-and-others-not.html



> A transparent rating tool puts a lot of countries, including Canada, lower on the credit-worthiness scale. The crowd-sourced update makes us look better. The rating agencies drag their feet on downgrades because it affects their income.   The weight given each element is spelled out and input is welcome.  (Guest post at ZeroHedge)  Only Hong Kong and Luxemburg got top rating before the voting.  The new set of numbers is closer to Dagong than to Moody, Fitch and S&P.
> 
> Initiated by Austrian mathematics Dorian Credé and and finance whiz Erwan Salembier, ratings are derived from weighted user input. They stress to point out that their model will improve with rising user input who also have a say in improving the formulae used.



The army of davids approach should provide an alternative to the major bond rating agencies. So long as they avoid the "takeover" of subjects the way Wikipedia was contaminated, this should provide a new approach to discovering financial information.


----------



## a_majoor (28 Jan 2012)

Keystone XL. The weakening of the US economy (especially if self induced) will carry a high price for us:

http://pjmedia.com/blog/pipeline-politics-derails-more-than-jobs/?print=1



> *Pipeline Politics Derails More than Jobs*
> Posted By Patrick Richardson On January 28, 2012 @ 12:00 am In economy,Elections 2012,Environment,Money,Politics,US News | 44 Comments
> 
> The death of the Keystone XL pipeline was a blow to economic development in every state through which it would have run and has cost by, some estimates, 20,000 jobs.
> ...


----------



## GAP (28 Jan 2012)

Natives have rights, but not veto: experts

Most B.C. first nations oppose pipeline but UN declaration, case law unlikely to stop oil's flow

By Peter O'Neil, Vancouver Sun January 28, 2012
Article Link

The world received two blunt messages this week on Enbridge Inc.'s proposed $5.5-billion oilsands pipeline from Alberta to B.C.'s northern coast.

Prime Minister Stephen Harper told the World Economic Forum in Davos, Switzerland, that the government will "make it a national priority to ensure we have the capacity to export our energy products beyond the United States, and specifically to Asia."

But that pitch for the pipeline megaproject, which would open up the largely landlocked oilsands resource to non-U.S. buyers, was countered by a report quoting Assembly of First Nations National Chief Shawn Atleo. Atleo said the federal government and Calgarybased Enbridge required the "consent" of B.C. first nations who are mostly opposed to the project.

So do aboriginals have the legal ability to stop a major energy megaproject that the Harper government touts as the key to creation of numerous jobs and billions of dollars in new wealth?

They probably don't, legal experts said this week, though uncertainty remains about how courts might deal with a legal challenge.

Atleo's claim was made at a news conference after this week's Crown-first nations summit in Ottawa.

"The notion of first nations having free, prior and informed consent means exactly that," he said.

Atleo, of B.C.'s Nuuchahnulth First Nation, avoided using the word "veto." Instead, he adopted the "free, prior and informed consent" that is taken directly from the United Nations Declaration on the Rights of Indigenous Peoples.

Another of B.C.'s aboriginal leaders, Jody WilsonRaybould, concurred.

"There are impacts of major development projects that, based upon our rights and our territories, may and potentially will require the consent of first nations," said WilsonRaybould, a lawyer and the AFN's regional chief in B.C.
More on link


----------



## GAP (4 Feb 2012)

I had to add this simply because it's such a great political cartoon.......with a focus....


----------



## Edward Campbell (6 Feb 2012)

Here is an interesting article, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_, that connects two points that get made here, on Army.ca, on a regular basis: don't count America out just yet; and watch for the Chinese to "hit the wall:"

http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/americas-down-but-not-out/article2325859/


> America’s down, but not out
> 
> NEIL REYNOLDS
> 
> ...




I suspect Mark Carney is right: we will never, again, see _"the U.S. we used to know.”_ I am pretty certain that Doran is also right: China must "hit a wall," if not, necessarily, "the" wall. Neither prognostication is "good" for Canada but we need - the whole world needs - to hope, mostly, that they are not coincidental.


----------



## a_majoor (6 Feb 2012)

Looks like investors may get a haircut and a shave:

http://www.theatlantic.com/business/archive/2012/02/greeks-inch-closer-to-default/252602/



> *Greeks Inch Closer to Default*
> FEB 5 2012, 9:51 PM ET 170
> 
> Debt negotiations usually seem to get resolved at the very last minute.  After all, the resolution is almost always that someone is not going to get paid as expected, and this gives every "someone" strong incentive to hold out as long as possible, in the hopes that intransigence will get them a slightly better deal.
> ...



It is a bit hard to imagine that Greece has abruptly gone from a primary deficit to a primary surplus, but we will either have to wait for an audit or watch how the market reacts to discover the truth of the matter.


----------



## a_majoor (12 Feb 2012)

The dead hand of government becomes lethal. Since virtually all drug research and much non generic drug manufacturing is done in the United States, it should be worrying for us as well; how will this affect our drug supply and health care system?

http://togetrichisglorious.blogspot.com/2012/02/drug-shortages.html



> *Drug shortages*
> 
> Today's New York Times has an article noting the shortage of methotrexate in the US, a drug used to treat a form of cancer known as acute lymphoblastic leukemia. The shortage is so severe that the newspaper says that "hospitals across the country may exhaust their stores within the next two weeks, leaving hundreds and perhaps thousands of children at risk of dying from a largely curable disease" according to federal officials and cancer doctors.
> 
> ...


----------



## a_majoor (25 Feb 2012)

Desperate governments looking for revenues should consider the implications of this (Premier McGuinty and President Obama are the two closest to home, but most governments have debts that range from worrying to apocalyptic). Massive tax increases (and coordinated tax grabs to prevent people and wealth from fleeing jurisdictions) will cause further economic slowdowns, which simply cause the vicious circle to get smaller:

http://taxprof.typepad.com/taxprof_blog/2012/02/uks-25.html



> *U.K.'s 25% Tax Hike on the 'Rich' Produces Less Revenue*
> The Telegraph, 50p Tax Rate 'Failing to Boost Revenues’:
> 
> The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.
> ...


----------



## a_majoor (28 Feb 2012)

Not sure what happened with the UK piece, reposted here for ease of reading:

http://taxprof.typepad.com/taxprof_blog/2012/02/uks-25.html



> U.K.'s 25% Tax Hike on the 'Rich' Produces Less Revenue
> The Telegraph, 50p Tax Rate 'Failing to Boost Revenues’:
> 
> The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.
> ...


 
and Greece gives everyone a haircut:

http://www.bloomberg.com/news/2012-02-27/greece-cut-to-selective-default-by-s-p.html



> *Greece Cut to Selective Default by S&P*
> By Greg Chang - Feb 27, 2012 5:29 PM ET
> 
> Greece Ratings Cut to Selective Default by S&P  Orestis Panagiotou/Landov
> ...


----------



## Edward Campbell (2 Mar 2012)

An interesting development, to say the least, is reported in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/economy/iceland-eyes-loonie-canada-ready-to-talk/article2356634/


> Iceland eyes loonie, Canada ready to talk
> 
> BARRIE MCKENNA
> 
> ...




The implications of this are far more than just financial and they would invite, maybe demand, closer social and even political integration.


----------



## Kirkhill (2 Mar 2012)

Interesting turn of events indeed.

But Icelanders have been associated with Canada for a while.

http://www.icelandicfestival.com/

The include one of my wife's bridesmaids.


----------



## Retired AF Guy (2 Mar 2012)

> *Iceland eyes loonie, Canada ready to talk*



Next step ... a couple of those islands in the Caribbean that wanted to join Canada.


----------



## Edward Campbell (2 Mar 2012)

It will be interesting to see how this impacts Iceland's application to join the EU.


----------



## Zartan (2 Mar 2012)

If we can present them with a better offer than the European Union - which should not be altogether too hard but for Quebec, could they not cancel their application to our, and their favour? After all, our prospects are better, and I do not think I am exaggerating too greatly to say, simply as a matter of comparison, that it would probably be less demanding of them to become a Canadian province (which I am not suggesting, but merely proposing for the sake of comparison) then obeying the regulations of the Eurozone.


----------



## Edward Campbell (2 Mar 2012)

I'm not sure where it may lead, but Norway and Switzerland are also _outside_ the EU and, with Iceland and Liechtenstein, for the EFTA.


----------



## Edward Campbell (2 Mar 2012)

Double post, sorry.


----------



## GAP (2 Mar 2012)

Does this mean we will have to pay them equalization payments too?


----------



## a_majoor (3 Mar 2012)

While this development is funny and somewhat surprising, we can deal with this in several ways.

There is nothing to actually stop the Icelandic parliament from adopting the Loonie as their national currency regardless of what we do; several small nations use the USD as their currency without any authorization from the Treasury or the State Department. The downside for Iceland is they have no say in our fiscal or monetary policy, so in the event that Ontario defaults or an NDP government is formed, Iceland is s****d. 

Iceland can also ask to become associated with Canada in some way, ranging from a Co Dominium to a protectorate. A status like the US Commonwealth of Purto Rico or a Province is probably closer to what they would like, but any Canadian government will need to examine the issue very closely, including joining conditions and exit strategies. Domestic politics will also play a heavy role; is Iceland going to end up a marginalized "province", and all the political parties will have to calculate "can we wi a majority without Iceland?". Of course, how will Icelandic domestic considerations affact Canada, our policies and our political discussion?

Given the vast differences in history, culture, economies and everything else I'd say Iceland and Canada could not do a "merger" as a province or anything else without severe strain and dislocation to both parties. OTOH, there is nothing wrong with forming a "North Atlantic Free Trade Agreement" with Iceland as the first partner, and giving them (and us) new market outlets for our respective economies. If they adopt the Loonie at the same time, trade integration becomes much easier.


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## Edward Campbell (3 Mar 2012)

Thucydides said:
			
		

> While this development is funny and somewhat surprising, we can deal with this in several ways.
> 
> There is nothing to actually stop the Icelandic parliament from adopting the Loonie as their national currency regardless of what we do; several small nations use the USD as their currency without any authorization from the Treasury or the State Department. The downside for Iceland is they have no say in our fiscal or monetary policy, so in the event that Ontario defaults or an NDP government is formed, Iceland is s****d.
> 
> ...




This is what I think is the next, logical step: Iceland joins NAFTA(II) and, as I have advocated elsewhere on Army.ca, we erase the border by massively harmonizing standards.


----------



## Edward Campbell (5 Mar 2012)

And more, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_:

http://www.theglobeandmail.com/report-on-business/top-business-stories/five-reasons-why-iceland-should-adopt-the-canadian-dollar/article2357815/


> Five reasons why Iceland should adopt the Canadian dollar
> 
> MICHAEL BABAD
> 
> ...




Iceland is somewhat larger and more productive than PEI and Björk isn't that bad ... 
	

	
	
		
		

		
			





 ... in fact, think of Celine Dion and, suddenly, Björk looks (and sounds) better and better.


----------



## a_majoor (5 Mar 2012)

E.R. Campbell said:
			
		

> Iceland is somewhat larger and more productive than PEI and Björk isn't that bad ...
> 
> 
> 
> ...



And for that alone I nominate ERC for "Post of the Year"  ;D ;D ;D


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## Fishbone Jones (5 Mar 2012)

Thucydides said:
			
		

> While this development is funny and somewhat surprising, we can deal with this in several ways.
> 
> There is nothing to actually stop the Icelandic parliament from adopting the Loonie as their national currency regardless of what we do; several small nations use the USD as their currency without any authorization from the Treasury or the State Department. The downside for Iceland is they have no say in our fiscal or monetary policy, so in the event that Ontario defaults or an NDP government is formed, Iceland is s****d.
> 
> ...




A la the Duchy of Grand Fenwick?
(The Mouse that Roared - http://en.wikipedia.org/wiki/The_Mouse_That_Roared)


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## a_majoor (23 Mar 2012)

Of course, US unemployment data is fictional now, but the convergence of events in Europe and China should be making people quite nervous over here as well (especially American politicians who are hoping for good news, and Canadians who are riding in too small an economy to stay fully afloat in turbulent economic waters):

http://www.reuters.com/article/2012/03/22/us-global-economy-idUSBRE82L0KL20120322



> *China factories falter, euro zone business wilts
> *
> By Andy Bruce and Nick Edwards
> 
> ...


----------



## a_majoor (23 Mar 2012)

And a longer term view. Some good news in the long run (but Lord Keynes also said "In the long run we are all dead"):

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/03/19/weeks-when-decades-happen.aspx



> *Weeks When Decades Happen*
> 
> By Louis Gave
> March 14, 2012
> ...


----------



## a_majoor (30 Mar 2012)

Well if Germany will no longer accept this sovereign debt as collateral, why would anyone else? Expect to see interest rates rise as bond markets start demanding higher risk premiums for bonds from at risk polities. Bonds issues by "Blue" American states in financial difficulty (like New York and California) as well as Ontario and Quebec can also be put under pressure from investors seeking higher risk premiums as well. The follow on effect on national economies will also be devastating. Canada alone pays over $30 billion/year in interest on the national debt in this very low interest rate environment. What will hapen to programs, finances etc. if the interest costs double or triple?

In a macro sense, this is very bad for all of us, particularly anyone with outstanding debts. Pay down what you can while you can still take advantage of low interest rates, and lock in anything that you won't be able to pay off quickly.

http://www.nationalreview.com/corner/294928/ever-closer-union-andrew-stuttaford



> *Ever Closer Union*
> By Andrew Stuttaford
> March 30, 2012 3:03 P.M. Comments0
> 
> ...


----------



## a_majoor (12 Apr 2012)

Spain may yet pull down the EU project, since its economy is so much larger than the other PIIG nations. I must point out Ontario's own NDP is also advocating tax hikes to deal with our stalling economy, so econo0mic illiteracy is common on both sides of the Atlantic and apparently all ends of the political spectrum.

A Spanish default will put global financial markets in chaos, and the most probable outcome will be rapidly rising interest rates as people start demanding a much higher risk premium on sovereign debt, particularly jurisdictions with high levels of debt. Even sub national entities with high levels of exposure will be targeted; Ontario, the US "Blue" states and highly exposed municipalities will all feel the heat:

http://www.forbes.com/sites/louiswoodhill/2012/04/11/spain-is-headed-for-a-major-economic-crash/



> Spain Is Headed For a Major Economic Crash
> By Louis Woodhill
> 
> On June 1, 2009, Air France flight 447 crashed into the Atlantic Ocean, killing all 228 people aboard. The disaster was caused by human error. With the plane already in a stall, the pilots pointed the nose upward, which was the exact opposite of what the situation required. When recovered, the cockpit voice recorder revealed that, before they hit the water, the pilots knew that they were going to crash.
> ...


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## a_majoor (27 Apr 2012)

Spain is demoted to BBB+. The rating agencies and Bond Hawks are also looking at Italy and the other PIIGS cannot be far behind. There is also an object lesson for Ontario, which is on a downgrade watch. A spike in Canadian interest rates due to an Ontario downgrade cannot have any positive effects for us either (and a chain reaction of debt downgrade or interest rate spikes in Europe will not be contained in Europe either). Since governments are not acting swiftly enough, we must get our personal houses in order, and be prepared for a rough economic ride ahead.

http://www.reuters.com/article/2012/04/27/us-spain-economy-idUSBRE83Q0BQ20120427



> *Spanish economy in "huge crisis" after credit downgrade*
> 
> By Nigel Davies
> MADRID | Fri Apr 27, 2012 12:49pm EDT
> ...


----------



## a_majoor (29 Apr 2012)

BZ for our government for finally saying no to the nonsensical bailing out of debt ridden EU states. The debtor nations solemnly swear to fix the problems, but either take half measures or put off solutions (has Greece or any of the other PIIGS actually reduced their debts and deficits by a significant amount?) Asking our taxpayers to fork over for the irresponsible actions of others should never be an option:

http://www.torontosun.com/2012/04/28/canada-rightly-said-no-to-the-imf-kent



> *Canada right to deny IMF: Kent*
> 
> Jim Flaherty saved Canadian taxpayers from funding failed Eurozone economies with fiscal settings stuck on stupid
> 
> ...


----------



## a_majoor (1 May 2012)

While "Its the Spending, Stupid" should be the tagline for today's ongoing economic crisis, this author looks beyond straight austerity and tax increases (programs which have failed in the EU zone), and tries to suggest the proper policy mix:

http://www.hoover.org/publications/defining-ideas/article/116071



> *Beyond Austerity*
> by Richard A. Epstein (Peter and Kirsten Bedford Senior Fellow and member of the Property Rights, Freedom, and Prosperity Task Force)
> We must liberalize labor markets, not rely on macroeconomic “fixes.”
> 
> ...


----------



## Edward Campbell (8 May 2012)

The _Financial Times_ is reporting that Iran is accepting Chinese RMB as payment for oil. This is a major development because the RMB is not, generally, a _convertable_ currency but the Chinese are trying to change that. In fact the Chinese want to make the RMB fully convertable and add it to the World Bank's _basket_ of global reserve currencies.

But there are other implications:

1. US sanctions against Iran are seriously weakened; and

2. Ditto US _power_ to use sanctions to impose its political will.

The Chinese are taking a risk, maybe a small one, in exposing the RMB to the slings and arrows of the free market but they are hoping to reap economic, social and political gains.

My guess:

1. Asia, generally, will get behind China;

2. India, specifically, will feel emboldened to defy the US and buy its much needed oil from Iran; and consequently

3. Euro-American economic sanctions will fail to damage Iran; and, thus

4. US global power will be weakened again.


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## GAP (8 May 2012)

Once the sanction power is diminished enough, then force becomes an option.....


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## a_majoor (18 May 2012)

The changing Global economy will also herald changes to geopolitical alignments, as Walter Russell Mead points out here:

http://blogs.the-american-interest.com/wrm/2012/05/17/the-geopolitics-of-greeces-exit-from-the-euro/



> *The Geopolitics of Greece’s Exit from the Euro*
> 
> Geopolitics has so far been absent from the eurozone crisis. But is that about to change? As banks, businesses and Brussels begin accepting the possibility that Greece may indeed exit the euro—until recently an inconceivable proposition—the political ramifications could be just as profound as the economic consequences.
> 
> ...



How this will affect Canada will be interesting to contemplate; Russia is hardly a friendly power and having it’s influence grow and spread in the Eastern Mediterranean is going to have unpredictable consequences for everyone.


