Making Canada Relevant Again- The Economic Super-Thread

[Edward Campbell]

I think, based upon his "opening statement" reported in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, that I'm going to like Stephen Poloz:

http://www.theglobeandmail.com/report-on-business/economy/bank-of-canada-governor-stephen-poloz-says-global-recovery-like-postwar-reconstruction/article12377774/#dashboard/follows/

Bank of Canada governor Stephen Poloz says global recovery like ‘postwar reconstruction’

KEVIN CARMICHAEL
The Globe and Mail

Published Thursday, Jun. 06 2013

Bank of Canada Governor Stephen Poloz described for the first time what he sees happening in the Canadian economy, likening the current situation to a “postwar reconstruction” that will take some time to complete.

Speaking to parliamentarians on his fourth day on the job, Mr. Poloz also shed light on how he will approach the dollar, saying the currency’s strength is having only a “marginal” impact on the competitiveness of Canada’s exports.

Governor of the Bank of Canada Stephen Poloz appears before the House of Commons Standing Committee
on Finance on Parliament Hill in Ottawa on Thursday June 6, 2013 regarding his appointment as the new
Governor of the Bank of Canada.                                                    (Sean Kilpatrick/THE CANADIAN PRESS)

“Just as the financial crisis triggered an atypical recession, the recovery cycle is unusual,” Mr. Poloz said in prepared remarks for the House of Commons Finance Committee. “We need to see the reconstruction of Canada’s economic potential, and a return to self-sustaining, self-generating growth.”

Mr. Poloz’s remarks were broad, offering little insight on whether he will push for a shift in the central bank’s current policy stance. He called the central bank’s inflation target “sacrosanct” and echoed long-standing central bank doctrine the exchange rates should be determined by market forces.

There is a view among some market participants that Mr. Poloz could take a different view on the dollar than his predecessor, Mark Carney, whose tenure at the Bank of Canada ended on the weekend. Mr. Poloz, who was leading Canada’s export finance agency when he was selected to lead the central bank, has boasted of visiting some 70 executives in 2012. That closeness to exporters has caused some to wonder if the new central bank governor might have more sympathy for their concerns about a stronger currency.

If that’s true, it wasn’t evident Wednesday. Mr. Poloz said the exchange rate has little impact on the sales because those are determined by contracts between buyer and seller. If the exchange rate changes in the meantime, the “only thing that changes is the amount of money the company gets,” in other words, profit margins, Mr. Poloz said.

Here, also reproduced under the Fair Dealing provisions of the Copyright Act from the Bank of Canada's website, is the full text of his statement:

http://www.bankofcanada.ca/2013/06/speeches/opening-statement-06-06-13/

Opening Statement - Stephen S. Poloz
Governor of the Bank of Canada
Presented to: House of Commons Standing Committee on Finance
Ottawa, Ontario

6 June 2013

Introduction

The Bank of Canada’s commitment to Canadians is to promote the economic and financial welfare of our country. One way we do this is to communicate our objectives openly and effectively and stand accountable for our actions.

So I thank you for the opportunity to come before you this morning to share the Bank’s perspective. Kindly note that today is day four on the job for me - I trust you will forgive me if there are any details I haven’t yet become familiar with. That said, I look forward to hearing your views and taking your questions, and I will answer them to the best of my ability.

The common denominator that ties together all of the Bank’s work is confidence. Through our actions and our words, what the Bank of Canada delivers is confidence in our currency; confidence in our role as fiscal agent for the federal government; confidence in our banking system; and confidence in the value of money.

This is familiar ground to all of us here today. I don’t propose to delve into the details of the Bank’s functions. Rather, I will discuss the current context in which we are operating and how that is influencing the Bank’s work of delivering confidence. In short: what are the challenges that we are facing? And, how do they affect the business of the Bank?

Today's Global Context

It is now almost six years since the start of the global financial crisis. Given the near-collapse of the global financial system and the dramatic plunge in global demand, it’s perhaps no surprise that we haven’t yet returned to normal economic conditions.

The global economy continues to struggle. Most advanced economies are still facing credit stresses and record-low interest rates. Many central banks continue to use unconventional means to provide stimulus, and governments are doing everything they can to manage their respective debt situations.

Clearly, the global economy is still in recovery. Global economic activity is expected to grow modestly this year before strengthening over the following two years. But this is not a recovery in the usual sense. It’s more like a postwar reconstruction. It will require sustained and focused efforts to rebuild global economic potential.

Allow me to talk about how, in this context, the Bank of Canada delivers confidence.

Delivering Confidence

Delivering Confidence in our Currency

Let me start with confidence in our currency which, for many Canadians, is our most tangible work. Every bank note in the wallets of Canadians is the product of specialized and sophisticated expertise. We have nearly 200 people - physicists, chemists, engineers and other experts - who design, test and distribute bank notes across Canada. We also communicate with retailers, financial institutions and the public, and work with law enforcement to deter counterfeiting.

The stakes are high when it comes to counterfeiting, not only in direct losses to Canadians, but also the loss of confidence that it creates in the use of bank notes.

The challenge of counterfeiting is significant. There was a time, in 2004, when counterfeiting in Canada was at a historic peak - and high by international standards. I’m sure many of you remember seeing signs posted in stores saying that $100 or $50 bank notes were not accepted.

The Bank of Canada introduced enhanced security features and worked closely with law-enforcement agencies, the RCMP, and the courts, as well as financial institutions and retailers, to bring those counterfeiting rates down. And we succeeded. Even before the introduction of our new polymer bank notes, counterfeiting rates had been reduced by 90 per cent.

But it’s important to remember that staying ahead of counterfeiters is a constant challenge. We must always be proactive.

That is why the Bank launched a new series of polymer bank notes that are safer, cheaper, and greener. Safer, because of sophisticated security features, including holography and transparency, that make these new notes harder to counterfeit and easier to verify. Cheaper, because they last at least 2.5 times longer than paper-based notes. This means that fewer notes will need to be printed, making the series more economical.

And greener, because over the life of the series, fewer notes produced means fewer notes transported. And when they do need to be replaced, the notes will be recycled in Canada.

With these new notes, Canadians can have full confidence in their currency.

Delivering Confidence in Our Funds Management

The second area of our focus is much less visible to most Canadians. As the fiscal agent of the federal government, the Bank of Canada provides advice and administers the government’s debt and reserves - and demonstrates global leadership in these realms. Innovative work is being done, for example, to reduce the reliance on external credit-rating agencies in the management of the government’s assets and liabilities.

There is a lot of money at stake. In 2012, the Bank managed Government of Canada daily cash balances averaging about $17 billion. We also managed, on behalf of the government, official international reserves amounting to about US$69 billion.

Delivering Confidence in Our Financial System

As with any plumbing system, we tend to take notice only when things go wrong. Through the crisis and since, the Bank’s work has meant that the resilience of Canada’s payment clearing and settlement system has been maintained at a very high level, ensuring that Canadians can have confidence that the economy is supported by solid financial market infrastructures.

Financial stability at home is necessary, of course, but not sufficient. The crisis made it abundantly clear that the global financial system needed remodelling - and the Bank of Canada has been at the forefront of global reform work.

Canada has also made good on our G-20 commitments. Among other reforms, we have put in place Basel III capital standards ahead of schedule. We have made significant strides on other market infrastructure reforms, which we can address in detail during our discussion.

These are real accomplishments, and our financial system is stronger as a result. But we must not lose momentum, here in Canada or on the international stage. More work is required to end the phenomenon of institutions that are too big to fail, including recovery and resolution plans for banks. And countries need to address the issue of shadow banking to ensure that systemically important financial institutions operating outside the perimeter of regulation come broadly into line with their regulated counterparts.

Delivering Confidence in Monetary Policy

Finally, confidence is clearly important for the conduct of monetary policy.

Monetary policy in Canada is supported by a governance structure that instills confidence and ensures that Canadians, through their government, have a say in setting the monetary policy framework. Importantly, the structure also ensures the independence of the central bank to make the right policy decisions to achieve our inflation target.

Canada’s monetary policy framework is a good one. After a tremendous amount of research, Canada adopted an inflation-targeting regime in 1991. Since 1995, the target has been 2 per cent. We recognized early on that a commitment to hold inflation absolutely steady at 2 per cent was unrealistic. Shocks to the economy must be taken into account. So the framework is designed to keep total CPI inflation at the 2 per cent midpoint of a target range of 1 to 3 per cent over the medium term. It bears mentioning that the target is symmetrical. We care just as much about inflation falling below as we do about it rising above the target. The Bank raises or lowers its policy interest rate, as appropriate, in order to achieve the target typically within a horizon of six to eight quarters - the time that it usually takes for policy actions to work their way through the economy and have their full effect on inflation.

Over the past couple of decades, the average rate of inflation has been very close to target. Even during the global economic and financial crisis, our commitment did not waver. The inflation target is sacrosanct to us and has become a credible anchor for the inflation expectations of Canadians.

A key component of the Bank of Canada’s inflation-targeting framework is a flexible exchange rate. While the exchange rate is influenced by such variables as commodity prices, relative inflation rates, and relative interest rates, its value is determined in currency markets.

The credibility earned by the Bank over the past twenty years allows us to take advantage of the flexibility inherent in the framework with respect to the amount of time it takes to return inflation to target. The recent turmoil tested the limits of our flexible inflation-targeting framework. Nonetheless, the inflation expectations of Canadians remain well anchored, proving that our framework is secure and working. But it also informs us that we need to validate those expectations to maintain our credibility.

This brings me to a discussion of the domestic context.

The Context in Canada

The severity of the global economic and financial crisis meant that the recession it triggered in Canada was different from any other postwar recession. Canada experienced a particularly deep contraction of investment and exports, as business confidence plummeted along with global demand.

In the immediate aftermath of the crisis, stimulative monetary and fiscal policies proved highly effective in supporting robust growth in domestic demand, particularly household expenditures, which grew to record levels. Yet, as effective as it has been, with domestic demand now slowing, the limits of this growth model are clear.