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## a_majoor (25 May 2012)

Sadly, most governments will not be following this advice. This will have disastrous results in the EUzone, and spillover effects throughout the world. Sub polities like Ontario and the Blue US states will be implementing this advice, either in a controlled drawdown or during a financial catastrophe as revenues collapse:

http://online.wsj.com/article/SB10001424052702304707604577423720925560872.html?mod=WSJ_Opinion_LEFTTopBucket



> *To Get Growth, Shrink the State*
> The best stimulus is a smaller government.
> 
> By TIM KNOX AND RYAN BOURNE
> ...


----------



## a_majoor (20 Jun 2012)

While this example is specifically American (and could go in the US economy thread), the implications are universal and could be imported to the EUzone or Ontario, for that matter. We may all actually live to see this, but not as a policy choice due to controlled drawdowns of spending and winding up of programs, but as a collateral result of the bankruptcy and collapse of the social welfare state model. The problem in that case is the transition period, which will not be pretty:

http://www.hoover.org/publications/defining-ideas/article/120481



> *A Fiscal History Lesson*
> by David R. Henderson (Research Fellow)
> 
> Following World War II, government spending cuts led to an incredible economic boom.
> ...


----------



## a_majoor (25 Jun 2012)

Cue more ominous music. If this blogger is right, then the entire structure of a fiat money economy has been put at risk. For those of us who remember the 1970's, with its inflationary spiral and finally "stagflation" this isn't a very promising state of affairs. Potential bright spots are the potentially positive effects of disruptive technologies (especially the ones that lower the costs of energy, food and shelter), and the fact that we have come so close to the brink that the only real options left are bankruptcy (like European investors facing 60% haircuts on sovereign debt instruments) or drawdowns of government spending. Option three is chaotic economic collapse:

http://blogs.the-american-interest.com/wrm/2012/06/25/central-bankers-losing-independence/



> *Central Bankers Losing Independence?*
> 
> In most western countries, central banks are, at least in theory, wholly divorced from the political process. Central bankers are selected to terms far longer than that of the average politician—and they are typically allowed to oversee numerous changes in political leadership during their time at the helm—in order to insulate them from the rough and tumble of everyday politics. In theory anyway, the central bank concerns itself purely with inflation rates and monetary policy; fiscal policy, tax rates, and other such matter are left up to the politicians.
> 
> ...


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## a_majoor (3 Jul 2012)

The Laffer curve vindicated (yet again!), as tax revenues fall in the UK after a rate hike. Politicians never seem to learn, however (just ask Ontario's own Liberal NDP coalition government):

http://danieljmitchell.wordpress.com/2012/07/01/the-laffer-curve-wreaks-havoc-in-the-united-kingdom/



> *The Laffer Curve Wreaks Havoc in the United Kingdom*
> 
> July 1, 2012 by Dan Mitchell
> 
> ...


----------



## DBA (5 Jul 2012)

A good quote from "Basic Economics: A Common Sense Guide to the Economy by Thomas Sowell":



> A government which proceeds as if the planned effect of its policies is the only effect often finds itself surprised or shocked because those subject to its policies react in ways that benefit or protect themselves, often with the side effect of causing the policies to produce very different results from what was planned.



The general idea applies to a lot more than just governments.


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## a_majoor (20 Jul 2012)

The $21 trillion dollar figure is astounding in of itself, but brings to mind one of the theories about the start of the Great Depression; the penultimate cause was the huge debt overhang that the Great Powers had accumulated in prosecuting the Great War. Certainly one of the primary factors of this economic clalamity (possibly new depression) is the debt overhang, and the realization that most people will be getting a huge "haircut" at some point in the future. The $21 trillion figure isn't even comprehensive, this is probably direct debt, and does not take into account the unfunded liabilites of government employee pensions and future expenditures like social security and CPP type pensions, as well as rising healthcare expenditures. In Canada there is a known $500 billion unfunded liability for pensions and benefits for government employees, to give you an idea of the scale of things:

http://blogs.telegraph.co.uk/news/jamesdelingpole/100171475/red-pill-blue-pill/



> *Red Pill, Blue Pill *
> 
> By James DelingpolePoliticsLast updated: July 18th, 2012
> 
> ...


----------



## a_majoor (24 Jul 2012)

Greece is even further downhill. This is a worrying situation since the other PIIGS have to take equally drastic action, but like Greece, may not. The idea that a 120% Debt to GDP ratio is sustainable is so far out of arc the only valid respons should be "WTF?"; the fact that Greece isn't even going to meet that figure bodes ill for everyone.

http://business.financialpost.com/2012/07/24/greeces-finances-hugely-off-track/



> *Greece’s finances ‘hugely off track’*
> Luke Baker, Reuters  Jul 24, 2012 – 12:29 PM ET
> 
> Aris Messinis/AFP/Getty Images files
> ...


----------



## Kirkhill (25 Jul 2012)

When you are looking at a bunch of numbers spread across a broad range it is a common strategy to chuck out the high and the low numbers, declare them to be outliers and then refigure the analysis based on what is left.

In the EU/Euro situation the comparable strategy would be to throw Greece AND Germany out of the club and try to come up with a useful solution amongst those that are left.


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## Brad Sallows (25 Jul 2012)

France can't afford to throw Germany out of the mix.


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## Kirkhill (25 Jul 2012)

Economically or Politically?

Politically I get it. Germany has a couple of millenia of history as "The Other" - speaking Theutiscam instead of Romansch, and often a stronger attachment to  Orthodox Constantinople than Trinitarian Rome.  The EU is all about binding Germany to France.  

But Germany is demonstrating yet again, just as Greece is, that it is different to France.  And all those other little micro-cultures scattered around those European valleys are equally different.

No amount of vapid politicians havering on about "all mankind are brothers yet, for all that" will change that essential European reality.
On the economic front though things are different.  

Just after I wrote that comment yesterday I saw this article in the Telegraph  by about 17 pro-Euro German economists declaring the Euro broken and offering a 20 year investment tool to fix it.

Investments need investors.  Germany would be better outside as an investor than inside as a "penitent".  Greece, on the outside, would change the dynamic, potentially making the burden of the other penitents less.  Greece could then be treated as the small special case that it is.  

France - outside the instrument, which it needs, it could assuage its pride as being one of the Great and the Good, just like Germany and Britain and the US and Japan and China.

France - inside the instrument, could assuage its pride as being one of the Great and the Good leading the benighted to the promised land of European Unity.

I generally consider the Germans to be too pragmatic to let pride get in the way of a good deal these days.


Edited to add link.


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## a_majoor (23 Aug 2012)

The economic statistics look poor all over. Regardless of how well our government and economy do, the fact that we are "missing" 33 million potential customers in the US alone (U3 unemployment number) tends to hold us back, and as this article points out, big drops are very likely in the EUzone and China. India, while not mentioned here, is also slowing considerably as inefficiency and corruption strangle growth. Previous experiences with debt driven depressions suggest that we may be in for up to a decade of slow growth as things get deleveraged.

http://business.financialpost.com/2012/08/23/economic-rot-spreads-from-beijing-to-berlin/



> *Economic rot spreads from Beijing to Berlin*
> Steven C. Johnson and Jonathan Cable, Reuters | Aug 23, 2012 7:17 AM ET | Last Updated: Aug 23, 2012 9:38 AM ET
> More from Reuters
> 
> ...


----------



## a_majoor (28 Aug 2012)

Consumer product giant Unilever sees the future, and begins to roll out third world marketing strategies for Europe. The erosion of wealth and consumer purchasing power isn't confined to Europe; watch to see if this sort of marketing rolls out in North America as well:

http://www.telegraph.co.uk/finance/financialcrisis/9501771/Unilever-sees-return-to-poverty-in-Europe.html



> *Unilever sees 'return to poverty' in Europe*
> 
> Unilever will adopt marketing strategies used in developing countries in order to drive future growth in Europe, as the head of its European business warned that poverty will rise in the region as a result of the debt crisis.
> 
> ...


----------



## Kirkhill (28 Aug 2012)

How many supermarkets are there in Indonesia versus Bazaar sales?

What is the profit margin on Ipads versus Surf detergent and Mashed Potatoes?

What Unilever is doing is going back to Europe of the 1950s.  People re-evaluating the definition of luxuries and necessities.  People shopping with cash in hand at the local corner shop because they can't afford to put gas in the car and you can't carry much home on the bus.

Meanwhile, those that can afford to shop in an Apple store are blissfully unaware of their countrymen's trials as evidenced by this poor Spaniard  winging about having to get by on 5100 Euros a month when 25% of his constituents are receiving 400 Euros a month as total income when on unemployment.

Keep this up much longer and more countries will be experiencing their Marie Antoinette moment.

PS Comparative Analysis of Britain and Italy  - probably related to Britain exporting more outside the EU than inside the EU.


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## Edward Campbell (8 Sep 2012)

This article, reproduced under the Fair Dealing provisions of the Copyright Act from the _Globe and Mail_ suggests that we are headed towards an (unnecessary) divide:

http://www.theglobeandmail.com/news/world/blocs-within-blocs-undermining-apec/article4528865/


> ‘Blocs within blocs’ undermining APEC
> 
> MARK MACKINNON
> VLADIVOSTOK — The Globe and Mail
> ...




So, the Americans, in pursuit of very short term advantages, may have given the Chinese the "key to Japan." 

Europe is, now, in the process of redefining its economic and political superstructures.

Russia is in inexorable decline.

Latin America, led by Brazil, had failed to "bloom."

Africa remains ... well Africa.

Ditto the Middle East and West Asia.

The Americans, and others, *should* move ahead with the TPP, despite the fact that Japan and South Korea may enter into a tripartite free trade agreement with China, *but* the long term goal for Australia, Canada, Malaysia and the other TPP members *must* be to unite the TPP and the China-Japan-South Korea free trade area, assuming that both come to fruition.

The American decision to try to marginalize China is a serious _strategic_ blunder. A sound grand strategy requires China to be _"inside the tent pissing out,_ [rather]_ than outside the tent pissing in,"_ as the late President Lyndon Johnson put it. But, what's done is done and we, the American led West, have to live with America's (flawed) choices.

The good news, such as it is, is that China has decided to intervene, albeit slightly, in Europe's financial crisis.

Our, Canadian, *imperative* - which we share with e.g. Australia, Mexico, Norway and South Africa, is to bring Asia, especially China and India, fully into the global free trade system. Our "enemy," in the immediate term, is, distressingly, the USA - no matter who is president. The fact, and it is a fact, that the global free trade system is none of global, free or a system is of less importance than that some countries, including Australia, Canada New Zealand and Singapore, want one and are willing to compromise to get one.


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## Brad Sallows (8 Sep 2012)

"China’s exclusion is strange given its huge economic presence in Asia-Pacific."

IOW, might makes right.  China's protectionist policies should be no-one else's concern and China should have a seat - probably a distinguished seat - at any table.

My counter-proposal is to let smaller organizations of highly protectionist nations negotiate whatever "free" trade they can manage among themselves after they exclude all their sacred cows while we join larger, more nearly "free" trade blocs and prosper.  They will gradually become relatively weaker, and there won't be any question of mustering the strength to sustain a stream of piss when they finally come knocking at the tent door.


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## a_majoor (19 Sep 2012)

Argentina seems to be the poster child for what not to do. Kirkhill had noted in another thread that modern communications and financial products like PayPal provide a way to bypass the gatekeepers. Well Argentina is now attempting to divest savers from their wealth by blocking PayPal for domestic transactions:

http://news.slashdot.org/story/12/09/18/0135227/paypal-users-in-argentina-can-no-longer-make-domestic-transactions



> "The online payment service said that from 9 October: 'Argentina resident Paypal-users may only send and receive international payments.' Last year the Argentine government announced restrictions on the purchase of U.S. dollars. It has led to an increase in currency sales on the black market — but Paypal's exchange rates are better. Locals were setting up two accounts under different email addresses and transferring money between the two, exchanging local currency pesos for dollars in the process."


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## Edward Campbell (4 Oct 2012)

Respected prognosticator Nouriel Roubini gives his take on the state of the global economy in this piece which is reproduced under the Fair Dealing provisions of the Copyright Act from _Project Syndicate_:

http://www.project-syndicate.org/commentary/fiddling-at-the-fire-by-nouriel-roubini


> Fiddling at the Fire
> 
> Sep 13, 2012
> 
> ...




The Great Recession just will not evolve into a broadly based, energetic recovery.


----------



## kevincanada (5 Oct 2012)

I do agree with this statement in the article "Ineffective governments with weak leadership are at the root of the problem", I'm not a big fan of what I just read.  A lot of lingo was used instead of factual information.  As in "Monetary hawks, bailout resources, game changer"  I felt it was just more a play of words for publicity rather than providing a informative overview.

I haven't keep up much on the Eurozone problems.  I do feel it is relevant to toss a few things out there as food for thought regarding the global problems.  I will quote Ben Bernanke.   He did a interview a couple years back regarding the problems in the united states, but these also apply to the world too.

#1 problem was technology.  While good for our health, it is bad for jobs.  I am quoting Mr. Bernanke, (my percentages and wording could be off a little as this is from memory) albeit the principles involved are the same.  'In the 1960's 50% percent of the American workforce is in agriculture.  Today only 3% of the American workforce is in agriculture.  This is due to technology and and better machinery.  The problem we had to face was shifting 47% of the workforce and retraining them and providing new fields for them to go into'

47% of the American workforce equals 10's of million of jobs.

Mr. Bernanke also went on to say 'The problem is not captial.  Banks and Corporations have more than enough capital.  The problem is business have no where to invest the capital in order to create jobs'

Some food for thought.


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## Brad Sallows (5 Oct 2012)

>The Great Recession just will not evolve into a broadly based, energetic recovery.

We can't move past the necessary corrections/adjustments as long as politicians energetically resist the corrections/adjustments.  The fundamental problem they will not confront and solve is the desire to spend all of today's and some of tomorrow's revenues - every day.


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## Edward Campbell (5 Oct 2012)

Brad Sallows said:
			
		

> >The Great Recession just will not evolve into a broadly based, energetic recovery.
> 
> We can't move past the necessary corrections/adjustments as long as politicians energetically resist the corrections/adjustments.  The fundamental problem they will not confront and solve is the desire to spend all of today's and some of tomorrow's revenues - every day.




I agree with you, Brad: spending, all spending, including all sacred cows, *must* be cut. Where I suspect we part company is on the revenue issue. I don't think spending cuts *of sufficient depth* are wise, much less politically possible; therefore I think revenue must be enhanced, also. The easiest, but least desirable way to raise more revenue is to raise individual (income) taxes; a much better, but also, I suspect, politically impossible way is to impose a national/federal value added tax, à la our HST, on top of state and local sales taxes. That leaves reforms of the HUGE and HUGELY complex US tax code. My guess is that enough revenue can be found within a few sane, harmless (except to tax lawyers and accountants) tax code reforms to make the spending cuts equally harmless, albeit still painful to many voters.

My other guess is that 99.9% of elected US legislators, Democrats, Independents, Republicans of all stripes, equally, are too frightened or too indebted to the lobby industry to do what good economic sense and simple patriotism require; they will neither cut nor reform until a wholly preventable disaster strikes.

Americans, again of all political stripes, are the authors of their own misfortunes but the world will pay for their willful irresponsibility.


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## GAP (5 Oct 2012)

The subsidy game that congress has allowed over the past decades is probably one of the biggest contributors to the huge deficit.....A real hard knocks management and elimination of most would help immensely


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## Edward Campbell (5 Oct 2012)

GAP said:
			
		

> The subsidy game that congress has allowed over the past decades is probably one of the biggest contributors to the huge deficit.....A real hard knocks management and elimination of most would help immensely




The problem with industrial subsidies is that, despite international trade rules, everybody does it. The net effect is that a _unilateral_ cut in subsidies will harm the country making the cuts without any immediate or near term offsetting benefits. Trade negotiations are, largely, exercises in me attacking your subsidies while I, resolutely, defend my own. The US has been stunningly successful at making _national security_ exempt from international trade scrutiny and then using the defence budget as a HUGE industrial subsidy programme, but, in so doing, they have opened the same door to the rest of the world.

Don't get me wrong: I detest subsidies and I believe that many important traders, like Australia and Canada, could and should cut tariffs and subsidies unilaterally - accepting some (considerable) "short term pain" for, the historical record suggests, even more considerable "long term gain." But that, too, is politically impossible or, at least, highly improbable.


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## Edward Campbell (5 Oct 2012)

E.R. Campbell said:
			
		

> I agree with you, Brad: spending, all spending, including all sacred cows, *must* be cut. Where I suspect we part company is on the revenue issue. I don't think spending cuts *of sufficient depth* are wise, much less politically possible; therefore I think revenue must be enhanced, also. The easiest, but least desirable way to raise more revenue is to raise individual (income) taxes; a much better, but also, I suspect, politically impossible way is to impose a national/federal value added tax, à la our HST, on top of state and local sales taxes. That leaves reforms of the HUGE and HUGELY complex US tax code. My guess is that enough revenue can be found within a few sane, harmless (except to tax lawyers and accountants) tax code reforms to make the spending cuts equally harmless, albeit still painful to many voters.
> 
> My other guess is that 99.9% of elected US legislators, Democrats, Independents, Republicans of all stripes, equally, are too frightened or too indebted to the lobby industry to do what good economic sense and simple patriotism require; they will neither cut nor reform until a wholly preventable disaster strikes.
> 
> Americans, again of all political stripes, are the authors of their own misfortunes but the world will pay for their willful irresponsibility.




Watch this: it is US specific but the principles, inefficient and ineffective tax regimes, are a global problem and so is too much _entitlement_ spending.


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## Brad Sallows (6 Oct 2012)

Tax increases are not necessarily the solution.  There are four factors to consider: taxables, tax rates, tax credits (aka tax expenditures), and tax shelters.  The latter two could be lumped together as one for purposes of this discussion.

Too much attention focuses on the simple linear relationship involving taxables and tax rates, and not enough attention on human behaviour.  The "rational economic man" is a myth, the "rational investor" is not.  At the risk of sounding like Noam Chomsky, "no serious person" disputes that increased tax rates encourage tax avoidance (movement of capital into tax shelters) and decreased tax rates remove that incentive.  It is simple investment arithmetic: is the after tax income from the non-sheltered investment greater than the RoI from the sheltered one, or not?