What’s less clear is the rebuilding process underlying the necessary rotation of growth toward net exports and business investment. While the Canadian economy as a whole has recovered from the recession, thanks to domestic demand, the depth and duration of the global recession delivered a direct, sharp blow to Canadian business. In many cases, temporary plant shutdowns were not sufficient to match the fall in demand. Some firms permanently downsized their operations. Others simply closed their doors. Large job losses resulted.

In effect, the recession caused a significant structural change in the Canadian economy. The level of our country’s productive capacity - in other words, its potential - dropped, as the Bank noted in April 2009. Standard macroeconomic models don’t really capture these dynamics.

Just as the financial crisis triggered an atypical recession, the recovery cycle is unusual. The rotation of demand will require more than just the ramping up of production. The sequence we can anticipate is the following: foreign demand will recover; our exports will strengthen further; confidence will improve; companies will invest to increase capacity; existing companies will expand and new ones will be created.

In short, we need to see the reconstruction of Canada's economic potential, and a return to self-sustaining, self-generating growth.

This sequence may already be underway.

We are now seeing signs of recovery in some important external markets, notably the United States and Japan, and there is continued growth in emerging-market economies. The Bank expects that the gathering momentum in foreign demand should help lift the confidence of Canada’s exporters. This is critical for Canadian firms to boost their investment to expand their productive capacity.

Conclusion - Confidence in Words, as well as Actions

The Bank has a role to play nurturing that process, to the extent possible within the confines of our inflation-targeting framework. There is no conflict between nurturing this and our need to get inflation up to the 2 per cent target.

In monetary policy, actions are critically important, but words, too, matter a great deal. We can bolster confidence by explaining the forces at work in our economy, our projections for what’s ahead, and our monetary policy response. And we help nurture confidence by listening to businesses, to labour groups, and to industry associations in order to expand our understanding of what’s happening in the real economy.

We must always remember that beneath our economic and financial statistics and analysis are real people, making real decisions that can lead to bad outcomes as well as good ones. Those decisions are hard to make any time, but when uncertainty is high and confidence has not been fully restored, they can be even more difficult. A lack of confidence can mean that such decisions are postponed - and that opportunities are lost.

To help engender confidence, an active engagement with Canadians must be a cornerstone of the policy of the Bank of Canada, not least of which is a continuing dialogue with this committee.

With that, I thank you for listening. I would be pleased to take your questions.

I am very happy that he sees inflation - and the bank's inflation range target - as "sacrosanct." I am equally happy to know that he shares he view that exchange rates have a limited impact (but some, to be sure) on productivity. A good start in my view.


Edit: format

 

[Brad Sallows]

>The percentage who say their national economy is "good:"

The transition from dog to beef exerts strong positive emotions.  When you are lower on the diminishing returns curve, a smaller change in "x" gets you more "y", and hence more satisfaction.

 

[Edward Campbell]

Here is an interesting article, co-authored by Edmund S. Phelps which, if for no reason other than the credentials of its co-author, deserves a read. It is reproduced under the Fair Dealing provisions of the Copyright Act from Project Syndicate:

http://www.project-syndicate.org/commentary/blaming-capitalism-for-corporatism

Blaming Capitalism for Corporatism

Saifedean Ammous and Edmund S. Phelps

Jan. 31, 2012

NEW YORK – The future of capitalism is again a question. Will it survive the ongoing crisis in its current form? If not, will it transform itself or will government take the lead?

The term “capitalism” used to mean an economic system in which capital was privately owned and traded; owners of capital got to judge how best to use it, and could draw on the foresight and creative ideas of entrepreneurs and innovative thinkers. This system of individual freedom and individual responsibility gave little scope for government to influence economic decision-making: success meant profits; failure meant losses. Corporations could exist only as long as free individuals willingly purchased their goods – and would go out of business quickly otherwise.

Capitalism became a world-beater in the 1800’s, when it developed capabilities for endemic innovation. Societies that adopted the capitalist system gained unrivaled prosperity, enjoyed widespread job satisfaction, obtained productivity growth that was the marvel of the world and ended mass privation.

Illustration from the Project Syndicate article

Now the capitalist system has been corrupted. The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. This system, however, is not capitalism, but rather an economic order that harks back to Bismarck in the late nineteenth century and Mussolini in the twentieth: corporatism.

In various ways, corporatism chokes off the dynamism that makes for engaging work, faster economic growth, and greater opportunity and inclusiveness. It maintains lethargic, wasteful, unproductive, and well-connected firms at the expense of dynamic newcomers and outsiders, and favors declared goals such as industrialization, economic development, and national greatness over individuals’ economic freedom and responsibility. Today, airlines, auto manufacturers, agricultural companies, media, investment banks, hedge funds, and much more has at some point been deemed too important to weather the free market on its own, receiving a helping hand from government in the name of the “public good.”

The costs of corporatism are visible all around us: dysfunctional corporations that survive despite their gross inability to serve their customers; sclerotic economies with slow output growth, a dearth of engaging work, scant opportunities for young people; governments bankrupted by their efforts to palliate these problems; and increasing concentration of wealth in the hands of those connected enough to be on the right side of the corporatist deal.