Tax shelters and tax rates act together to distort market signals (risk pricing) and the flow of investment capital.  Those who are able to offer tax sheltered investments can reduce their price (essentially, transfer some fraction of risk pricing to taxpayers - socializing risk, to which most progressives would object if they understood it); those who cannot offer shelter must offer higher rates of return (than the risk would ordinarily warrant) to compete for capital.

In the US, where they have tax-free municipal (and some state) bonds, this is exceptionally pernicious.  Capital is drawn away from more productive investments.  The cost of borrowing, for governments, is cushioned.  It should be clear that this might promote lazy, sloppy, inefficient, imprudent government spending practices.  So reduction of tax rates and elimination of tax shelters would achieve two useful goals: redirect more capital into innovation and production, and force governments to either fix their imbalances or accept a greater cost for not doing so.

Notice I've written nothing about "the rich" spending more and supporting some sort of "trickle down" effect.  "Trickle down" is a strawman created to support objections to tax reductions.  Thomas Sowell has a standing challenge - which AFAIK no one has met - to anyone to find a reputable source which espouses a "trickle down" theory.  The thrust of the counter-complaint - which I believe to be largely valid - is that "the rich" don't spend the money, so nothing "trickles down".  But the follow-up question is never asked: so what do "the rich" do with the reduction in their tax liabilities?  Surely no-one believes they stuff it in mattresses.  And I have already stipulated that they don't spend enough of it to matter, so the objection "oh, they spend it on X" is already null.  Short of burning it, the obvious explanation is that it is invested.  And regardless where it is invested, it means jobs and economic activity (all or most of which will be taxed).  And that is why tax reductions are useful, and why tax reform marrying tax reductions with elimination of tax shelters shows a lot of potential to increase economic activity, and thereby increase government revenue take.  If the reform is revenue neutral or even nearly so, the increased economic activity can be enough to generate a net surplus for government.


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## ModlrMike (6 Oct 2012)

For the most part Brad I'd agree with your summation. However you'll never convince the "tax the rich" crowd that they can continue to cut thicker and thicker slices from the ham and still feed everybody. At some point you run out of ham; or worse, you run out of pigs.


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## a_majoor (6 Oct 2012)

Actually, Brad has plenty of empirical evidence to back him up; the various economic booms during times of tax reductions in different times and places, and the increase (sometimes large increase) in tax revenues accrued by the various nations that have implemented a flat or single tax.

The real reason for the various straw man arguments always raised against changes to the tax code (especially broad based tax cuts or elimination of various tax loopholes) has little to do with overall economic efficiency but everything to do with special interests that benefit from one or more tax loopholes or other economic distortions. These are the sort of people who will fight to the last taxpayer to preserve their special benefits and perques.


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## Redeye (7 Oct 2012)

Thucydides said:
			
		

> Actually, Brad has plenty of empirical evidence to back him up; the various economic booms during times of tax reductions in different times and places, and the increase (sometimes large increase) in tax revenues accrued by the various nations that have implemented a flat or single tax.
> 
> The real reason for the various straw man arguments always raised against changes to the tax code (especially broad based tax cuts or elimination of various tax loopholes) has little to do with overall economic efficiency but everything to do with special interests that benefit from one or more tax loopholes or other economic distortions. These are the sort of people who will fight to the last taxpayer to preserve their special benefits and perques.



Funny enough, most of that countries that use flat taxes which are proffered to support that argument are countries which have also just undergone massive transformations in their economic system (they're almost all Eastern European/former Soviet states), meaning it's rather hard to argue the benefit because it's anything but clear what caused it. In most cases where flat taxes are proposed, the middle class (which is a pretty vast swath of voters) stands poised to get hit hard, as do poorer people, because they benefit from a number of deductions put in place to accomplish other goals. Things like child care deductions, earning income tax credits/personal exemptions, dependent credits, etc benefit them in proportionally greater ways. That's why such plans generally flop with voters once the ramifications are explained. The upside of them is that they greatly simplify the tax collection system and probably can reduce avoidance.  If pitched with a reasonable individual or household exemption it could gain some traction, and if coupled with consumption taxes (again, exempting a broad range of staple goods to reduce incidence on lower income persons), it'd be interesting to model the impact.

What's most interesting is the optics through which fiscal imbalance are perceived by different groups - or rather, how they are perceived as being perceived. The "rich" are portrayed in America, for example, as being angry that a massive deficit is being run to subsidize "freeloaders". I don't accept that argument, especially, since it's a caricature, just as any portrayal as "the left" as being idle, non-working, "Occupy" folks, when they're not generally, but they do seem to have a legitimate reason to question, in many countries, why they're being saddled with debt to give tax breaks to businesses, or to fight wars abroad, or for any other form of wasteful spending. There's legitimate reasons, in any state or jurisdiction, to not want to run long-term deficits, and to spend government money prudently. I'm watching Nova Scotia's government piss-artists once again hand a bunch of public money to businesses to "create jobs" in economically depressed areas. As soon as those subsidies are withdrawn, the businesses will leave as has happened umpteen times, and one can only wonder what if any benefit taxpayers received. However, it's a problem that will exist in many places - trying to maintain a post-industrial economy.

I'd never considered the perverse incentives created by munis - interesting concept that makes complete sense. The more common one brought up is mortgage interest deductibility and how it impacts housing markets and consumer behaviour with respect to home equity financing in the United States. It's interesting how programs can cause distortion in consumer choices, and I often wonder if they were intended or at least anticipated consequences.

I tend to agree with the argument Roubini makes that government is unable to fix the issue at either extreme - because they're either looking short-term in the context of an election cycle - or their long-term self-preservation interest means they're risk averse and will accept underperformance as a cost of stability. No one, for example, will touch the defense budget in the USA, which is a perfect storm of all the problems - protectionism, waste, etc, because it has consequences at the ballot box. The problem is, there isn't any realistic solution. Our economies are going to wildly change, regardless of policy decisions, because trade, free or not will force them to.


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## Edward Campbell (8 Oct 2012)

Many American so-called _conservatives_ will, with absolutely no intellectual foundation, describe Joseph E. Stiglitz as a radical socialist ~ that's arrant nonsense of the highest order which tells us a lot more about the intellectual poverty of American political discourse than it does about Stiglitz.

Joseph E. Stiglitz is part of the _New Keynesian_ movement, which I, personally, regard as just as muddle headed as _classical_ Keynesian  economics ~ it's not that Keynes was a bad economist, in fact his theories make good sense, it is just that Keynesian economics is a *political impossibility*: it is easy to run deficits and spend, Spend, SPEND in a recession; it is hard, too hard, indeed impossible to do what Keynes said and *cut* spending in good times, to pay off the deficits and pay down the debt. Keynes and the Keynesians, new and old, failed to sqaure that circle, but so do the _neo classicists_ who are all in favour of cuts but cannot manage to tell us where and how.

But, being politically naive does not make Stiglitz a bad economist and his Nobel Prize (2001) suggests that he might be better than anyone teaching at, say, College of the Ozarks which is a favourite of American conservatives.

Anyway, now that that's of my chest, here, reproduced under the Fair Dealing provisions of the Copyright Act from _Project Syndicate_ is Stiglitz on why he believes _monetary_ policy, alone, cannot work:

http://www.project-syndicate.org/commentary/quantitative-easing-3--qe3--and-the-problems-of-the-fed-and-ecb-s-expansionary-monetary-policy-by-joseph-e--stiglitz


> Monetary Mystification
> 
> Joseph E. Stiglitz
> 
> ...




Stiglitz is right, in so far as he goes: _monetary_ stimulus, by itself, will not work; some sorts of _fiscal_ stimulus are needed, too; *but* many countries, including the USA, *cannot* provide any _fiscal_ stimulus until they get their existing budgetary houses in order. So, first, some "short term pain" is necessary: for those (47%?) who are _"entitled to their entitlements"_ and for those who suck, endlessly, at the teat of the _"military industrial complex_." The, and only then, will it be possible to provide _fiscal_ stimulus. Politically, I think, the two must be made to happen simultaneously: entitlements and the defence budget must both be cut and most of those cuts can, productively, be applied to _New Keynesian_ type _fiscal_ stimulus which we have learned, from every other recession, actually works. What we, Keynesians and classicists alike, must learn is that _fiscal_ stimulus works when it is applied, indirectly, to e.g. public works - maintenance of sewers and bridges, for example - not directly, to _entitlements_ which become too hard to cut.


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## Edward Campbell (8 Oct 2012)

Part 1 of 3

More pessimism in this interview with *Ian Bremmer*, president of Eurasia Group and author of _The End of the Free Market: Who Wins the War Between States and Corporations?_ and *Nouriel Roubini*, professor of economics at New York University's Stern School of Business, who is co-founder and chairman of Roubini Global Economics, which is reproduced under the Fair Dealing provisions of the Copyright Act from _Foreign Policy_:

http://www.foreignpolicy.com/articles/2012/09/24/fear_premium_roubini_bremmer?page=0,0


> Fear Premium
> *An exclusive conversation with Nouriel Roubini and Ian Bremmer on the hidden economic risks as geopolitical tensions bubble over in the Middle East and China.*
> 
> INTERVIEW BY BENJAMIN PAUKER
> ...




End of Part 1


----------



## Edward Campbell (8 Oct 2012)

Part 2 of 3



> *FP*: And high officials have blown off Hillary Clinton as well.
> 
> *IB*: That's right. And you saw there were sources close to the leadership that said he had a minor back problem and that he'd be back. I accept that at face value -- or close to face value -- in the sense that if it had been something more serious, we would have seen folks close to Xi Jinping leaving the country and showing up at American consulates, things like that. I don't think there was a significant instability issue.
> 
> ...



End of Part 2


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## Edward Campbell (8 Oct 2012)

Part 3 of 3



> *FP*: Do you buy Mitt Romney's statement that Russia really is our "No. 1 geopolitical foe"?
> 
> *IB*: That's very funny; you know, [Vladimir] Putin just kicked USAID [out of] Russia, so at the very least, it's going to cost U.S. taxpayers a little less. Maybe Romney will like him more now. I think that it was a little farcical that Romney called Russia the No. 1 geopolitical foe." It implies that he was looking back at the 1980s or the 1970s. But then again, when Obama was asked, he said that al Qaeda was our No. 1 geopolitical foe, and that means he's looking back 10 years.
> 
> ...



End of Part 3 of 3


Neither Bremmer nor Roubini is out of the _mainstream_, neither sees anything bright on the horizon. The *Great Recession* drags on and on and on and ...


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## Edward Campbell (11 Oct 2012)

To make matters worse, the _Financial Times_ warns of the *"Risk of a US-China trade war"*. There is scant *hard* evidence that _Huawei_ engages in corporate espionage, on its own behalf or on behalf of the Chinese government - no more evidence, anyway, than exists on the same charges against say _Alcatel_ (France) or _Motorola_ (USA) - but that has not stopped the US Congress from imposing serious sanctions against it. The US has also imposed punitive tariffs against a Chinese solar panel maker. In both cases some commentators  (e.g. Michael Hlinka on CBC Radio) suggest that this has much, much more to do with US elections than with anything the Chinese companies may have done (probably did to, to be fair). So, in all likelihood, it's business a usual in a US election year, *BUT* there is also a change of government underway in China and there is a real possibility that _signals_ can be misunderstood with serious consequences for the global economy if China decides to retaliate, in kind, against the USA.

The _Financial Times_ says, "Whatever the merits of the case, the risks of a trade war must be contained." Amen.


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## Edward Campbell (12 Oct 2012)

Economics professor Danny Quah offers a suggestion for restoring _balanced_ growth to the global economy in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from _global policy_:

http://www.globalpolicyjournal.com/blog/11/10/2012/small-proposal-rebalance-global-economy-just-let-china-grow


> A Small Proposal to Rebalance the Global Economy: Just let China Grow
> 
> Danny Quah
> 
> ...




We too often forget that *our* collective goal is to move from this:





Toronto home, 14 August 1913 (courtesy City of Toronto Archives/SC 244-134).

To this:





A 21st century home on Toronto's _Bridle Path_

China is in the process of doing that - the shift is by no means complete, to be Churchillian, it is the end of the beginning for China, not the beginning of the end. There is still a lot, too much, of this:





*Most* of China, now 

The next, vital, step up is this:





*Some* of China, now

But China will not be ready to save more than it consumes until pretty much everyone has this:





Where China needs to be

I have travelled a fair bit in China, including well away from the prosperous, sophisticated East Coast, and I can assure you that there is a lot of _productive consumption_, probably a full generation's worth of it, before China gets from even *Some* of China, now to Where China needs to be. Thus I think Prof Quah is on the right track and President Obama and Governor Romney, both of whom say they want to _restrain_ China's growth, are wrong.


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## GAP (12 Oct 2012)

Oh....they want China to follow the pattern of the West's economics and price themselves out of the market. 

Would it not then be Indonesia's turn, then xxxx, then xxxx? 

What happens when all these grown economies are all grown up to consume and wither on he vine, production wise?


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## Edward Campbell (12 Oct 2012)

GAP said:
			
		

> Oh....they want China to follow the pattern of the West's economics and price themselves out of the market. Yes
> 
> Would it not then be Indonesia's turn, then Philippines, then Nigeria? Yes
> 
> What happens when all these grown economies are all grown up to consume and wither on he vine, production wise? Russia, which will have declined to _Third World_ status, along with Greece, Spain and Italy, will begin the _looooong, loooooooong_ and painful rise back to prosperity. Don't forget that 500 years ago China accounted for more than 25% of the global GDP, then it sunk to near zero and now it is the second largest economy in the world; in the same 500 years Britain rose from lower middle rank to the very top and has, now, declined back to the middle again. It's all cyclical.


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## GAP (12 Oct 2012)

Oh....I love cycling clubs.....uh...not the same thing huh?  bummer   ;D


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## kevincanada (13 Oct 2012)

So much talk about the USA economy, yet no one has even looked at the USA economy numbers.  All these news articles of tax this, do that even the postings on here....  I had look at the Federal reserve balance sheets.  Aside for the obvious cracks in the the system bailouts and such,  looking at the numbers and it hits you in the face why the usa recovery is so slow.

When you take the rises in government spending, lowered income, and the Federal reserve easing up on credit,  subtract out the increase of liquid personal holdings, repayment of debt and increase of corporate holdings.  The numbers balance out.

The trillions of dollars spent over the last 4 years in this recession, has virtually all gone into people holdings and debt payments on those credit cards and mortgages.  All other stuff aside, it explains why it is so sluggish.

Don't believe the media and their tax system reports... Taxes just keep the money flowing is all.


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## a_majoor (13 Oct 2012)

While repaying debt is virtuous, the real reason the recovery is slow or nonexistent has far more to do with the money being parked in various safe spots or offshore, rather than being invested in wealth creation. (Note politicians use the term "investment" differently from the rest of us; government spending on roads and sewers is "investment"; government spending on hockey arenas is not). Apple Corp is thought to be sitting on an offshore dragon's horde of @ $35 billion dollars alone.

The "Capital Strike" of 1937-38 is perhaps the most recent and clear cut example of what is really happening; business in the United States simply refused to make any investments during the capital strike due to the chaos and uncertainty created by the "New Deal", plunging the United States into the deepest part of the Great Depression since it had started in 1929. The current economy is hamstrung for similar reasons, as business is unwilling to invest in new projects due to uncertainty caused by uncertainty due to the unknown impacts of Obamacare, potential tax code revisions, political demagoguery and the potential to face competition from taxpayer funded crony capitalists. They will know one way or another on election day.


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## kevincanada (14 Oct 2012)

Yes this is true.  The Politicians and central banks in America and Canada as well have done their job and made the money available.  The issue is as you say is the faith side of the value of money.  It's public faith that you will wake up tomorrow go to work and have a paycheck that allows you to spend money.  When this faith is in a state of hardship as it is now, it has a real and negative impact on the quality of living for everyone in the form of finances.

The election is dire for improvement, as is Europe is dire for improvement.  Even some good news that we have a real solution in order even if it takes a decade to implement.  Simply something worthwhile coming out of Europe would have a positive affect for America and the whole world.  They really are dragging everyone behind in Europe, both directly in raw production and indirectly being the faith/political spectrum.


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## Edward Campbell (18 Oct 2012)

Some news from the IEA, reproduced under the Fair Dealing provisions of the Copyright Act from the _IEA Press Release_ site:

My *emphasis* added
http://www.iea.org/newsroomandevents/pressreleases/2012/october/name,32158,en.html


> Global map of oil refining and trade to be redrawn over next 5 years, IEA report says
> 
> 12 October 2012
> 
> ...




The changes in refining capacity represent the changes in gasoline demand, for automobiles, which is, ever so slightly, falling in North America even as it is, rapidly, growing in East and South Asia.


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## Edward Campbell (18 Oct 2012)

Interesting and illustrative economic _factoid_: Heard at 2nd Annual China Consumption Conference in Hong Kong - sales of adult diapers will outsell those for babies in Japan this year!

More 
	

	
	
		
		

		
		
	


	




 than 
	

	
	
		
		

		
		
	


	




 is not an enviable economic position.


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## Edward Campbell (20 Oct 2012)

I'm not sure what this report, reproduced under the Fair Dealing provisions of the Copyright Act from the _Sunday Straits Times_, means, exactly:

http://www.straitstimes.com/breaking-news/money/story/hk-defends-currency-peg-first-time-2009-20121021


> HK defends currency peg for first time since 2009
> 
> Published on Oct 21, 2012
> 
> ...



My guess: QE (quantitative easing) really means that Ben Bernanke is printing more and more and more money with nothing new happening in the US economy to give it any real value. Thus the US dollar is 'devaluating' itself against e.g. the HK (and Canadian) dollar and this poses a threat to price stability in HK as the US money leaves America in search of real value elsewhere - e.g. HK real estate. In other words "bad" money flows in and drives out "good" money, if you like Gresham.


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## kevincanada (21 Oct 2012)

A several posts back a few days ago you may have noticed, when I looked at the numbers since the recession began, the vast majority of money printed, spent, created etc. had went into stabilizing bank accounts, corporation holdings and reducing debt, very little has went into circulation for the purposes of purchases goods and job creation.

I do believe Ben Bernanke is on the right track with more QE.  They need to devalue the dollar and keep printing until jobs come back.  If they are buying up the US dollar, yeah it does mean they are scared of it triggering inflation on the Hong Kong end.  China and Hong Kong have been getting a free ride for many decades, we keep buying their cheap goods.  The American dollar is a major player in powering their economy.  If the dollar devalues, It will bring jobs back, we'll see higher level of debt repayment and improved markets as a whole.  As for Hong Kong? Decreased exports and slowed growth, and the outlook not so good.

Obama tried to do the same thing with the made in America clauses on goods, I believe the Republicans shot it down a couple years back.  Obama and Bernanke could be thinking retaining jobs failed using legislation and politics, fine we'll get it done using credit then.



			
				E.R. Campbell said:
			
		

> I'm not sure what this report, reproduced under the Fair Dealing provisions of the Copyright Act from the _Sunday Straits Times_, means, exactly:
> 
> http://www.straitstimes.com/breaking-news/money/story/hk-defends-currency-peg-first-time-2009-20121021
> My guess: QE (quantitative easing) really means that Ben Bernanke is printing more and more and more money with nothing new happening in the US economy to give it any real value. Thus the US dollar is 'devaluating' itself against e.g. the HK (and Canadian) dollar and this poses a threat to price stability in HK as the US money leaves America in search of real value elsewhere - e.g. HK real estate. In other words "bad" money flows in and drives out "good" money, if you like Gresham.


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## Edward Campbell (21 Oct 2012)

I'm not sure Bernanke is on the right track but I don't see what other courses are open to him.

From the point of view of HK, Singapore and a few other _strong_ currency countries, however, the US policy is dangerous, so I expect them and maybe a few others may take similar, _defensive_ measures.


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## kevincanada (21 Oct 2012)

There is no other course open, for anyone really.  We are all to far into debt. the more I learn about this recession, the more I'm blaming Keynesian policy and debt levels gone out of control.   While it stinks for the little countries, They can take all the defensive measures they want.  They are to small to have a choice changing impact.  Hong Kong, is $250 billion GDP est.

According to the Wikipedia, hong kong economy is 90% service, 9% industry.   Perhaps it is their stock market they are worried about.  

Either way, I'm willing to bet we see the American dollar gradually being devalued over a number of years, like how our dollar raised in value over the last few decades.  I think they don't have a choice, Either devalue the money, or invoke trade clauses to stop the jobs from going over seas.  The latter Obama has already tried.


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## Edward Campbell (21 Oct 2012)

kevincanada said:
			
		

> There is no other course open, for anyone really.  We are all to far into debt. the more I learn about this recession, the more I'm blaming Keynesian policy and debt levels gone out of control.   While it stinks for the little countries, They can take all the defensive measures they want.  They are to small to have a choice changing impact.  Hong Kong, is $250 billion GDP est.
> 
> According to the Wikipedia, hong kong economy is 90% service, 9% industry.   Perhaps it is their stock market they are worried about.
> 
> Either way, I'm willing to bet we see the American dollar gradually being devalued over a number of years, like how our dollar raised in value over the last few decades.  I think they don't have a choice, Either devalue the money, or invoke trade clauses to stop the jobs from going over seas.  The latter Obama has already tried.




It's the Hong Kong dollar - they, like Singapore - are HUGE traders: in goods, in services and in currencies, but most transactions pass, in part, at least, through HK banks. You need to see the HK (and Singapore) container ports: they, too, are HUGE. You're right, they don't manufacture much, but they are major, _global_  entrepôts and they buy and sell vast amounts of goods. If their dollars are valued too high they will lose business to other centres. The trading business in HK and Singapore employs many tens of thousands of local people: good, well paying jobs; the governments will do whatever it takes to protect their positions.

While the Singapore and HK economies are, indeed, small ($260 and $245 Billion vs $1,700 Billion for Canada) they are, still, in the top quarter in the world and, on a _per capita_ basis, both are in the top 10 in the world, far ahead of Canada (at about 15th place). They matter in the global economic system and their reaction to US actions matter, too.

But, I suspect that, in general, we are in violent agreement about what can be done.


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## a_majoor (21 Oct 2012)

Printing money and devaluing currency really only has one end point, as the people living at the end of the Weimar Republic could tell you. Argentinians have also been on the receiving end of hyperinflation, and the Iranian people are learning about this as well.

Devaluing the currency is not the only option for the Americans, nor is it the best. Really the only reason that the Administration allows or encourages this behaviour from the Treasury is:

1. It avoids making tough choices and kicks the can down the road a little farther

2. Real changes like cutting entitlement spending, reforming the tax code or eliminating crony capitalism would inflict huge amounts of pain on the population or political client groups, which politicians would avoid to maintain their power and perques.

Jobs do not "come back" because the government devalues the currency; jobs are created through investment, which needs savings and accumulated wealth to kick start. Creating piles of monopoly money just won't do.


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## Edward Campbell (21 Oct 2012)

The US Treasury/Administration neither "allows" nor, officially, "encourages" the Federal Reserve. Chairman Bernanke's options are limited to monetary policy, President Obama's are limited to fiscal policy. I agree that President Obama has done a poor job on his end, but that just leaves Ben Bernanke with fewer options.


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## kevincanada (22 Oct 2012)

I'm not looking to debate you on any of these examples, I think you bring up some good points.  But can you show how reforming the tax code will fix the present problems?  It's a very good point.  

The problem of inflation is actually not so much the Big Banks for this, with cheap money.  There is a few types of inflation, the main two are printing money, and the second raising prices.  Just because they are printing money does not mean the cost of living will go up.  Business raising the cost of goods looking to make a profit is what raises the cost of living.  Easing of credit offsets this.  Somewhere in the wisdom of the Federal Reserve, they use a 2% annual cost of living increase as a target number that seems to keep things running and people happy.

The whole world is so far in the hole now, that doing Quantitative Easing will actually help, there simply is not enough money in circulation.  I should correct that statement, there is enough cash to go around, everyone is still putting it into holdings and pay off debt. Neither of which is good for job growth.  It appears to me that the Federal Reserve has recognized this issue hence the new round of Quantitative Easing.

I just noticed a advertisement here in Canada on television today showing the Canadian economic action plan?  This too is inflation yet another form of it.  If we still have that running, it means we are not out of hot water yet also.  It's a pickle of a situation.
Printing money isn't really that bad,  GDP doubles roughly every 10 years, and the Cost of goods (cpi index) has went up 78% in the last 10 years for the Americans,  We are actually wealthier today than 10 years ago with printing of money, wars and recession all included.





			
				Thucydides said:
			
		

> Printing money and devaluing currency really only has one end point, as the people living at the end of the Weimar Republic could tell you. Argentinians have also been on the receiving end of hyperinflation, and the Iranian people are learning about this as well.
> 
> Devaluing the currency is not the only option for the Americans, nor is it the best. Really the only reason that the Administration allows or encourages this behaviour from the Treasury is:
> 
> ...


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## kevincanada (22 Oct 2012)

I should just throw this out there.  All countries print money.  Always have. Get a mortgage? Swipe a credit card? Car loan?  Student loan?  It is all printing money and inflation of the currency, only difference is now people are taking notice.  It's like GST, PST and HST.  PST/GST was always there, it was just buried in tax code.  You were paying it all along, just you only took notice of it recently since someone made a stink about it. Prime Minister Brian Mulroney, is credited with creating GST, which is 100% false, he only relabeled a existing tax and brought it to the surface and made it public.

Same thing goes for world economy and printing money.  It's been going on since days we all lived in mud huts and traded silver shillings and probably longer than that.


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## Redeye (22 Oct 2012)

kevincanada said:
			
		

> The latter Obama has already tried.



He did? When? Not that protectionism is any broad terms good for anyone, but when did he try it?


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## a_majoor (22 Oct 2012)

Actually, no.

Commodity money was very "inflation proof", since there was a very fixed supply. You could get the occasional influx on "new" money if you were able to conquer another polity and seize their supply of silver (the best example was the overthrow of the Persian Empire by Alexander III, which liberated a huge horde of gold and silver); but generally, coinage was debased through practices such as "shaving" (done by people) or issuing new coins with a lower weight of precious metal (done by the State).

The next time a large segment of the economy was hit hard by inflation was when the Spanish discovered silver in the New World. Since the Hapsburg economy wasn't growing or generating real wealth at anywhere near the rate new silver was entering the economy, an inflationary spiral began in Spain and spread across Europe. One marker was the replacement of free rowers in galleys by convicts and slaves; it became too expensive to hire rowers so first the Spanish, then the French and eventually the various Italian city states replaced free rowing gangs with convicts (by the Battle of Lepanto, only the Venetians had a large fleet with free oarsmen). 

Your point about the difference between "money" and "circulation" also indicates some popular misconceptions. There is indeed a vast amount of money, but it is not in circulation because various factors are discouraging it. Paying off personal and corporate debt is _not_ one (money going from my pocket to pay off a debt is still in circulation, someone else gets to use it), in a larger sense money is sitting idle because there is no practical place to put it. Interest rates are near zero everywhere, suppressing cash investment in bonds and money accounts, while various State actors have basically declared war on investment through various tax schemes (would you want to invest in France when the government declares they want to take 75% of your income? How about Quebec with unspecified future taxation measures against the "rich"). You should note that tax receipts in the UK dropped when the Conservative government raised tax rates, and "millionaires" have vanished in various US States which passed "millionaire tax" laws; mostly through people rearranging their affairs to reduce their tax burdens. Apple Inc. is sitting on an estimated $35 billion in cash since bringing it into the United States would expose it to a punitive tax rate.

As Milton Friedman stated: "inflation is always and everywhere a monetary phenomenon." More money chasing the same amount of goods causes people to bid up the price; _that_ is the essence of inflation.


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## Edward Campbell (22 Oct 2012)

There is a fundamental difference between debasing coinage, which Gresham described, and devaluing modern currencies and one should be careful about mixing the two; see e.g: http://eh.net/encyclopedia/article/selgin.gresham.law / Extensions to Paper Money and Bimetallism.

The fundamental historical lesson is that a debased or devalued currency reduces _confidence_ which, we can see, does have an impact on the national economic performance.


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## GAP (22 Oct 2012)

kevincanada said:
			
		

> I should just throw this out there.  All countries print money.  Always have. Get a mortgage? Swipe a credit card? Car loan?  Student loan?  It is all printing money and inflation of the currency, only difference is now people are taking notice.  It's like GST, PST and HST.  PST/GST was always there, it was just buried in tax code.  You were paying it all along, just you only took notice of it recently since someone made a stink about it. Prime Minister Brian Mulroney, is credited with creating GST, which is 100% false, he only relabeled a existing tax and brought it to the surface and made it public.
> 
> Same thing goes for world economy and printing money.  It's been going on since days we all lived in mud huts and traded silver shillings and probably longer than that.



Actually the GST replaced the hidden Manufacture's Tax that was in place. The GST is a consumer's tax, is visible and covers far more items than the old tax did. It was the Federal Government's mother lode.....


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## Redeye (22 Oct 2012)

GAP said:
			
		

> Actually the GST replaced the hidden Manufacture's Tax that was in place. The GST is a consumer's tax, is visible and covers far more items than the old tax did. It was the Federal Government's mother lode.....



Mulroney is often demonized for it, but he replaced a complicated, hidden tax system with a straightforward and visible, transparent consumption tax. And it helped substantially in deficit eradication for his successors.


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## kevincanada (22 Oct 2012)

Thucydides said:
			
		

> Actually, no.
> 
> Commodity money was very "inflation proof", since there was a very fixed supply. You could get the occasional influx on "new" money if you were able to conquer another polity and seize their supply of silver (the best example was the overthrow of the Persian Empire by Alexander III, which liberated a huge horde of gold and silver); but generally, coinage was debased through practices such as "shaving" (done by people) or issuing new coins with a lower weight of precious metal (done by the State).
> 
> ...



Regarding trading metals back in the day. There was still inflation,  there was never enough money to go around, the bankers at the time issued paper I.O.U's effectively devaluing the money.  It was called fractional banking, there was never enough supply to go around pre-1913? Whenever the Central banks took over.  It's still done today, they use a different method now.  Yes paying off debt doesn't take money out of circulation.  It is still out there I 100% agree.

But when you owe $100 a month, and are only earning $110 a month.  You need to pay down that debt first before you can spend it somewhere else.  Only way to pay it down faster so you can spend it on job creation is with more credit becoming available.  Ergo Quantitative Easing.  The money is in circulation, although not enough to offset the debt load.  The money is out there, but is presently useless.

You can see this looking at the Federal Reserve balance sheets,  They added trillions of dollars since the recession began, the job creation remained stagnant and trillions went into debt repayment.


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## Edward Campbell (22 Oct 2012)

kevincanada said:
			
		

> Regarding trading metals back in the day. There was still inflation,  there was never enough money to go around, the bankers at the time issued paper I.O.U's effectively devaluing the money.  It was called fractional banking, there was never enough supply to go around pre-1913? Whenever the Central banks took over.  It's still done today, they use a different method now.  Yes paying off debt doesn't take money out of circulation.  It is still out there I 100% agree.
> 
> But when you owe $100 a month, and are only earning $110 a month.  You need to pay down that debt first before you can spend it somewhere else.  Only way to pay it down faster so you can spend it on job creation is with more credit becoming available.  Ergo Quantitative Easing.  The money is in circulation, although not enough to offset the debt load.  The money is out there, but is presently useless.
> 
> You can see this looking at the Federal Reserve balance sheets,  They added trillions of dollars since the recession began, the job creation remained stagnant and trillions went into debt repayment.




:goodpost:

Plus there is, often, some _tension_ between a monetray policy _push_ being offset by a fiscal policy _pull_ in a different direction.


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## Kirkhill (22 Oct 2012)

If I'm following the conversation correctly what I am hearing is that with QE the Fed is following the same strategy as Chretien and Martin with the Canadian Peso.

They allowed the dollar to fall  thereby devaluing the work of Canadians on the world market.  That made it harder to buy Korean stereos and American cars.  That caused a great deal of aggravation.

That devaluation had little impact on most folks lives because they bought their milk and beer from Canadians, bought their houses from Canadians and bought their money from Canadians.  All of those transactions were unaffected by the international price of Canadian money.

Short form: Canadians were aggravated but employed and not rioting in the streets.

The theory should work for the Americans - and will - and has.  

The problem is one for the rest of the world that is using the American dollar as a means of squirreling away treasure.  They are seeing the size of that pile of treasure get smaller and smaller.  

It is also true of American savers but not equally so.  They are seeing the number of Korean cars they can buy decrease, and the number of barrels of Saudi and Canadian oil.  But they can still, and will still be able to, purchase American cars, American natural gas and American milk at the same rate as ever.

(I accept over-simplification as a criticism).


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## a_majoor (22 Oct 2012)

> Only way to pay it down faster so you can spend it on job creation is with more credit becoming available.



Once again, no. This statement is about as sensible as saying the only way to avoid a hangover is to remain drunk. While it may be "true" in a very narrow sense, getting deeper into debt simply reduces your freedom of action and range of available choices, and having access to more or easier credit is simply a recipie for more debt.

In the age of free banking, any bank could issue currency based on its own asset base, but if it became apparent that the bank was not able to make good on its currency people would collapse the bank by withdrawing all their assets (a bank run). Bank collapses were localized for the most part because most banks did not have a vast asset base or customers covering a wide geographic area. It is also an interesting observation that economic crisis in the free banking era were smaller and over much faster than in the central bank era, although correlation is not causation. 

There is evidence that the Great Depression was ultimatly caused by the inflationary excess and debt loads of the Great War, and if true then the current economic crisis starting in 2008 can also be seen as a gobal unwinding or deleveraging. Since Governments around the world seem determined to devalue their currency and inflate their way out of debt, inflation and even hyperinflation will be a large and growing concern. (edit to correct typo)

On that note, I offer the following comparisons:

http://www.theblaze.com/stories/not-just-gas-check-out-the-drastic-price-increases-on-these-21-everyday-items/



> *NOT JUST GAS! CHECK OUT THE DRASTIC PRICE INCREASES ON THESE 21 EVERYDAY ITEMS*
> Posted on October 17, 2012 at 11:20am by  	 Benny Johnson Print »Email »
> 
> Tuesday’s presidential debate touched on some massive economic issues that are affecting all Americans. The immense increase in gas prices was a crucial part of the discussion, but have other everyday products seen a drastic increased in price over the same time period?  According to Blaze research on data provided by the the Bureau of Labor Statistics* gas prices are not alone in skyrocketing over the last decade.  Wait till you see chocolate chip cookies!
> ...


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## Kirkhill (22 Oct 2012)

Extract the highs and lows (Gas and Strawberries) and the average increase is 52% over 10 years (2002 to 2012).  Linearized that is about 5.2% per year. 

Approximate equivalent inflation rate is a bit over 4.4%.

Actual inflation rate between 2002 and 2012 according to the same BLS source is 2.68%

The delta between the Cherry Picked Data and the BLS Data is 1.7%.

Aggravating but not enough to produce riots in the street.....


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## Brad Sallows (22 Oct 2012)

Debt needs to be paid off.  Resisting the correction is the equivalent of oversteering in a skid.

If the money supply is increased while productivity remains constant (or falls), it just means more money chasing the same amount of stuff.  The end state is to reduce the "value" of debt, but also savings.  People can tolerate a small amount of price inflation - enough to prevent a deflationary crisis, which means about 1-2% annually - but any more is simply taxation of savings and fixed incomes.  Stealth taxation is abhorrent and should not be tolerated.  I still have a long ways to go until retirement, and my retirement is essentially "defined contribution".  I'm basically inflation-proof, unless the returns on investments can't keep pace with inflation.  I will not suffer if GICs go to 10-12% for 5 year terms again. But there are people - low income seniors, retired (or soon to retire) people who held public or private sector jobs and live on defined benefit pensions - who will be squeezed rather hard.  A little more thought needs to go into their interests.  This blithe "Oh, let's just apply a little monetary inflation" that pundits roll out as if there are no harmful effects is bullsh!t.  I'd rather see some honesty from politicians: jack up the income and other tax rates and face the consequences.


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## kevincanada (23 Oct 2012)

With the food prices listed above, I'm going to assume you guys did not take notice to the severe drought in the United states which destroyed all kinds of crops and virtually bankrupted many farms in one season this year.