This shift of power from owners and innovators to state officials is the antithesis of capitalism. Yet this system’s apologists and beneficiaries have the temerity to blame all these failures on “reckless capitalism” and “lack of regulation,” which they argue necessitates more oversight and regulation, which in reality means more corporatism and state favoritism.

It seems unlikely that so disastrous a system is sustainable. The corporatist model makes no sense to younger generations who grew up using the Internet, the world’s freest market for goods and ideas. The success and failure of firms on the Internet is the best advertisement for the free market: social networking Web sites, for example, rise and fall almost instantaneously, depending on how well they serve their customers.

Sites such as Friendster and MySpace sought extra profit by compromising the privacy of their users, and were instantly punished as users deserted them to relatively safer competitors like Facebook and Twitter. There was no need for government regulation to bring about this transition; in fact, had modern corporatist states attempted to do so, today they would be propping up MySpace with taxpayer dollars and campaigning on a promise to “reform” its privacy features.

The Internet, as a largely free marketplace for ideas, has not been kind to corporatism. People who grew up with its decentralization and free competition of ideas must find alien the idea of state support for large firms and industries. Many in the traditional media repeat the old line “What's good for Firm X is good for America,” but it is not likely to be seen trending on Twitter.

The legitimacy of corporatism is eroding along with the fiscal health of governments that have relied on it. If politicians cannot repeal corporatism, it will bury itself in debt and default, and a capitalist system could re-emerge from the discredited corporatist rubble. Then “capitalism” would again carry its true meaning, rather than the one attributed to it by corporatists seeking to hide behind it and socialists wanting to vilify it.

This column was produced within the framework of the EC-funded “V4Aid” project. The views expressed do not necessarily represent the view of the EU.

Saifedean Ammous is a lecturer in economics at the Lebanese American University.
Edmund S. Phelps, a Nobel laureate in economics, is Professor of Political Economy at Columbia University, and Director of its Center on Capitalism and Society. One of the world’s leading experts on the sources of economic dynamism, he is the author of many books, including Rewarding Work: How to Restore Participation and Self-Support to Free Enterprise and Designing Inclusion.

This is not exactly new - our colleague Thucydides rails against "crony capitalism" - but it is rare to see the consequences of corporatism so clearly defined:

    [o]Dysfunctional corporations that survive despite their gross inability to serve their customers;

    [o]Sclerotic economies with slow output growth;

    [o]A dearth of engaging work;

    [o]Scant opportunities for young people;

    [o]Governments bankrupted by their efforts to palliate these problems; and

    [o]Increasing concentration of wealth in the hands of those connected enough to be on the right side of the corporatist deal.

That is a pretty fair description of many most developed economies.

What can be done?

    1. Stop believing that anything is "too big to fail;"

    2. Stop supporting David Lewis' "Corporate Welfare Bums;" but

    3. For 1 & 2 to happen citizens have to grow some B&B (balls and brains) and elect governments that will "do the right things and do things right."

 

[Edward Campbell]

Paul Krugman is a great economist, the fact that I disagree with him on many issues does not, not even in the slightest, diminish his stature. But he is, also, a nearly obsessive Obama cheerleader and he "sees" the roots of the financial crisis solely in terms of mistakes and missteps by Republican presidents and Republican congressional leaders and businessmen who must be Republicans, too. Thus it was not surprising to read, a while back, that he felt that Canada was too Republican and that our policies and leadership would spell our doom. To be fair he was not and is not alone; several economists are betting against Canada. But some, including TD Bank's Diana Petramala beg to differ, as explained 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/top-business-stories/td-bank-to-paul-krugman-youre-wrong-about-canada/article12722261/#dashboard/follows/

TD Bank to Paul Krugman: You’re wrong about 'vulnerable' Canada

MICHAEL BABAD
The Globe and Mail

Published Friday, Jun. 21 2013

Toronto-Dominion Bank is taking Paul Krugman to task for suggesting Canada may be headed for trouble.

It would take a shock for that to happen, TD economist Diana Petramala says.

In his New York Times blog a week ago, Mr. Krugman noted that he’d been to Canada to get an honorary degree from the University of Toronto, which got him thinking about the Great White North, and how it could be a test case in the post-recession era.

The Nobel prize winner said many observers believed the financial crisis was a banking one, and felt the economy would rebound at a fast pace when the financial services sector was stable.

While the industry indeed calmed down, he said, the economy did not pick up, leading some economists, including Mr. Krugman, to think that other problems were at hand, notably depressed housing and consumer debt.

“Famously, Canada’s old-fashioned, boring banking system avoided getting caught up in the global financial crisis,” the economist wrote.

“And for a while Canadian housing prices lagged those south of the border.”

Of course, Canadian property values shot up, as did the key measure of consumer debt to disposable income.

“So if the new, non-bank-centred view is right, Canada ought to be quite vulnerable to a big deleveraging shock despite its boring banks,” Mr. Krugman said.

“Of course, people have been saying this for several years, and it hasn’t happened yet – but remember, the U.S. housing bubble took a long time to pop, too.”

Mr. Krugman is not alone. Others from outside the country have also warned they believe Canada is headed for trouble.

Canadians, of course, are all too familiar with warnings from the Bank of Canada to get their household finances under control, and Finance Minister Jim Flaherty’s four attempts to cool down the real estate market.

The latest numbers from Statistics Canada show the household debt burden continuing to ease from record levels, while home sales have fallen sharply though prices have held up.

That’s the background.

TD economist Diana Petramala agrees that there are risks associated with the housing market and consumer debt, but that there are “important counter-arguments” to Mr. Krugman’s worth noting.

In a research note, she pointed out the warning signs in the run-up to the U.S. crisis, which included rising mortgage interest costs and mortgage delinquencies that climbed along with consumer debt.

“The charts show that Canadian households are far less financially vulnerable than their U.S. counterparts were heading into the crisis,” Ms. Petramala said.

“Largely owing to a continued low interest rate environment, mortgage interest costs as a per cent of personal disposable income have fallen despite the sharp rise in the debt-to-income ratio,” she added in her report.

“Meanwhile, while mortgage delinquency rates in Canada and the U.S. were similar during the 1990s, the per cent of mortgages in arrears 90 days or more in Canada is about a third of what they were in the U.S. leading up to the 2008-2009 crisis.”

Ms. Petramala cited the “riskier lending practices” in the U.S. between 2002 and 2007, and the tighter restrictions now in place in Canada.

Add to that the fact that incomes have climbed at a faster pace in Canada since the recovery began, helping to ease “some of the recent overvaluation” in the property market.

That’s not what happened in the U.S.

“We would be concerned should we see a further increase in household indebtedness or an acceleration in home price growth – both of which are certainly a risk given a continued low interest rate environment,” Ms. Petramala said.

“However, absent of a negative economic shock, excesses are expected to continue to unwind in an orderly fashion.”

Frankly and, I think, fairly, I think Ms. Petramala's view is both better informed and more carefully reasoned and, therefore, more likely to be correct.

 

[Edward Campbell]

I have been reading about and watching/listen to report of the "Occupy" movements (I don't think it's one, monolithic 'thing,' yet) with careful albeit not rapt attention. A few observations:

1. Inequality, growing inequality, is both real and problematical;

2. The "children" (my, personal view of them - from being 35-50 years older than most of them) express "frustration" and "disillusionment" with a system which they cannot fathom;

3. What the children see is that there are a very few, very, very rich people - some of whom appear to gain great wealth for little effort - and there are many, many people who do not have enough. "Enough" is not just sufficient to keep body and soul together, a roof over one's head, adequate clothes and some recreation; "enough" means more than that, it appears, to me again, that it means a higher level of comfort and pleasure that with which the traditional "working class" might be content;

(Parenthetically, I do not detect any real concern for the "poor." The "Occupiers" appear, to me, most concerned with the relative decline of the middle class - the class to which they belong. Really poor people do not, because they cannot, afford the time or the money march and stream live video at the same time.)

Niko Salassidis chants as he streams a live video of the Occupy Toronto protest in Toronto, Ont.
October 16, 2011. Protesters have set up camp at Saint James Park near Toronto's financial district.
(Michelle Siu for Globe and Mail)

4. So, what do these "frustrated" and "disillusioned" and, I repeat, inchoate bands of children do? They 'mobilize,' something they can do well because they are skilled social media users and they have the absolute luxury of free time, and then they 'demonstrate;'

5. We get some ideas of what they are against. Thus far I have no idea, not from "Occupy Wall Street," or "Occupy Bay Street" or "Occupy __[insert street name here]__," what they are demonstrating for;

6. I am tempted to look back, before I was born, to the early days of the Great Depression. People 'demonstrated' then, too - about the essential unfairness of the disasters which had befallen them. But we society knew what they wanted: charity;

Hunger march, Edmonton, 1932

7. But in the "dirty thirties" most people (as many as 63% of non farm workers, 75% of all workers) took whatever jobs they could find - two jobs when necessary;

(Parenthetically, again, I can cite known family history - my parents both graduated from university about the time the Great Depression was getting started. They had debts - there were no student loans but family members (both families) had chipped in ($10.00 here, $20.00 there) to finance the last year or so of study and that all had to be repaid. At the same time the good, high paying, professional jobs to which they had looked forward were gone. They had to take more than one lower paying job and live more frugally while they survived, gained experience, paid debts and so on. Maybe attitudes have changed.)

8. So what is the problem? Is it the 1%/99% myth? (Look it up for yourselves, please, you are not bloody helpless - if you were you would be out "occupying" some public park.) Or is it that the Great Recession is so much harder on people than the Great Depression? Or, perhaps, is it that the "children" are too lazy to work and too nervous to steal?

9. Two things about which we can be certain: the children are very media savvy and the media is, comme d'habitude, easily fed/led.