It wasn't inflation that drove those prices up, it was the weather.


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## a_majoor (23 Oct 2012)

A spike in food prices over one year is weather. A sustained upwards increase over a decade is inflation.

Actually, there are many overlapping factors, such as the perverse incentive's through ethanol subsidies, increasing prices of petroleum affecting the prices of fuel, fertilizer, pesticides and other petrochemicals needed for modern industrial farming, not to mention downwards pressures by people substituting cheaper foods for ones they cannot afford anymore. This makes economics a "dismal science" (it not only has a huge number of inputs, but is also a chaotic system like Earth's biosphere, where outputs are not affected in a linear manner by changes in inputs), but the year over year increase is a pretty clear marker of inflation, and the only constant input over the last decade (indeed over most of the 20th century) is the constant debasement of currency by national governments.


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## Kirkhill (23 Oct 2012)

kevincanada said:
			
		

> With the food prices listed above, I'm going to assume you guys did not take notice to the severe drought in the United states which destroyed all kinds of crops and virtually bankrupted many farms in one season this year.
> 
> It wasn't inflation that drove those prices up, it was the weather.



Kevin - I would add in the impact of sillybugger policies on bio-fuels (ethanol and bio-diesel).

Fuel goes up.

Farmers costs go up.

Farmers profits decline.

Farmers have the option of selling their crops as fuel.

Farmers recoup their losses.

Food processors now have to compete with the fuel industry for material as well as pay higher fuel costs.

All food processors pay higher fuel costs.

Some food processors pay higher ingredients cost.

Margarine is pure oil - It could be sold as bio-diesel.

Strawberries are hand picked, sold raw and are lousy fuel.

Margarine tracks Oil.

Strawberries don't.

Everything else falls in between.

And inflation takes its toll regardless.

Cheers.


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## Edward Campbell (24 Oct 2012)

The _Wall Street Journal_ is reporting that the *"Chinese Manufacturing Gauge Shows Signs of Recovery,"* indicating that the all important _'soft landing'_ is more likely, thus taking out one of the props of a global Great*er* Recession.

The _WSJ_ report says that _"the preliminary HSBC China Manufacturing Purchasing Managers Index still showed manufacturing activity contracting in the world's No. 2 economy. But the rate was a healthy improvement from the September reading,"_ so it is not even the "end of the beginning," just a signal that disaster is not looming large.


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## kevincanada (25 Oct 2012)

Thucydides said:
			
		

> A spike in food prices over one year is weather. A sustained upwards increase over a decade is inflation.
> 
> Actually, there are many overlapping factors, such as the perverse incentive's through ethanol subsidies, increasing prices of petroleum affecting the prices of fuel, fertilizer, pesticides and other petrochemicals needed for modern industrial farming, not to mention downwards pressures by people substituting cheaper foods for ones they cannot afford anymore. This makes economics a "dismal science" (it not only has a huge number of inputs, but is also a chaotic system like Earth's biosphere, where outputs are not affected in a linear manner by changes in inputs), but the year over year increase is a pretty clear marker of inflation, and the only constant input over the last decade (indeed over most of the 20th century) is the constant debasement of currency by national governments.



Everything always goes up year after year.  It is a underlying principle of Keynesian theory.  Us in the private sector use capitalism,  this does not hold true for government.  Our leaders have the luxury of using Keynesian theory for their end of the economic spectrum.  It is a saving grace for the world if use properly.  Sadly like many things when abused the results is devastating as in this present recession.

For example, if the drought and biosphere wreck havoc that could potentially cause a inflation rate of 3 to 4% instead of the annual 2% goal for the country.  The cost of food doubled that year edging annual inflation up.  Since this is bad, The government steps in, borrows several billion from the Central bank, imports food and prevents the double of the price of food.  But now there is to much money in circulation this year, so now other products are going up in price.  The Central bank now steps in and constricts credit and stops the raise inflation so come end of the year it for the hole country is still a 2% annual increase, disaster included.

The point being of this example.  We can debate apple and oranges as in cost of wars, droughts, hurricanes etc.  When you apply Keynesian theory to the situation  It is the government that drives inflation,  What we do in the private sector gives it some nudges to the left or right, they have the final say at the Federal level not the private sector.  No matter our actions.  The bottom line is.  Government and Central Banks control the money in and the money out.

What triggers this inflation is interest on money.  All money is loaned from the bank.  I cannot get money to pay someone unless it is borrowed.  I borrow a $100 at 5% annually.  I only have $100 and I now need to come up with $5 more.  Only way to do this in the current economy is to borrow more or sell a service to someone else.  But that guy has only has $100 with 5% annual interest. If he decides to pay me, he now has $95 and owes $10 while I now owe nothing.   Everyone is so from this system in the hole now all governments can do is continued Quantitative Easing, or Reform the system on how we do economics.

To offset this problem, Government goes into debt.  They never repay the debt, and never will.  At best they balance the books and the Bank keeps issuing I.O.U's in exchange for paper bills.  I can prove it.

Every single country in the world spends more on it's local economy than it takes in in a taxes in the form of GDP versus DEBT ratio.  All the countries presently collapsing or on the verge have a higher than 100% GDPvsDEBT ratio.


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## a_majoor (26 Oct 2012)

Kevin, slow down and take a deep breath. Fractional banking and interest payments have been around for a very long time; Social Credit economics, not so much.

You are quite correct that the State manipulating the currency causes inflation, but you should also take into account the other effects that this manipulation has. Hayekian "bubbles" will form as access to credit is eased and money starts flowing to follow speculative projects offering high rates of return (the .com bubble in the 1990's and the decades long housing bubble are current examples; the 1720 "South Sea Bubble" would never have formed if investors were not offered shares on generous "margin" terms).

Keynesian economics is favoured by the political class because it gives them palusible sounding cover to do what they want to do anyway (which is to use public money to ensure their re election and to shower favours on their clients [crony capitalism] who will work to that end). Looking at times and places where heavy duty Keynean economics was used for real, we don't see a sterling record; the Great Depression may have lasted seven years longer because of the "New Deal" (read "The Forgotten Man"), and of course the current administration claimed that the $800 billion "stimulus" package would bring unelployment down to the Bush era 5% range. The Stimulus and $5 trillion dollars of deficit spending later, U3 is stuck at 11.2%, putting the number of unemployed at @ 33 million, almost equal to the population of Canada. European nations are not doing a lot better, and loans and bailouts are hard to come by as people no longer have faith the governments in question will either change their policies or ever pay off the bonds (the Greek government giving bond holders a 60% haircut is something every bondholder will take active steps to avoid). Even other governments are not keen to enter the market any more, see how the EU struggles to get the northern tier of European nations led by Germany to put any more money into the game.

So the end point will really happen when either the loans are repaid (deleveraging) or struck off the books as unpayable (default). Either course of action has risks and benefits associated with it, and I am pretty sure the downside risks of default are far higher than deleveraging, but since no one wants to bite the bullet for deleveraging, we may be heading to default anyway.


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## Edward Campbell (27 Oct 2012)

Two good news _factoids_ from Ian Bremmer:

*"In 2009, 54% of the world’s middle class lived in the developed world. In 2020, that share will fall to 32%."*

and

*"More than 3/4s of the growth in the developing world’s middle class is coming from Asia."*


Edit: to add 2nd _factoid_


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## kevincanada (28 Oct 2012)

Not trying to bash Ian Bremmer, he only pointed out the blatantly obvious. poor economies that are in a high growth has always seen a prosperous middle class.  (lots of resources, money to be spent, absorbed and used).

Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.

He was shooting for brownie points  ;D


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## Edward Campbell (28 Oct 2012)

kevincanada said:
			
		

> Not trying to bash Ian Bremmer, he only pointed out the blatantly obvious. poor economies that are in a high growth has always seen a prosperous middle class.  (lots of resources, money to be spent, absorbed and used).
> 
> Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.
> 
> He was shooting for brownie points  ;D




I'm not sure history agrees in either count:

Plenty of countries have had high growth without ever developing a secure, stable middle class. In fact, from, say, 1500 to 2000, aside from Northern Europe,* I'm hard pressed to think of any. Russia and Spain, for example, were quite rich - high growth - in the 16th and 17th centuries but a middle class never developed. Consider, even more, China about 1000 years ago - it accounted for about half of the world's GDP but never developed a middle class. 

Despite the decline in growth of e.g. the Britain and the Netherlands the middle class in each remained stable and secure.

My  :2c:

----------
* In which I include the USA, Canada, Australia, etc - all of which are culturally Northern European


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## kevincanada (28 Oct 2012)

If the global economy is to ever be fixed,  I really think we need a ombudsman type roll in all the economies to bridge the gaps from federal, corporate and personal levels and wipe out most of the credit based aspects of it so the "average joe" doesn't rack up a mountain of debt he/she is paying for years.  Make people earn their money before they spend it instead of spend now, work later.

Locally. Costco held a job fair,  hiring 110 part time works for their new store opening.  A work force of all part time workers.   Last I checked 20% of the work force is in retail.  Nearly all retail jobs are part time aside for some managers and various personal at a administrative level.  Floor personal is nearly always part time minimum wage workers.

These companies often justify doing this by saying things like "you don't have to take the job"  reality says yes you do. [(Another principle of Keynesian theory that gets abused debt makes people work in turn creates productivity]  The roads were packed with parked cars for several city blocks.

The point is, it is a very easy legislation fixed at the provincial or federal level.  Saying companies can only employ a percentage or ratio of workers as part-time.  4:1 full time/part time.  Nobody wins when companies do these things except for the company.

Worker = working poor
Family often suffers having to help support the underemployed
Worker may give up and go on welfare
Taxes collected isn't even worth mentioning the amount is so small
Needless to say the physiological affects of being poor on the individual
Even medically, drug abuse is more common amongst the poor than anywhere else; although it still exist in the wealthy families.  Hence higher medical costs.


This is just off the top of my head, for something as simply as legislation and some voting.  This affects millions of Canadian workers, and millions more family members.  Yet it never gets fixed.


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## cupper (28 Oct 2012)

kevincanada said:
			
		

> Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.



Gotta disagree with you here. You still need to employ a middle class to maintain and improve the infrastructure.


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## a_majoor (29 Oct 2012)

Kevin, if you invest in stocks, mutual funds or have a pension or RRSP that is invested in the stock market, then I have some shocking news for you:

*You* are the reason that corporations use ruthless means to increase the bottom line, that CEOs can receive spectacular wage and benefit practices, and many of the other things you see as evil happen. After all, you want your investments to increase, your retirement to be well funded and fulfilling and your personal wealth to grow, don't you. Most of us do, and reward the companies that bring the biggest returns, while shunning the ones that don't. Activist investors would move heaven and Earth to remove CEO's and management that does not achieve the targets that you, the investor want.

So remember that you have a choice to divest yourself, or realize that the desires of the market as a whole dictate what will happen (an attempts to distort the market with regulatory intervention often have unanticipated and unwanted consequences).


----------



## Kirkhill (29 Oct 2012)

E.R. Campbell said:
			
		

> I'm not sure history agrees in either count:
> 
> Plenty of countries have had high growth without ever developing a secure, stable middle class. In fact, from, say, 1500 to 2000, aside from Northern Europe,* I'm hard pressed to think of any. Russia and Spain, for example, were quite rich - high growth - in the 16th and 17th centuries but a middle class never developed. Consider, even more, China about 1000 years ago - it accounted for about half of the world's GDP but never developed a middle class.
> 
> ...





I had an interesting conversation with my son the other night where he was parroting the same line about the Middle Class shrinking.

It must be someplace out there in the ether.

In our case it came up as we discussed his job prospects and my daughter's part time employment in the service industry making ice-cream for a store-front operation.

From there to Supermarkets
From there to daughter's shop recreating The Butcher, The Baker, The Greengrocer, The Fishmonger, The Ironmonger....
From there to the Milkman.

The Supermarket required everyone to go to the Warehouse and help themselves.
The Butcher et al required everyone to go to the High Street and be advised as to what was available in their price range.
The Milkman came to your door.

You put the empties out on the doorstep every night, along with your order and the money.
In the morning, before you were up, the milkman came around with his horsedrawn wagon, scooped the empties, poured the coins out of the bottles, read the order, delivered the goods to the doorstep.
When you got up your three pints of milk, half pint of cream, dozen eggs and loaf of bread were waiting for you.


Fast forward to 2012 - anybody believe that either the money or the food or both would survive the night?


My son put it down to a more level, middle class society with food for all and no thuggery.  Of course things were good when we were young.  We have messed it all up and destroyed society and the middle class along with it.

In the horse drawn society of my youth - Britain in the late 50s - my grandfather's relations still worked down the mines and my grandfather offered the first of his catch of fish to the Laird's Ghillie before taking any home for himself.  Outdoor privies were a common sight.  Baths were once a week.  Hot water, gas and electricity were bought in your living room by plugging the meter with shillings.  Borstals managed young thugs up to the age of 16 with a 1 inch thick birch rod.  Schools managed the rest of us with canes, slippers and the particularly Scottish instrument of correction - the Taws - a foot of leather split in two for the first 6 inches - the introductory version of the cat of nine tails.  Hanging was still the solution for those that wouldn't learn.

We knew those that had and those that had not.  And the divide between them was great.

We divided the world into Upper Class, Upper Middle, Lower Middle, Lower and Working ... as well as the Royalty and Wogs (Wogs were anybody not from Britain and included the French, Spanish, Italians and Germans when we were being charitable to them).  We were taught to speak "proper English" at school, punished for speaking like our parents in the playgrounds and charitable teachers encouraged us to give up the colloquialisms that identified us and our regions.

And in that slough of despond of non-progressive ideals, of class warfare and labour strife, of upper and lower class divide.... in the middle of that mess we were still able to put a couple of hours of wages on the door step, on every door step, every night,  and receive on the same door step enough food to feed a family for a day.

I'm sure that somebody, somewhere, occasionally, stole the milk money.......but in 10 years in Britain, in slums and "middle class estates" that milk was always there for my breakfast cereal.

In our current predicament (what predicament is that exactly?) when all of the above iniquities have disappeared - you can't get a milkman to countenance delivering the service under the old rules of engagement in a society where progress is so evident.

The middle class hasn't dropped.  Everybody has become middle class. What has changed is that in my youth the working class aspired to be middle class and the middle class aspired to be upper class.  Everybody acted the part regardless of their backgrounds.

These days everybody, including the upper classes, acts the part of a working class yob who would have been at home in a borstal - and revels in it.

It ain't the economy stupid.


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## Edward Campbell (29 Oct 2012)

_Globally_, the middle class is growing rapidly and markedly; the upper classes are growing, too, albeit not at so high a rate; the lower classes, especially the statistically poor, are shrinking. 

Here, in North America and Europe, we _perceive_ that the middle class is losing ground, and, relative to the upper classes, it is. But it is not shrinking - at least not according to anything I have read, not even in the wreck of the _Great Recession_. But we _perceive_ that because the rich are getting richer (true) and the poor are getting poorer (not true, but _believed_ to be true) that the middle class must be sliding into poverty.

Your five categories - rich, three middle classes and the poor - is still good, although some people subdivide both the rich and the poor into two sub-classes, but, as far as I have read over the past few years, we are looking at something like:

Rich                                            = <10%   - but have 40%+ of the wealth
Upper Middle Class                    = <10% )
Middle Class                              =    35% ) - but the 80% have only about 50% of the common wealth 
Lower Middle or Working Class =    35% ) 
Poor                                          =  <15%   - but have <5% of the wealth

(I didn't bother to look up recent (right) numbers; the above is "off the cuff" but those who check will find I'm in the right range, agreed by most mainstream sources.)


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## Kirkhill (29 Oct 2012)

PS E.R.

The last line of my missive wasn't directed at you.  Just to be clear on that.

Cheers.


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## The Bread Guy (30 Oct 2012)

Interesting exercise scenario for the Swiss, spotted by the Foreign Policy blog folks.....


> The Swiss army is preparing for possible internal civil unrest as well as waves of refugees from euro-countries as the economic crisis drags on.
> 
> Switzerland, a non-EU, non-euro country landlocked between eurozone states, last month launched a military exercise to test its preparedness to deal with refugees and civil unrest.
> 
> ...


EUobserver.com, 12 Oct 12


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## kevincanada (30 Oct 2012)

Thucydides said:
			
		

> Kevin, if you invest in stocks, mutual funds or have a pension or RRSP that is invested in the stock market, then I have some shocking news for you:
> 
> *You* are the reason that corporations use ruthless means to increase the bottom line, that CEOs can receive spectacular wage and benefit practices, and many of the other things you see as evil happen. After all, you want your investments to increase, your retirement to be well funded and fulfilling and your personal wealth to grow, don't you. Most of us do, and reward the companies that bring the biggest returns, while shunning the ones that don't. Activist investors would move heaven and Earth to remove CEO's and management that does not achieve the targets that you, the investor want.
> 
> So remember that you have a choice to divest yourself, or realize that the desires of the market as a whole dictate what will happen (an attempts to distort the market with regulatory intervention often have unanticipated and unwanted consequences).



Easy there big guy. I know you said "if" but then went speaking as if I am doing these things, which I certainly 100% am not.  Attempts to distort the market?  The market is manipulated every single day by government.  What I singled out is something that exists, which is 100% abuse.  Nothing is gained or lost by hiring someone for a 40 hour week, versus hiring 2, 20 hour week labourers,  unless this is some hidden accounting pitfall which is being exploited, if true then the blame is on the government for allowing it to continue and should be corrected anyway.

Forcing companies to employ a normal work week will harm no corporations and raise the quality of living for the people who work for these scum bag retail chains that use these tactics.  Our government baises minimum wage on a 40 hour week,  anyone who gets less ours is Abuse of the system by the very definition which our government allows to happen.

So you know. I am a employer,  I always shoot to hire for a 40 hour week, I can tell I am aware of no accounting differences from having part-time to full-time, aside for a little extra paperwork from having extra unneeded employees.


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## cupper (30 Oct 2012)

Kevin:

Don't forget that these companies are exploiting loopholes in the various labour laws of the jurisdictions they are in that treat part time workers differently than full time workers. For example different requirements for medical benefits, paid time off, termination notice and so forth. It also allows flexibility in having people work extra time at straight time wages.