And here, at last, reproduced under the Fair Dealing provisions of the Copyright Act from the New York Times, is a sensible explanation of the real crux of the inequality problem ~ it stifles socio-economic mobility which is not only a attribute of successful societies, I would argue it is a requirement:

http://krugman.blogs.nytimes.com/2013/06/23/we-were-middle-class-once-and-young/?_r=1&

We Were Middle-Class Once, And Young

Paul Krugman

June 23, 2013

As I noted the other day, Greg Mankiw (pdf), in his defense of the one percent, seems oddly oblivious, among other things, to the extent to which America has changed since he was young. We are a much more unequal society now, and as a consequence arguably one with a lot less intergenerational mobility too.

I argued this impressionistically — but it turns out that Miles Corak has a paper for the same volume making the argument with lots of evidence. For example, here’s data on “enrichment expenditures”, defined as “the amount of money families spend per child on books, computers, high-quality child care, summer camps, private schooling, and other things that promote the capabilities of their children”:

Not only do the affluent spend much more on their children, but the gap has grown a lot since Greg and I were young. Maybe all that spending is wasted — but I doubt it. We have become both a more unequal society and a society with more unequal opportunities.

There’s a lot more in the Corak paper, by the way. I was especially struck by the comparison of mobility in the US and Canada. I wasn’t surprised that America has less mobility, and certainly not that in America it’s hard to escape the bottom decile. But it turns out that in America it’s also much easier to stay in the top decile — hardly the image of a meritocractic society, unless you believe that America’s top decile is genetically superior to Canada’s.

Anyway, we are not the society we once were — and baby boomers should realize that.

I think we are all familiar with the "rags to riches to rags" cycle in e.g. English history - one or two generations raise a family from nothing to riches, another one or two generations maintain that status and then another generation or two spend it all and reduce the family back to nothing. There is a pithy saying in Chinese that tells the same story in fewer words. We have, across humanity, a common view of socio-economic mobility and, also, a common sense that it is a good thing. What worries Krugman ~ and should worry us all ~ is that our "system" appears to be making socio-economic mobility harder to achieve. That Canada is somewhat less ossified than America is not a cause for celebration.

 

[a_majoor]

Interesting take on the debt loads of Ontario and Quebec. Bond rating agencies seem to elieve they have unlimited power to tax and borrow, without suffering any adverse consequences for doing so. The economic decline of Ontario from "have" to "have not" status, unemployment figures and economic growth statistics would seem to argue against that POV, and as the author poits out, at some point the taxpayers will have been pushed too far. While a "Tea Party" type movement may not be in the cards, taxpayers "Going Galt" and leaving the jurisdiction or foregoing opportunities to earn/spend more will leave a gaping hole in economic forecasts, and I doubt anyone can create a way to tax people on their theoretical earning potential if they are downsizing.

http://opinion.financialpost.com/2013/06/17/terence-corcoran-time-for-a-tax-revolt-in-ontario-quebec/

Terence Corcoran: Time for a tax revolt in Ontario, Quebec

Terence Corcoran | 13/06/17 | Last Updated: 13/06/18 11:43 AM ET
More from Terence Corcoran | @terencecorcoran

Moody’s main reason for maintaining Aa2 on Ontario and Quebec— despite debts respectively of $247-billion and $166-billion, or about $80,000 each per household — is because they have "access to, and complete control over, a wide-range of revenue bases."

The two provinces may be loaded with record debt, but hey, it’s no problem

We haven’t seen such enthusiasm for tax collecting since Roman Emperors sent out Publicans to plunder the provinces. In a report Monday, Moody’s Investors Service announced it would maintain its “high credit ratings” for Ontario and Quebec, high being Aa2, two notches below the highest rate possible. The two provinces may be loaded with record debt, but hey, it’s no problem. After all, the Liberal and Parti Quebecois governments can tax the living daylights out of their citizens.

In a bizarre report on the fiscal issues facing Canada’s two debtbeats, Moody’s also provided an instructive overview of the headspace in which the financial markets operate. If you want to know how Spain, Greece and a host of other European nations ended up in fiscal crises, the Moody’s Ontario/Quebec summary offers helpful lessons for taxpayers. First lesson, beware rating agencies bearing high ratings.

Moody’s main reason for maintaining Aa2 on Ontario and Quebec — despite debts respectively of $247-billion and $166-billion, or  about $80,000 each per household — is because they have “access to, and complete control over, a wide-range of revenue bases.” Moody’s likes the sound of those words, and so repeats them several times with variations.  The provinces have “complete control over many revenue-raising levers.” They have the “ability to adjust their tax rates as they wish, with no approval necessary from the federal government.”

Related

    Perverse power taxes
    Don’t mine Quebec royalties

Look at all the taxable stuff around that can be taxed as they wish. “They have unfettered access to taxes on tobacco products, liquor and gasoline, as well as the ability to raise revenue through lotteries.” And if that’s not enough, the provinces can also “implement and set, at their discretion, royalty rates for natural resources.”

I hate to rain on this beautiful tax heaven in which governments have unlimited ability to tax the hell out of their citizens, but at some point taxpayers come into the picture. Somehow, I doubt Premiers Kathleen Wynne and Pauline Marois feel they have unlimited ability to tax that Moody’s claims.*

Another lesson in the Moody’s report is the insight it provides into the workings of the financial markets. Moody’s says one reason for the high Ontario and Quebec ratings is that they have “unquestioned market access” to lenders internationally.  This is a “key factor” in Moody’s assessment of  Ontario/Quebec creditworthiness.  There’s a “large potential pool of investors” internationally, which “reduces the financing  risks” compared with other regions in the world.