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## a_majoor (30 Oct 2012)

Kevin, I was not attacking you personally, but pointing out that the actions of the market are determined by all of our choices. Since you and I and millions of other people (including, ironically the very full and part time workers who we are talking about) invest in various markets demanding the highest possible returns, then there are many built in incentives to lower costs and do everything possible to maximize ROI.

I applaud you for following you convictions, and perhaps in your industry (whatever that may be) there are no real advantages to having part time over full time workers. From a larger perspective (having worked part time, full time, as a contract employee and commissioned sales over the years), full time employees are generally more expensive because they get benefits. I felt relieved when I was in a position that provided benefits, and bore the costs of not having benefits when I was part time, contract and commissioned. In fact I can recall being annoyed working in a bank branch that the shifts were designed to be short enough that we didn't get a meal break. OTOH, while it sucked to be me at the branch, Canadian banks pull in billions in profit, some of which accrues to my investments.

Best of luck in your business, and remember that there are all kinds of forces out there (Adam Smith's Invisible hand) which are directing decisions and the flow of investment, many of which we will never be directly aware of.  You might also consider reading The Use of Knowledge in Society


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## kevincanada (30 Oct 2012)

Hi Cupper:  

You don't have to pay full time employees benefits or any perks.  This is often confused as some companies volunteer to pay it, and many unions.  Automotive comes to mind; they Negotiate benefits in their contracts.  There is no regulation saying you have to pay anything extra to a full time employee.  Only time off pay is holidays, this is government enforced for everyone,  there is a vacation pay in the form of percentage, but again it's static to both employee types.  Termination notice is on length of employment, not sub-types.


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## kevincanada (30 Oct 2012)

Hi Thucydides: 

I knew a banker who did investments with CIBC, she invent in the millions of dollars and make huge profits for the bank,  The average worker cannot do this.  It was high stakes investing for a quick fast profit.  Even the average millionaire cannot do this.  Some people make money from stocks, although most do not,  I looked at Costco, they have a 0.275c dividend on a $96.64 share price. LOL A whooping 0.28% return for every hundred bucks you give them hehehe  ;D at that share price giving them any money is pointless. they make take 30 years to hit $115 a share.

I'm a General Contractor in the housing market, small business, it's incorporated since 2006 I often have a few people running around working on houses filling contracts I generate.

I'll have a look at those resources your posted.
Thanks.


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## cupper (30 Oct 2012)

Just to point out, What I said was based on different jurisdictions have different requirements, so where you are the regs may be different than another province, or here in the US state by state.

As you may have heard, we have had a "government takeover of health care" here in the US over the past couple of years.  

As part of that, part time vs full time workers are treated differently when it comes to amount and type of coverage offered and how they count in total numbers of employees.

Another example, in NS, any employee working more than 48 hours in a week is to be paid time and a half. There are exceptions for certain industries (farming and fishing for example).


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## Edward Campbell (31 Oct 2012)

Another _factoid_ that illustrates the shift of the global economic cockpit from Europe to America to Asia (where it was 750 years ago):

The World Economic Forum (those super-rich folks who meet in Davos every so often to moan about the price of caviar) reports that *"Hong Kong improves position as world’s leading financial centre"*. The report goes on to rub a bit of salt in the wound by saying that _"This year, Hong Kong not only maintains its position, but also manages to increase its relative score, thereby creating a wider gap between it and United States ..."_


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## Kirkhill (1 Nov 2012)

Hong Kong (And Singapore?): Adding to some great islands of history?

Crete, Delios.

Gotland.

Cyprus, Rhodes, Malta.

Amsterdam (effectively an island in a swamp)

Britain (a big island off of Europe)

America (a really big island off of Europe with Manhattan a small island off of the big island)

And now Hong Kong and Singapore - With Australia well positioned to be an island something in between Britain and America with respect to historical attributes.


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## Redeye (1 Nov 2012)

kevincanada said:
			
		

> Some people make money from stocks, although most do not,



Plenty of people do. Anyone who depends on a pension in any form, included CPP, depends on making money on stocks.



			
				kevincanada said:
			
		

> I looked at Costco, they have a 0.275c dividend on a $96.64 share price. LOL A whooping 0.28% return for every hundred bucks you give them hehehe  ;D at that share price giving them any money is pointless. they make take 30 years to hit $115 a share.



You don't know anything about investing in stocks do you? Plenty of stocks pay absolutely no dividend at all. Someone investing in stocks isn't generally chasing dividends, they're hoping the value of the company will grow, and thus the shares will increase in value. If the stock pays a dividend, all the better, but it's not necessarily what people are after.


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## a_majoor (3 Nov 2012)

Absolute worst case scenario: what if the investors refuse to take a "haircut". I'm not entirely sure just what you can do if you forclose on a sovereign nation, the only historical precident seems to be installing a Procouncil and collecting tax revenues on your own behalf. Having a huge army of occupation is usually part of the process (and adds to the expense, meaning you need to squeeze higher taxes out of the occupied country....)

This is not totally undoable; the Roman Imperium was quite good at it, and the US Marines occupied Hispanolia and not only ran an efficient customs and postal service (to collect revenues) but also built functioning schools, infrastructure and so on. Sadly, the Marines are really go-to kind of guys and didn't include training the locals on how to run things and maintain infrastructure. The British East India Company did similar work in India, but had centuries to complete the work and relied quite heavily on locals to do a lot of the administration, building the cultural framework as well as the physical.

Of course, I doubt there would be many takers for Procouncil, Imperial Tax Collector or Army of Occupation these days, but a deep enough financial crisis might change people's minds:

http://blogs.the-american-interest.com/wrm/2012/11/02/bad-omens-for-greece-in-argentina/



> *Bad Omens for Greece in Argentina*
> 
> With Greece slowly circling the drain, the Greeks and the European officials charged with rescuing it badly need some good news. Instead, they get this: Quartz reports that the recent case in which an American hedge fund successfully sued Argentina for the full value of its bonds may set a precedent for similar actions by Greek creditors:
> 
> ...


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## kevincanada (4 Nov 2012)

I really believe the world needs to move away from the the debt system, or the 'rob Peter to pay Polly' view of doing finances.  Some fast numbers to drive the nail home.  We all know the 2% inflation number central banks use.  When applying the rule of "72" at 2% cost of goods would double in exactly 36 years.  72/2

The consumer price index went up 78% in last 10 years. in 36 years with all things being equal would mean a rise of 280.80% rise inflation on cost of goods.  A big difference than what the public seems to believe.  It means real inflation would be at between 5% to 6% yearly factoring in that it compounds.  Of course the banks stay ahead of this with money printing,  GDP doubling roughly every 10 years, so cash available would be increased 360% in 36 years hence us being richer.

Are we really going to be paying $10 for a diet coke at a convenience store in 36 years?  Or how about university tuition going from $10,000 per year to to $36,000 per year.

I find this to be a interesting concept and also a dilemma.  The system does make the people slowly richer, yet when trouble strikes as in the last 5 years it drags on and on and on.  How is it both can be true?  I guess everything really is a bell curve.


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## kevincanada (4 Nov 2012)

cupper said:
			
		

> As you may have heard, we have had a "government takeover of health care" here in the US over the past couple of years.



Yes ObamaCare, ie universal healthcare costs less.  United states, has i believe the highest cost per person in the world for healthcare.  Canada is like 27% percent cheaper,  Japan, includes, eyes, dental and everyone receives healthcare no mater who they are as long as they are within Japan's borders and they have a better system that costs less than Canada lol.

I'm not saying our hospitals are better.  But boy you guys are paying huge $$$ south of the border.


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## Edward Campbell (4 Nov 2012)

kevincanada said:
			
		

> I really believe the world needs to move away from the the debt system, or the 'rob Peter to pay Polly' view of doing finances.  Some fast numbers to drive the nail home.  We all know the 2% inflation number central banks use.  When applying the rule of "72" at 2% cost of goods would double in exactly 36 years.  72/2
> 
> The consumer price index went up 78% in last 10 years. in 36 years with all things being equal would mean a rise of 280.80% rise inflation on cost of goods.  A big difference than what the public seems to believe.  It means real inflation would be at between 5% to 6% yearly factoring in that it compounds.  Of course the banks stay ahead of this with money printing,  GDP doubling roughly every 10 years, so cash available would be increased 360% in 36 years hence us being richer.
> 
> ...




Debt is, most simply, the obverse of credit. If you cannot borrow then you will never have any debt. If you must save every penny that you, an independent contractor, need to buy a new tool then you will forgo the extra money you might make by being more productive until some time in the future. Credit allows you to have the tool now, when you need it, and with hard work and good management you can - most likely will - pay of the debt and make extra money for yourself at the same time. Credit and debt, amongst *many* other things fuel inflation. A bit of inflation helps you when you're paying off your debt. Each year the _value_ of the dollar you are repaying is slightly less than the _value_ of the dollar you borrowed - and that's why banks charge interest. Inflation hurts people on fixed incomes, e.g. pensions, unless those pensions increase at the rate of inflation that is applicable to their situation - for most pensioners that's the local cost of living index. Inflation is not the same all over, we all know, for example, that gas prices at the pump and food prices in the supermarket might be different in, say, Victoria and St John's or even in places as close together as Lloydminster AB and Lloydminster SK. Let's say that food and fuel prices, and taxes, are lower in AB than in SK but the rate at which CPP payments increase to account for inflation are set nationally: in that case, after the government has increased pensions, inflation will be more painful to the person in SK. But normal inflation can help the entrepreneur by allowing him or her to increase prices slightly more than his or her cost increase.

Oh, and the future vale of a present amount is calculated this way: FV = PV x (1.00 + i)n ~ that bit of arithmetic explains the "miracle of compound interest."

_“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”_
Albert Einstein


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## vonGarvin (4 Nov 2012)

I have recently begun to FINALLY understand compound interest, and am earning it, a few pennies more each week.


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## Brad Sallows (4 Nov 2012)

Health care, like most things, costs increasingly more per unit of improvement.  The US generally gets better health outcomes (murders and accidents are not "health outcomes", so there is no need to introduce life expectancy measures which include killings and accidental deaths at this point), and they pay more for those outcomes.  No one should be surprised.  The issues are what level of care should be provided to those who lack means and ability (or are unfortunate enough to suffer catastrophic illness or accident), and how should it be funded.

A low rate of inflation is preferable to any rate of deflation because it encourages economic activity (spending).

All you youngsters out there may not know that there was a time when mortgage rates ran at 16-18%.  When I first started working I could get 10+% on a 5-year GIC.  Don't plan on rates - interest or inflation - as they currently stand.


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## cupper (4 Nov 2012)

Brad Sallows said:
			
		

> Health care, like most things, costs increasingly more per unit of improvement.  The US generally gets better health outcomes (murders and accidents are not "health outcomes", so there is no need to introduce life expectancy measures which include killings and accidental deaths at this point), and they pay more for those outcomes.  No one should be surprised.  The issues are what level of care should be provided to those who lack means and ability (or are unfortunate enough to suffer catastrophic illness or accident), and how should it be funded.



Actually Brad, most studies comparing expenses vs outcomes show that the US in some cases gets only the same level of outcome as others but at higher costs, or in most studies, the outcomes are worse than other countries.


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## kevincanada (4 Nov 2012)

cupper said:
			
		

> Actually Brad, most studies comparing expenses vs outcomes show that the US in some cases gets only the same level of outcome as others but at higher costs, or in most studies, the outcomes are worse than other countries.



Yep.  The WHO when they kept records have always pegged the USA around 25th to 30th overall for quality of service.


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## Edward Campbell (4 Nov 2012)

kevincanada said:
			
		

> Yep.  The WHO when they kept records have always pegged the USA around 25th to 30th overall for quality of service.




I agree, that conforms to most of the data with which I am familiar: the US is near the bottom of the "outcomes" heap, usually *just above Canada* but at the top of the cost pile, usually *just above Canada* there, too.

Almost the only health care delivery system in the OECD which is not superior to ours is the US one. But our system is a failure in both policy and economic terms. The only reason we don't change it is that Canadians, in a very large majority, are both stupid and greedy. They _hope_ the system will, as if by magic, work when they need it and they _believe_, against all the evidence, that it is "free."


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## kevincanada (4 Nov 2012)

E.R. Campbell said:
			
		

> Debt is, most simply, the obverse of credit. If you cannot borrow then you will never have any debt. If you must save every penny that you, an independent contractor, need to buy a new tool then you will forgo the extra money you might make by being more productive until some time in the future. Credit allows you to have the tool now, when you need it, and with hard work and good management you can - most likely will - pay of the debt and make extra money for yourself at the same time. Credit and debt, amongst *many* other things fuel inflation. A bit of inflation helps you when you're paying off your debt. Each year the _value_ of the dollar you are repaying is slightly less than the _value_ of the dollar you borrowed - and that's why banks charge interest. Inflation hurts people on fixed incomes, e.g. pensions, unless those pensions increase at the rate of inflation that is applicable to their situation - for most pensioners that's the local cost of living index. Inflation is not the same all over, we all know, for example, that gas prices at the pump and food prices in the supermarket might be different in, say, Victoria and St John's or even in places as close together as Lloydminster AB and Lloydminster SK. Let's say that food and fuel prices, and taxes, are lower in AB than in SK but the rate at which CPP payments increase to account for inflation are set nationally: in that case, after the government has increased pensions, inflation will be more painful to the person in SK. But normal inflation can help the entrepreneur by allowing him or her to increase prices slightly more than his or her cost increase.
> 
> Oh, and the future vale of a present amount is calculated this way: FV = PV x (1.00 + i)n ~ that bit of arithmetic explains the "miracle of compound interest."
> 
> ...



Albert Einstein also said compound interest is the cruelest form of tax there is.

Yes credit today is easier to pay later and so on.  That is not my beef, my beef with it is, the application of that method is based on a assumption.  The assumption that there will be a pay cheque (check for you American readers  coming in tomorrow you can repay this credit with.  This is blatantly untrue.   Warren Buffet himself.  Who is sitting on 10's of billions in the stock markets admitted that his wealth is a unjust tax on the working class.

I believe it is because we take the credit on the assumption that there will be work tomorrow.  Then people like Warren Buffet step in, take $50 billion out of the market and doesn't spend it, That is $50 billion that has been zapped from the working class pool.

My other beef with the economy is monopolies.  I think back 15 years ago, There was no Home Depot, Lowes or Rona in my region I live in.  Now there is a few of each.  All but 2 of the Lumber yards have went out of business.

I use to have one yard, I could walk into if there was a problem with blue prints,  he could re-draw them for me, get it corrected and re0submit it and approved by the municipality. Lets see Home Depot do that LOL.

Point being, this whole credit system favours monopolies, when that happens, money gets sucked out of the pockets of the many into the pockets of the few, quality of service goes down,  poverty (I'm including working poor) goes up and quantity of cheap crap we can buy goes up.

City of New York knows this.  Walmart been begging for years to open up shop there.  New York won't allow them in due to this reasoning.


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## ArmyRick (4 Nov 2012)

I agree. I do not have the evidence or proof but I have a "gut" feeling that our government shows favorites to larger corporations and their bottom line, making $$$. 

Right now in my area, there is a huge shove from LOG about putting like 500 slots in an establishment. They are really pushing it as if though its all good and no down side and they seem to be in a hurray to get local council approval. That bothers me. Anyways, different subject.

Walmarts, home depot, etc, etc, the big chain stores that pop up everywhere, hire lots of local people on a part time basis and minimum wage basis mostly, then bring in management staff from somewhere else.

However most Canadians are complacent and have no passion about anything worth fighting for (like smaller business that actually serve people).


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## SeaKingTacco (4 Nov 2012)

Sooo.... Don't shop at the big box stores.  Enough people do that, and they will be out of business.  Problem solved.


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## Edward Campbell (4 Nov 2012)

SeaKingTacco said:
			
		

> Sooo.... Don't shop at the big box stores.  Enough people do that, and they will be out of business.  Problem solved.




 :goodpost:

The very fact that Home Depot Loews and Rona coexist and compete means that there is no monopoly in the home building supply business.

What you have is a very mature industry where, in so far as the market permits, economies of scale, and the _efficiencies_ they create, provide that old _utilitarian_ standby: the greatest good for the greatest number. I understand that in the more competitive environment which used to exist, when many, many small stores competed, they went out of their way to try to win your business, kevincanada - it cost them money something to do that, something that the owner could have used in a more productive manner. Home Depot doesn't do that; it doesn't have to; it wants your business but the _marginal_ impact of your business is not not big enough to make them "pay" any more for it.


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## kevincanada (4 Nov 2012)

SeaKingTacco said:
			
		

> Sooo.... Don't shop at the big box stores.  Enough people do that, and they will be out of business.  Problem solved.



Easier said then done =)


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## SeaKingTacco (4 Nov 2012)

kevincanada said:
			
		

> Easier said then done =)



No.  It is literally that simple.  Home Depot (et al) are not charities.  People shop there and spend money.  There must be a reason.

If they stop shopping at big boxes, big boxes will shut down and something else will spring up in their place.


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## kevincanada (4 Nov 2012)

kevincanada said:
			
		

> Easier said then done =)



It is a our politicians that lets the big chain stores in, as they have to acquire a permit.  I have nothing against big chain stores existing, just that they will stop at nothing for making a profit.  Walmart been sued many times for hiring cash laborers and employing illegal immigrants,  they have even had developing stores shut down.  At the end of the day it is bad for everybody and poor people will shop at walmart no matter the damage as they cannot afford to go elsewares.  Hey when you can get a T-shirt for $7 bucks why not right?


----------



## SeaKingTacco (4 Nov 2012)

kevincanada said:
			
		

> It is a our politicians that lets the big chain stores in, as they have to acquire a permit.  I have nothing against big chain stores existing, just that they will stop at nothing for making a profit.  Walmart been sued many times for hiring cash laborers and employing illegal immigrants,  they have even had developing stores shut down.  At the end of the day it is bad for everybody and poor people will shop at walmart no matter the damage as they cannot afford to go elsewares.  Hey when you can get a T-shirt for $7 bucks why not right?



With respect, it is not really up to "our politicians" to decide which businesses to protect us from, assuming the business model is legal in the first place.  Shop there, or don't.  Those are your choices.


----------



## Infanteer (4 Nov 2012)

I go to a box store because they generally have:

a.  what I need;

b.  a few varieties of what I need; and

c.  a cheaper price.

No government hand in that....


----------



## Bruce Monkhouse (4 Nov 2012)

kevincanada said:
			
		

> It is a our politicians that lets the big chain stores in, as they have to acquire a permit.  I have nothing against big chain stores existing, just that they will stop at nothing for making a profit.  Walmart been sued many times for hiring cash laborers and employing illegal immigrants,  they have even had developing stores shut down.  At the end of the day it is bad for everybody and poor people will shop at walmart no matter the damage as they cannot afford to go elsewares.  Hey when you can get a T-shirt for $7 bucks why not right?



I'm not what I would call poor but I go to Wal-mart because you will find more North American stuff there than at Sears......
Ditto for Costco.....try getting Stanfield's underwear anywhere else in Ontario.


----------



## kevincanada (4 Nov 2012)

E.R. Campbell said:
			
		

> :goodpost:
> 
> The very fact that Home Depot Loews and Rona coexist and compete means that there is no monopoly in the home building supply business.
> 
> What you have is a very mature industry where, in so far as the market permits, economies of scale, and the _efficiencies_ they create, provide that old _utilitarian_ standby: the greatest good for the greatest number. I understand that in the more competitive environment which used to exist, when many, many small stores competed, they went out of their way to try to win your business, kevincanada - it cost them money something to do that, something that the owner could have used in a more productive manner. Home Depot doesn't do that; it doesn't have to; it wants your business but the _marginal_ impact of your business is not not big enough to make them "pay" any more for it.



Ergo, why I am against monopolies due to abuse of their powers but not in principle for their existence.  For example, home depot will sell you anything they don't even care if it works or is done correctly.  At the contractor service desk they have foundation crack repair kits.  I read the ingredients.  100% polyurethane and very overpriced.  They don't sell the proper repair kits as they are toxic and dangerous,  you need chemical respirator and it is a two stage solution mixture, something like automotive bondo filler.


People purchase these kits from home depot being outright deceived and lied to by the staff.  The proper stuff is good for something like 30,000 pounds of pressure per square inch, it actually seals a foundation crack and stops it from shifting.  Stuff from home depot?  You can scratch it off by rubbing your car keys on it.  So what happens is you fix your crack, finish your basement, in 2 months the foundations shifts more the polyurethane falls out and you have ruined your basement from water seeping in again.

Home Depot doesn't 'win' anyone business, they lie, cheat and stole their way to the top.  I keep log of a few items to track market changes, one item is a 4x8x1/2 standard drywall sheet, it was $11.97 in 2005, it is still $11.97 in 2012.  But they always have sale on how it was mark down from $13.82 or $14.13 down to $11.97.

Most of the products are junk also, all tool boxes sold by home depot leak water, no wood is properly stored, all hardwood sold by them uses a low grade urethane, that is easily damaged,  there $3 range hardwood per square foot actually cracks and finish flakes off when being installed.  plus a dog claws will gouge the finish.  

See for yourself when you are in there, rub a key on a display piece of hardwood,  you will be very very disappointed.  But hey, it's $3 bucks a square foot!


----------



## kevincanada (4 Nov 2012)

SeaKingTacco said:
			
		

> With respect, it is not really up to "our politicians" to decide which businesses to protect us from, assuming the business model is legal in the first place.  Shop there, or don't.  Those are your choices.



Actually it is, some area's are banning and putting limitations on big box stores now due to their negative affects,  As in new york, google it.  "walmart and new york"  there is no walmarts in the area.

When I registered my corporation, there is a lot of zoning laws, and legalities, all business's are tightly regulated by the government it is up to your politicians to decide what business's to protect us from, always has been.

Locally, big box store permits are being issued based on local population so they there isn't to many.  They are allowed, but limited.


----------



## kevincanada (4 Nov 2012)

Bruce Monkhouse said:
			
		

> I'm not what I would call poor but I go to Wal-mart because you will find more North American stuff there than at Sears......
> Ditto for Costco.....try getting Stanfield's underwear anywhere else in Ontario.



I shop there too, picked up some christmas stuff today actually.


----------



## Bruce Monkhouse (4 Nov 2012)

kevincanada said:
			
		

> Ergo, why I am against monopolies due to abuse of their powers but not in principle for their existence.  For example, home depot will sell you anything they don't even care if it works or is done correctly.  At the contractor service desk they have foundation crack repair kits.  I read the ingredients.  100% polyurethane and very overpriced.  They don't sell the proper repair kits as they are toxic and dangerous,  you need chemical respirator and it is a two stage solution mixture, something like automotive bondo filler.
> 
> 
> People purchase these kits from home depot being outright deceived and lied to by the staff.  The proper stuff is good for something like 30,000 pounds of pressure per square inch, it actually seals a foundation crack and stops it from shifting.  Stuff from home depot?  You can scratch it off by rubbing your car keys on it.  So what happens is you fix your crack, finish your basement, in 2 months the foundations shifts more the polyurethane falls out and you have ruined your basement from water seeping in again.
> ...




If you're dumb enough not to read the label yourself then,....meh, never mind.................I need to call my Dentist to see what kind of car I should buy.


----------



## kevincanada (4 Nov 2012)

Bruce Monkhouse said:
			
		

> If you're dumb enough not to read the label yourself then,....meh, never mind.................I need to call my Dentist to see what kind of car I should buy.



It's a 5 year apprenticeship to do what I do for a living, people off the street don't know this stuff.  That is the whole point.  Expecting people to grasp these concepts which is being pitched by Home Depot is like my Dentist calling me a idiot for not knowing how to remove my own wisdom teeth, stitch up my mouth and stop the bleeding.  You cannot expect the general public to understand it.

That's where Home Depot gets their sales, they know they don't get it, and people just keep buying it up.  No one wins, but Home Depot.


----------



## Nemo888 (5 Nov 2012)

The problem was with real wages shrinking and middle class buying power decreasing the only way to shore up our life style was Walmart and cheaper manufactured goods from China. Businesses then needed to compete and then almost all our manufacturing went overseas.

Now our economy is a house of cards that runs off of our "financial services" sector. With no manufacturing our economy has no future. Now that we are selling our natural resources to China we can't even live off the profits from that. We can't go on like this, unless you want the financial instability of the last 5 years to be the new normal.

Pure free market capitalism can be almost as disastrous as communism. Cronyism and monopolies are the great flaw of both systems. But there is a strange area in between the two. When countries switch systems there is often  a time of great prosperity and short periods where people become successful based on their merits.  Unmapped by economists and not yet named by the political classes. It seems we are not at the end of history as Margaret Thatcher claimed. New and better ideas will replace our current archaic ones.


----------



## a_majoor (5 Nov 2012)

There seems to be a lot of economics 101 type misconceptions out there, mostly to do with large business like "big box" stores.

On the free market side of the equation, big box stores allow for economies of scale and minimizing marginal costs. It costs Home Hardware far more to get an extra customer than Home Depot on a percentage basis, since all the costs for advertising, storefront space, stocking and labour are coming from a much smaller capital base.

On the government side of the house, all the regulatory and tax burdens are also smaller in proportion to the capital base for large business. It is estimated that an Ontario business must spend 30hr/month to deal with the various paperwork associated with business regulations and taxes. For Home Depot this is another position on the payroll; for the owner of Home Hardware this is almost an entire work week taken away from actually running the store.

Now there have been a fair number of articles in the US in the last several years examining the perverse incentives of lobbying for government favours; spending monies to lobby politicians turns out to be a far better "investment" than anything else. Larger business don't mind because they can afford to lobby and recoup their costs, and the marginal costs argument means that would be competitors are frozen out since they cannot afford the costs of compliance, taxes etc.; nor can they lobby effectively.

WRT what the stores are selling, the rules have always been the same; the stores stock what they believe customers will demand, and customers will buy or not. Ancient merchants drove caravans vast distances to supply exotic goods and services, and people flocked to the markets to haggle and buy them. You may not believe they are selling "quality" merchandise, but so long as the buyer is satisfied, then the bargin is sealed and everyone goes away happy (until next time).


----------



## Edward Campbell (5 Nov 2012)

E.R. Campbell said:
			
		

> It's _Tweedle*dumb*_ vs _Tweedle*dumber*_; neither offers much to America or the world. It is _"events, dear boy, events"_* that will drive the US society and economy for the next four years, not politicians. The politicians will march (or flee or scramble, etc) in the directions the events dictate, not the other way around.
> 
> 
> 
> ...



Further to "on why Obama vs Romney is inconsequential," in this report ~ reproduced under the Fair Dealing provisons of the Copyright Act from the _Council on Foreign Relations_ ~ about the *"events, dear boy, events"*that will drive American politics no matter what any US poltician, anywhere, or even blithering f___ing idiots like Grover Norquist think:

http://www.cfr.org/economics/fiscal-cliff/p28757


> *Renewing America*
> What Is the Fiscal Cliff?
> 
> Author: Jonathan Masters, Online Editor/Writer
> ...



This *matters*, the presidency ... not so much.


----------



## cupper (5 Nov 2012)

Bruce Monkhouse said:
			
		

> I need to call my Dentist to see what kind of car I should buy.



Based on what a dentist makes, not sure any of us could afford what he could recommend. ;D


----------



## Brad Sallows (5 Nov 2012)

>The WHO when they kept records have always pegged the USA around 25th to 30th overall for quality of service.

"Fairness" isn't a health care outcome.  When I wrote of outcomes, I meant concrete measurables: eg. rates of survival for various types of cancers.


----------



## Brad Sallows (5 Nov 2012)

>At the end of the day it is bad for everybody and poor people will shop at walmart no matter the damage as they cannot afford to go elsewares.

That statement is self-contradictory.  If "poor people" shop at big box stores because the prices are low, it is difficult if not foolish to try to argue that it is "bad for everybody".

Everyone else can generally manage look after themselves; the "poor people" can not always do so.  To paraphrase, it doesn't help if the poor and rich alike are both allowed to shop at designer stores.  I will continue to cheerfully support the existence of stores devoted to pressuring suppliers to provide goods and services at low prices.   As long as there is a supplier, it means someone is still able to make a profit, and the market has not "failed".


----------



## Brad Sallows (5 Nov 2012)

>many Democrats, led by President Obama, would extend all cuts except for the wealthiest 2 percent of taxpayers.

Which is to say, they are either being exceedingly unrealistic or exceedingly dishonest.  The arithmetic has been done; the tax increases the Democratic Party supports will not meaningfully close the gap.  This was an election year - an excellent opportunity to state unambiguously how much they intend to increase taxation and reform spending - particularly entitlement spending - and yet for some reason they chose to abdicate responsibility and avoid the problem.


----------



## Edward Campbell (9 Nov 2012)

This chart, reproduced under the Fair Dealing provisions of the Copyright Act from _The Economist_ guesses _projects_ the per capita GDP, *measured as a % of US per capita GDP* of several countries:






The accompanying text says:

http://www.economist.com/news/finance-and-economics/21566005-oecds-forecasts?%3Ffsrc%3Dscn%2F=tw%2Fdc


> The world in 2060
> The OECD's forecasts
> 
> Nov 10th 2012 - from the print edition
> ...




In other words our economy will grow _slightly_ faster than the USA's, but some Western countries, notably France, will decline. The big "winners" are _guesstimated_ to be China and India and, in Europe, the Czech Republic.


----------



## Edward Campbell (9 Nov 2012)

E.R. Campbell said:
			
		

> Both Mark Carney and Larry Summers said, at a Canada 2020/TD seminar in Ottawa, that:
> 
> 1. The Fiscal Cliff has the very real potential to drive the US back into recession; and
> 
> ...




More on what Larry Summers said in Toronto in this _Editor's Letter_ which is reproduced under the Fair Dealing provisons of the Copyright Act from the _Globe and Mail_; I put it here because of what Summers is reported to have said (in the last paragraph):

http://www.theglobeandmail.com/community/editors-letter/join-lawrence-summers-on-a-tour-of-the-looming-fiscal-cliff/article5156800/


> Join Lawrence Summers on a tour of the looming fiscal cliff
> 
> John Stackhouse
> SUBSCRIBERS ONLY
> ...




Larry Summers is a partisan Democrat, but he's also a pretty good economist. There are, no doubt, procedural ways to _delay_ the Fisacl Cliff and, in fact, to turn it, in the words of former US Labour Secretary Robert Reich, into a _Fiscal Hill_ which Congress can negotiate one step at a time. But those delays and procedural tricks do not solve the problems, they just postpone the days of reckoning.


----------



## kevincanada (11 Nov 2012)

Brad Sallows said:
			
		

> >At the end of the day it is bad for everybody and poor people will shop at walmart no matter the damage as they cannot afford to go elsewares.
> 
> That statement is self-contradictory.  If "poor people" shop at big box stores because the prices are low, it is difficult if not foolish to try to argue that it is "bad for everybody".
> 
> Everyone else can generally manage look after themselves; the "poor people" can not always do so.  To paraphrase, it doesn't help if the poor and rich alike are both allowed to shop at designer stores.  I will continue to cheerfully support the existence of stores devoted to pressuring suppliers to provide goods and services at low prices.   As long as there is a supplier, it means someone is still able to make a profit, and the market has not "failed".



Yes this argument would be true if the goods sold to Canadians from walmart was balanced for imports/exports.  Nearly all the crap we get from walmart comes imported,  Which makes it bad for our economy.  The money gets sucked out, goes over seas or to the United States and doesn't come back.  If the crap from walmart was made in Canada borders it would be very good for Canadians.

Canada does a pretty good job balancing the ratio's so no harm no foul for buying cheap imports, For our neighbours to the south it is a major problem.  Obama tried to address it early on as President with his protectionism clauses.


----------



## Edward Campbell (11 Nov 2012)

Balance of payments and cheap, imported goods are not two sides of the same coin: they are quite unrelated.

We and the USA both have a balance of payments problem with China - it's a long standing, structural problem. Put simply we *want* a lot of what China makes, especially cheap consumer goods, and they *want* some of what we have: raw materials and a few luxury goods. The _global *market*_ prices for cheap consumer goods, raw materials and luxury goods are all set in the market. _WalMart_, by itself, is a "market maker" for some cheap consumer goods but raw materials and luxury goods are priced in a bigger, broader market. The simple fact is that we *want* what China makes and one big company, _WalMart_, is the main conduit through which those goods flow - take away _WalMart_ and it is most likely that the prices of all those cheap consumer goods, the ones to which we are accustomed, will rise.

Now consider the cheap consumer goods, themselves. You need a new something, say an electric skillet. They cost _about_ the same in _Sears_, _The Bay_ and _WalMart_, but the ones in _WalMart_ are, almost always, just a bit cheaper. If the average low/middle income consumer cannot buy them at _WalMart_ she has two choices: do without - use a non-electric skillet which uses more power and takes more time; or pay a higher price and, therefore, not buy something else, food or tooth-paste, for example.

There are not many options for the low and lower middle income consumers - it's products made, for low ages, in Asia or it's a harder choice. If you want a better balance of payments then more and more and more lower income consumers must be forced to make the tough choices.

The market is not a nice place: it is efficient and fair, but not disposed towards charity.


----------



## Brad Sallows (11 Nov 2012)

>The money gets sucked out, goes over seas or to the United States and doesn't come back.

There is no final destination for getting something with a Canadian dollar except Canada.  Sure, people abroad can recognize it and tender it and it can stay abroad for a long time, but ultimately the only thing someone can do once they take a Canadian dollar is buy something Canadian with it.  (Or burn it to heat/cook something.  But it has no inherent value.) And the longer it stays abroad, the less it buys (ie. the less we have to export to get it back).


----------



## Edward Campbell (12 Nov 2012)

Here, reproduced, without comment, under the Fair Dealing provisions of the Copyright Act from the _OECD Newsroom_, is the OECD's look ahead:

http://www.oecd.org/newsroom/balanceofeconomicpowerwillshiftdramaticallyoverthenext50yearssaysoecd.htm


> Balance of economic power will shift dramatically over the next 50 years, says OECD
> 
> 09/11/2012 -  The balance of economic power is expected to shift dramatically over the next half century, with fast-growing emerging-market economies accounting for an ever-increasing share of global output, according to a new OECD report.
> 
> ...


----------



## kevincanada (12 Nov 2012)

The cheap goods we buy and the cost to get them is a large problem.  I just did a fast Google for Spain and Greece trade deficit.  They are both problem countries, both import lots and Spain at least has nothing to sell to the world to offset their expenses.

A lot of people has been doing this with China for a long time,  Even in Canada, CEO's are literately folding up manufacturing companies, putting the machinery on ships and sending it to china; to produce the goods once made here so they can be resold back.  This has happened to a family member of mine.  The individual went from a $15 per hour job with overtime after 40 hours, plus benefits and pension matching, down to to a 20 hour week at minimum wage working retail for a big box store. 

How has this helped Canada?  Less tax revenue, less money for the individual to spend and less localized economic productivity,  higher tax payer burden do to IE payments from the Government, now less money for the Government to spend on infrastructure, medical, military etc.

I have nothing against cheap goods,  Cheap goods are fine.   I'm saying the poison is the cure in this scenario.  A alcoholic who is hallucinating and shaking and on the verge of death.  He may as well have another drink or two to stop the withdrawal then go to the hospital.   Hair of the dog.

I am saying the importing, and transferring out of money to other nations, for cheap goods,  helps to keep the poor people poor and makes it tougher for the country as a whole economically.  
I am also saying if you want cheap goods from overseas, it needs to be balanced cost wise, or if not balanced than a tariff needs to be added to make it balance.


----------



## Edward Campbell (12 Nov 2012)

kevincanada said:
			
		

> The cheap goods we buy and the cost to get them is a large problem.  I just did a fast Google for Spain and Greece trade deficit.  They are both problem countries, both import lots and Spain at least has nothing to sell to the world to offset their expenses.
> 
> A lot of people has been doing this with China for a long time,  Even in Canada, CEO's are literately folding up manufacturing companies, putting the machinery on ships and sending it to china; to produce the goods once made here so they can be resold back.  This has happened to a family member of mine.  The individual went from a $15 per hour job with overtime after 40 hours, plus benefits and pension matching, down to to a 20 hour week at minimum wage working retail for a big box store.
> 
> ...