If I understand this right: Ontario and Quebec have less financial risk because they can borrow a lot of money unquestioned in the international market.  One of the reasons for this, of course, would be the high credit ratings assigned by people like Moody’s. In short: They can borrow more money because the ratings are good and the ratings are good because they can borrow more money.  As we’ve seen in Europe, this circular bit of financial head-spinning has in the past led international lenders to purchase trillions in sovereign debt that became worthless.

Moody’s does acknowledge that spending could be cut.  The provinces have “complete autonomy to adjust their spending from year to year.” This “complete control over expenditures” is a significant credit strength, said Moody’s.  But just because government’s can cut spending doesn’t mean voters will let them.

Moody’s doesn’t address the issue of whether Ottawa, as the real sovereign credit, would also be on the hook if Ontario or Quebec were to suffer a credit meltdown.  That would be another reason to keep Ontario/Quebec credit ratings higher.

The final lesson: Taxpayers unite! The provinces may not need Ottawa’s approval for an endless shakedown of citizens, but provincial politicians still have to face the voters.  A tax revolt does not seem imminent, but in the debt game run by rating agencies and bond holders, including international lenders, it is clear that taxpayers are the suckers.  Spain had the same tax powers as Ontario and Quebec, until voters revolted.

 

[Edward Campbell]

And more on pipelines in this thoughtful article by long-time Liberal insider Gordon Gibson which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/commentary/canada-might-well-benefit-from-keystones-rejection/article10374471/

I agree with Gibson: if the Americans want to cut off their nose to spute their face that's their business ~ regardless of the fate of Keystone XL we, Canada, need to get our own, Canadian oil to our own, Canadian seaports for global exports.

I think we, Canada, need to get our petroleum to the global markets no matter what Americans, our own Canadian aboriginals or the children of the Occupy _____ movement think. But this article, which is reproduced under the Fair Dealing provisions of the Copyright Act from the National Post, notes, Canadian first nations and Occupy _____ - both of which are, as Thucydides and others have reminded us, are financed by big American foundations with ties to their energy sector - have joined forces to slow/stop that process:

http://fullcomment.nationalpost.com/2013/06/26/john-ivison-occupy-and-idle-no-more-could-team-up-to-block-pipelines-going-east/

Occupy and Idle No More could team up to block pipelines going east

John Ivison

13/06/26

The failure of Canadian oil and gas producers to get world prices for their product costs the country $28-billion a year, according to the last budget, reducing federal government revenues by $4-billion. No wonder Ottawa has been so keen to push projects that would help get natural resources to Asian and European markets.

Part of the solution is to build new pipelines, but the news on that front has been decidedly mixed. The Northern Gateway pipeline to Kitimat, B.C., looks as dead as a Norwegian blue parrot. The regulatory process is still ongoing, but negative public sentiment in B.C. makes it look a long shot.

The Keystone pipeline between Alberta and the Gulf Coast hangs in the balance, at the mercy of Barack Obama’s new climate change action plan. The President said Tuesday the project will only be given the go-ahead if it does not “significantly exacerbate” carbon pollution. Quite what that means remains a riddle, wrapped in a mystery, inside an enigma. Like Churchill’s famous quote about Russia, the key to that riddle may be America’s national interest. The Harper government argues this would be best served by North American energy security, where Canadian crude replaces equally high carbon imports from Venezuela and Nigeria. It’s not yet clear whether the President is convinced.

Such is the uncertain future of both projects that great store has been placed in nascent plans by both Enbridge and Trans Canada Corp. to transport crude eastward to refineries in Quebec and New Brunswick, from where it could be exported. (Enbridge is proposing to reverse an existing oil pipeline between Sarnia and Montreal. Line 9A from Sarnia to Westover, near Hamilton, has been granted regulatory approval; public hearings on Line 9B to Montreal will begin this fall. Trans Canada is proposing to convert existing natural gas pipelines for oil transportation between Alberta and tank terminals in Quebec City and Saint John, N.B.).

Politicians of all stripes have shown unusual solidarity in support of moving oilsands crude eastward. The good news for the pipeline companies is that there has not been concerted opposition from environmental and native groups to their proposals – until now.

Last Thursday, a group of environmental protestors took over a pumping station north of Hamilton. The action, dubbed Swamp Line 9, was aimed at blocking plans by Enbridge to reverse Line 9’s flow pipeline, which would allow it to eventually pump up to 300,000 barrels of diluted bitumen from the oilsands.

Early Wednesday, police raided the Enbridge pumping station and arrested 20 people.

But that is unlikely to be the end of the matter. The protest was supported by numerous environmental groups, Idle No More and the Occupy movement. This is the activist equivalent of a camel – the veritable horse designed by committee. Each group has its own agenda – the environmental NGOs want to make Energy East a proxy war for the oilsands and bottleneck production on the Prairies; Idle No More threatens more non-violent protests as part of its Sovereignty Summer, unless Ottawa recognizes the rights of native groups to say no to development on their traditional lands (among other demands); while Occupy calls for a “total restructuring of the political and economic system” no less.