 :bullshit:

What globalization does, has done, demonstrably, over the past 25 years is, turn: 
	

	
	
		
		

		
		
	


	




 into 
	

	
	
		
		

		
		
	


	




.

And that is, undeniably, "good."


----------



## kevincanada (12 Nov 2012)

E.R. Campbell said:
			
		

> :bullshit:
> 
> And that is, undeniably, "good."



While the pictures are nice, I do respect your postings.  But if you are going to call bullshit.  I do expect you to back it up.  I gave my opinion and a reason for that opinion,  look at "troubled" countries, look at their trade deficits.  Any reader can connect the dots from Deficit to economic trouble and even put it in chart form.

Plus I think you misunderstood me a little,  I am for globalization not against it, I blame greed for economic hardships I also blame greed for the trade issues I outlined above.


----------



## Nemo888 (12 Nov 2012)

Wouldn't "good" denote long term gain? At the current rates of resource extraction and environmental degradation it won't be "good" for much longer than a few decades. Maybe if we are lucky until we are dead. But I have kids so I still give a crap.

The economic sacrifice zones are growing. Basically human created wastelands. Places like the Grand Banks, the Tar Sands(so isolated who cares I know) or Sudbury  in Canada. The mountaintop removal in West Virginia's foot hills(I was there as a kid, so beautiful) and the Gulf in the USA. Almost all the world's coral reefs. I checked that out personally. That amazing world is dying at an alarming rate worldwide. 

Humanity never created an economic model that included environmental sustainability. We need a new system that does not externalize the costs of production. We have covered the entire planet. There is no place left to sweep all our crap under the carpet and no new places to go to after we foul our own nest. This was rarely a problem when there was only 100 million people.


----------



## Edward Campbell (12 Nov 2012)

kevincanada said:
			
		

> While the pictures are nice, I do respect your postings.  But if you are going to call bullshit.  I do expect you to back it up.  I gave my opinion and a reason for that opinion,  look at "troubled" countries, look at their trade deficits.  Any reader can connect the dots from Deficit to economic trouble and even put it in chart form.
> 
> Plus I think you misunderstood me a little,  I am for globalization not against it, I blame greed for economic hardships I also blame greed for the trade issues I outlined above.




My problem, kevin, is that I think you *misunderstand* trade issues, globalization, and, indeed, basic economics.


----------



## kevincanada (12 Nov 2012)

E.R. Campbell said:
			
		

> My problem, kevin, is that I think you *misunderstand* trade issues, globalization, and, indeed, basic economics.



Then prove me wrong.  I've cited reasoning to back myself up using,  Obama policy,  New York City policies, the destruction of Greece and Spain, Local manufacturing industries closing their doors, local municipal polices that regulating store zoning, how employing part time people in retail is potentially bad,  I even went into Keynesian policy.

The only thing I claimed is hiring work forces of part time employees is bad, unfair trade is bad and to much debt/interest is bad.

You kind of have to give me something?  Or you don't have the right to call bullshit on my writtings.


----------



## Edward Campbell (12 Nov 2012)

And now Japan is having more trouble according to this article which is reproduced under the Fair Dealing provisions of the Copyright Act from _Sky News_:

http://news.sky.com/story/1010216/japan-nears-recession-amid-china-boycott


> Japan Nears Recession Amid China Boycott
> *The world's third largest economy risks recession as its recovery efforts are damaged by a Chinese boycott of Japanese goods.*
> 
> Monday 12 November 2012
> ...




The global recovery is still so fragile that every bit of bad news is magnified and then rattles around the world's markets, knocking things over.


----------



## YZT580 (12 Nov 2012)

kevincanada said:
			
		

> The cheap goods we buy and the cost to get them is a large problem.
> 
> That should read "the goods we buy". It is a fallacy to believe that because it comes from China ergo it is cheaper.  It may be made cheaper in China than here but that just gives the company managers a larger profit.  It doesn't contribute to a price reduction for you and I.  consider Blue Jeans.  They were being manufactured in the US up until a few years back and then one by one the plants there started to close and the whole mfg went off-shore.  I didn't notice that the price came down though did you?  My flag is made in Barrie.  It cost me about 12 dollars more than a comparable off-shore product.  It is the 3rd one I have bought from there because it lasts more than twice as long as it's offshore shelf mate.  But I am fortunate.  My local store sells both.  Wallmart and others usually only offer the offshore variety.  I don't get a choice.  And that is bad for both the local economy and my blood pressure


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## Edward Campbell (21 Nov 2012)

While I think UK Prime Minister David Cameron is correct in saying that the G8 still matters it is some of the G8 that matter, not all, and it shuld _morph_ into something better, a G_n_ consisting of:

1. NAFTA (three members, one voice);

2. The EU (20+ members, one voice);

3. China;

4. Japan;

5. ASEAN (10 members, one voice);

6. India;

7. Brazil;

8. Australia;

9. South Africa; and

10. South Korea.

This new group should _usurp_ global authority over the key points PM Cameron made in the linked article ~ *T3*:

1. Freer trade;

2. International tax reform; and

3. Transparency.


----------



## Edward Campbell (26 Nov 2012)

Breaking news: Mark Carney leaving Bank od Canada, going to head the Bank of England.

Big step up for him.


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## Edward Campbell (26 Nov 2012)

E.R. Campbell said:
			
		

> Breaking news: Mark Carney leaving Bank od Canada, going to head the Bank of England.
> 
> Big step up for him.




But *stupid* Canadian journalists are still asking him about being Liberal leader.  :facepalm:

Canadian television journalism is an intellectual wasteland populated by nincompoops.    :


----------



## Edward Campbell (26 Nov 2012)

Here is the official announcement from HM Treasury:



> Governor of the Bank of England
> 
> 26 November 2012
> 
> ...


----------



## The Bread Guy (26 Nov 2012)

And from this end....


> The Honourable Jim Flaherty, Minister of Finance, today announced that Mark Carney, current Governor of the Bank of Canada, has been appointed as Governor of the Bank of England effective July 1, 2013.
> 
> "On behalf of the Government and all Canadians, I would like to thank Governor Carney for his work at the Bank of Canada and offer my best wishes in his future role at the Bank of England,” said Minister Flaherty. “This appointment, which marks the first time a foreign national has headed the Bank of England, is another strong example that Canada’s monetary and fiscal systems serve as models to the world. While other countries have faced significant turbulence, our financial system has consistently been ranked as the soundest in the world.”
> 
> ...


----------



## Edward Campbell (26 Nov 2012)

Army.ca member and journalist, but *not* a stupid one, David Akin did a lengthy and thoughtful interview with Mark Carney about a month ago. It can be seen/heard and read here and, by the way, kudos to _SunMedia_ for even allowing such an interview; many Canadian media outlets would not think that something of this length and _narrow interest_ would be worth the effort.

Listen carefully, especially, to Part 3 for his views on Europe and the USA. There is nothing surprising - Governor Carney would never surprise anyone in the media - but it is very clear.


----------



## Edward Campbell (26 Nov 2012)

Rumour has it that Governor Carney will get £624,000 (about $(CA)1 Million) a year, apparently -- double the salary of his predecessor, Sir Mervyn King, who made £305,000.

Good thing he's getting a raise. A very nice, but far, Far, FAR from the most expensive, apartment in Central London can be had for about £500,00 per year ~ and it's only 5 miles or a half hour's drive from the Bank of England.


----------



## Edward Campbell (26 Nov 2012)

Now it is time for the rumour mill to speculate about Governor Carney's replacement. The _National Post_ does so in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from that newspaper. There is some speculation that Prime Minister Harper will want the list of candidates (which will be provided by the Bank's Board of Directors) to include a _Francophone_ and a woman:

http://business.financialpost.com/2012/11/26/who-will-fill-mark-carneys-shoes/


> Who will fill Mark Carney’s shoes?
> 
> John Greenwood
> 
> ...



Jean Boivin is a _Francophone_ and Julie Dickson is a female.


----------



## tomahawk6 (26 Nov 2012)

I think the Government hit a homerun with this appointment. According to the article the difference in Carneys pay and Sir Mervyn is due to the generous pension that Sir Mervyn will be getting.

http://www.bbc.co.uk/news/business-20503377

The Canadian economy and Canada's banks weathered the great financial storm of 2007-08 in better shape than pretty much every other major developed economy, with the possible exception of Australia.

Which is why George Osborne was very keen to recruit the governor of the Bank of Canada, Mark Carney, to succeed Sir Mervyn King in a rather bigger and more complex job, as governor of the Bank of England.

Mr Osborne regarded Mr Carney as the central banking equivalent of Sir Alex Ferguson or Pep Guardiola. But Mr Carney isn't cheap - and will receive a pay package of £624,000.

The chancellor first approached Mr Carney last February - and Mr Carney said no (as you can see from this BBC interview).

But Mr Osborne was keen to get his preferred central governor, because Mr Carney was widely perceived to have all the bits: he is admired by monetary economists, regulators and - allegedly - his staff (or to put it another way, he is an unusual economist and central banker, in that he is seen as a half-decent manager).

What's more, he brings with him the ability to seriously influence the future all-important global debate on making the banks safe, because he is the chair of the Financial Stability Board - the senior worldwide financial regulatory body.

So Mr Osborne would not let go and went back to Mr Carney a couple of weeks ago, and this time he said yes.

However, Mr Carney still had to get through the interviews: he had his a fortnight ago; and the UK now has its first ever foreign governor of the Bank of England (although Mr Carney has a British wife, British children and will apply for British citizenship).

Some may feel a tiny bit sorry for the four other eminences on that short list (Paul Tucker, Lord Turner, Lord Burns and Sir John Vickers) - because they now look like the chancellor's insurance in case Mr Carney said no.

As it happens, I did not think Mr Carney was in the frame because a well-placed Treasury source told me - in terms - that the unknown fifth person on the short list "was very unlikely to get the job" (see my blog of two weeks ago).

Mr Osborne looked pleased as punch with having kept the appointment under wraps till parliament was informed at 3.30pm and - perhaps especially - with the enthusiastic support for the advent of Mr Carney given by Ed Balls, a shadow chancellor who rarely praises his oppo.

So where does the controversy - if any - lie in the Carney pick?

Well, it is yet another promotion for a Goldman Sachs alumnus (the two most important central banks in Europe, the ECB and the Bank of England, will be run by former Goldman managing directors).

And on paper his pay at the Bank of England looks chunky. He will receive a package of £624,000, and will receive a yet-to-be-decided relocation and accommodation allowance (the court of the Bank of England will fix this emigration payment - and, for what it is worth, Barclays got a bit of stick for saying it would pay extra tax on behalf of Bob Diamond, when its former chief executive moved back to the UK).

Now Mr Carney's package of £624,000 is more than double Sir Mervyn King's salary of £305,000. But the Treasury and the Bank of England both point out that Sir Mervyn is a fully paid-up member of a staggeringly generous Bank of England pension scheme. That scheme is now closed, so Mr Carney isn't allowed to join it. But if he were allowed to join it, according to the Treasury that would be roughly worth the £300,000 difference between his salary and Sir Mervyn's (so it really must be an amazing, gold-plated scheme).

Also, the Treasury points out that Mr Carney will receive less than the £685,000 package of Martin Wheatley, who will run the UK's newly created Financial Conduct Authority, and less than Hector Sants was paid as chief executive of the Financial Services Authority.

So there are other public servants paid more than Mr Carney. And to state the bloomin' obvious, only time will tell if Mr Carney will turn out to be value for money.
Update:

It is hard to think of another developed economy where a foreigner would be appointed to such an important and sensitive public service post.

So the choice of the Canadian Mark Carney to be the next governor of the Bank of England marks the UK as unusually free from nationalist prejudices and hang-ups.

And that is certainly how the chancellor sees the appointment.

I have just interviewed George Osborne for the BBC and he says that his choice of Mr Carney is testament to the openness and tolerance of Britain, which he reveres.

But doesn't it also show a dearth of home grown talent? Well, Mr Osborne insists the runners-up were all first rate.

He would not confirm their names. But apart from the ones I have mentioned before, they also included the founding chairman of the Financial Services Authority, Sir Howard Davies.

As for whether Mr Carney is worth his £624,000 a year, Mr Osborne did not grumble when I pointed out this is four times his own remuneration, and simply said - as you would perhaps expect - that it is the going rate for the job.

So should we read into the arrival of Mr Carney that there really is a conspiracy for former Goldman Sachs partners to rule the world? Well, Mr Osborne sees it the other way round - saying that Mr Carney had made an important choice to leave behind the even more lavish rewards on offer at Goldman.

Hmmm.

So what is it about Mr Carney that persuaded Mr Osborne to pursue him all year, and not even to give up after Mr Carney initially turned down the job? 

Well it is that - unlike all the other serious candidates - Mr Carney has actually run a central bank, and a particularly successful one at that.

Oh, and as a secondary consideration, Mr Osborne has got to know Mr Carney pretty well and likes him. But running a central bank like the Bank of England will be quite a step up from the Bank of Canada, for a number of reasons.

First, the UK economy is in much more of a mess than Canada's

Second, the British banking industry is in much more of a mess than Canada's.

Third, the Bank of England is an institution in a state of some flux, having been criticised by some for failing to stem the great crisis of 2007-8, and about to be endowed with enormous new powers to temper the next financial crisis.

Mr Carney has not signed up for the quiet life.


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## Rifleman62 (27 Nov 2012)

Two years from now, the Queens Birthday honours, as a British citizen, Sir Mark, then eventually Lord so in so. Good on him.


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## a_majoor (29 Nov 2012)

And now some bad news. US environmental groups are essentially attacking Canada economically and depriving the economy of some $18 billion/year, a considerable amount of new wealth to fuel investment and job creation. Vivian Krause details some of the shenanigans here:

http://opinion.financialpost.com/2012/11/28/vivian-krause-u-s-greens-shut-down-canadian-oil/



> *Vivian Krause: U.S. greens shut down Canadian oil*
> 
> Vivian Krause, Special to Financial Post | Nov 28, 2012 8:38 PM ET | Last Updated: Nov 29, 2012 8:23 AM ET
> 
> ...


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## a_majoor (30 Nov 2012)

More on how we are tied to the US economy and how US politics intrudes upon our decision making. Frankly, attempts to legislate what we drive will simply result in more and more old cars staying on the road as people realize the trade off between paying $10,000 more for a car is hardly worth a $900 reduction in your fuel bill (not to mention that such cars will probably not meet the needs of the vast majority of people).

http://opinion.financialpost.com/2012/11/29/peter-foster-mandating-cars-people-dont-want/



> *Peter Foster: Mandating cars people don’t want*
> 
> Peter Foster | Nov 29, 2012 8:34 PM ET | Last Updated: Nov 29, 2012 8:45 PM ET
> More from Peter Foster
> ...


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## Edward Campbell (12 Dec 2012)

Part 1 of 2

Good news *for* Canada according to this report which is reproduced under the Fair Dealing provisions of the Copyright Act from the _Financial Post_:

http://business.financialpost.com/2012/12/11/goldmans-top-economist-explains-his-big-call-for-the-u-s-economy/


> Goldman’s top economist explains his big call for the U.S. economy
> 
> Joe Weisenthal, Business Insider
> 
> ...


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## Edward Campbell (12 Dec 2012)

Part 2 of 2



> *BI: Why is it that you don’t think we’ve seen that yet on the long end. It appears there’s been a turn (based on the stock market and some labor market indicators). More people are talking about the economy getting closer to liftoff. And yet, if you were just looking at long-term rates you wouldn’t see that at all.
> 
> HATZIUS:* It’s been a little surprising to us that we’re quite as low as we are. Having said that, we’ve not seen a sustained return to above trend growth, maybe in some of the labor market indicators you could sort of infer above-trend growth, but in other GDP-type indicators, broad indicators, like our current activity indicator, which measures a wide variety of different signals for the economy, certainly is not sending a message of above-trend growth.
> 
> ...




As the main article says, Mr Hatzius deserves our attention; let's all hope he's right ... again.


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## CougarKing (29 Mar 2013)

More about the BRICS in the news again:

link



> Associated Press
> 
> *Once-poor BRICS countries are preparing a better future without us*
> COLIN ROBERTSON
> ...


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## Edward Campbell (29 Mar 2013)

We need to avoid treating the BRICS as a single entity. There is not much similarity, at all, between the economies of China and South Africa or Brazil and India or between Russia and any of them. Each country deserves attention on its own merits and because of its own capabilities and limitations ~ and the limitations abound in some of them, especially Russia and, to a somewhat lesser degree in Brazil and South Africa, too.

That they are trying to cooperate is interesting but, in my personal _quesstimation_, likely to be pointless unless they can find a few bits of political common ground, which i find hard to imagine.

China and Russia are, for example, making nice right now, but I am certain it is a very temporary thing, having more to do with China's reaction to the US _Asian Pivot_ than to any common ground China and Russia might have.


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## CougarKing (30 Mar 2013)

Forget the BRICS. One should look at this group of emerging nations called the TIMPS. 

Take note that one of the TIMPS, the Philippines, has recently surpassed China and India as Canada's largest source of immigrants in recent years, as reported by this Globe and Mail article from 2011. 

Reuters link



> *BRICs, move over. TIMPs are the new emerging market stars*
> By Conrad de Aenlle
> 
> LONG BEACH, California | Thu Mar 28, 2013 9:58am EDT
> ...


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## a_majoor (30 Mar 2013)

Interesting observation about Turkey's geographic position and ability to bridge markets in that article; the same observation is made in Robert Kaplan's "The Revenge of Geography" and alluded to in George Friedman's "The Next 100 Years".

While geography isn't the only factor, it is a "constant" which continues to work to the advantage or disadvantage of the polity on that piece of ground.


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## a_majoor (13 Apr 2016)

The end game for Japan as their decades long economic deflation fails to respond to Keynesian economics. F.A.Hayek described what happens when a credit bubble a long time ago, and one comment on Zerohedge was that while you can always create more credit, you cannot create more creditworthy borrowers:

http://www.telegraph.co.uk/business/2016/04/11/olivier-blanchard-eyes-ugly-end-game-for-japan-on-debt-spiral/



> *Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral*
> Olivier Blanchard was the most influential chief economist in IMF history
> Ambrose Evans-Pritchard, lake como, italy
> 11 APRIL 2016 • 5:59PM
> ...


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