Line 9 has been carrying conventional crude from east to west for 20 years without incident, but this protest has been sparked by claims that diluted bitumen from the oilsands is more acidic and corrosive, and thus more likely to spill.

With uncanny timing, the protest culminated just as the U.S. National Research Council released its findings on the transportation of diluted bitumen, concluding that claims by such groups as Friends of the Earth are false. “Diluted bitumen has no greater likelihood of accidental pipeline release than other crude,” the report said.

However, as native environmental activist Clayton Thomas Muller pointed out, Enbridge’s track record on leaks has done the protesters a big favour. It was an Enbridge pipeline that spilled 3.3 million litres of oil in Michigan and the company reported another leak in northern Alberta last weekend.

“Their narrative is unraveling with every spill,” he said.

The Sovereignty Summer is still in its infancy – rallies in sympathy with the Swamp Line 9 protest across the country were sparsely attended Tuesday. But if unrest becomes more coordinated, this could be the start of a long, hot summer.

Line 9 runs through the traditional lands of the Six Nations of the Grand River in southwestern Ontario. As the Six Nations proved in the Caledonia land dispute, they are a far bigger impediment to development they consider unwelcome than a rag-tag band of environmentalists.

While the sea may refuse no river, the quest for Canadian crude to reach tidewater is proving a good deal more problematic.

National Post

I have a lot of sympathy for first nations, in general. As our own Supreme Court has reminded us, we, Canadians over the generations, have treated them poorly unfairly and dishonestly, but the redress to their real grievances will require cooperation, not confrontation, on both sides.

I have no sympathy for Occupy _____. While I agree that inequality is a problem, Occupy _____ does not really understand what inequality is all about, nor does it care. Occupy ____ are all spoiled children of the middle class: too lazy (and ill educated) to work and too nervous to steal. A little taste of real communism - forced labour in harsh regions - would help them to grow up.


Edit: typo

 

[Edward Campbell]

The truth about how we assess/analyse President Obama's musings about the Keystone XL pipeline, reproduced under the Fair Dealing provisions of the Copyright Act from the Ottawa Citizen:

http://www.ottawacitizen.com/opinion/editorial-cartoons/index.html

MacKay, Hamilton Spectator

 

[a_majoor]

While this s an American example we have no reason to feel smug. Canada's Federal government has $500 billion in unfunded liabilities (mostly government pensions), which is the same order of magnitude as the National Debt. While I have been searching, similar figures are not present for the Provinces and municipalities, although since few polities use the same format for their finacial reportings, it is hard to say what is going on. If anyone has reasonably up to date figures for Provincial and Municipal unfunded liabilites, I would be interested to see them. As you can see from the American examples, the consequences of unfunded liabilities can be even more extreme than public debt (and the combined impact is pretty much insoluable in the worst cases).

http://blogs.the-american-interest.com/wrm/2013/06/27/ten-states-now-buried-by-pensions/

Ten States Now Buried by Pensions

There are currently ten states whose pension liabilities are higher than total yearly revenues, according to a new Moody’s report on public pensions. The states in question included Colorado, Kentucky, New Jersey, Hawaii, and Connecticut. Worst of all was Illinois, where pension liabilities are more than twice as high as revenues. As Reuters reports, the culprit is the same in all cases:

“The states that have the largest relative pension liabilities have at least one thing in common: a history of contributing less to their pension plans than the actuarially required contributions (ARC),” Moody’s said in the report, which looked at data for fiscal 2011.
On the other hand, states with pension liabilities that represented just a sliver of revenues, such as Wisconsin, “have little in common outside of a commitment to making full…payments to their pension plans.”

Among other things, this suggests that pension liabilities will play an even larger role in determining the creditworthiness of states and cities than they do now. Mayors and Governors who want to borrow money in the future—i.e. all of them—need to look long and hard at the way they manage their pension programs.

 

[Edward Campbell]

This proposal, which is in an article that is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, might, as the author suggests, be a neat way for Canada to "steal a march on the U.S."

http://www.theglobeandmail.com/report-on-business/streetwise/why-a-yuan-hub-makes-sense-for-toronto/article13038256/#dashboard/follows/

Why a yuan hub makes sense for Toronto

SUBSCRIBERS ONLY

Boyd Erman
The Globe and Mail

Published Friday, Jul. 05 2013

Word is Canadian banks are looking at trying to create a centre for trading China’s yuan in Toronto, hoping to steal a march on the U.S.

The idea is a nice niche play for a financial centre that has probably not capitalized on all the headlines about Canadian strength as much as expected.

Coming out of the financial crisis, the feeling was that Canada was ascendant as an international financial centre. At the margin, it’s been true. The country’s big banks and brokerages are stronger, having used the opportunity to acquire people and businesses, but in an incrementalist rather than transformative fashion for the most part. From a risk point of view, it was the smart play.

And as attractive as Canada is, our strength has not brought an influx of foreign firms looking to establish large operations here. There’s been no flight to Canada to speak of. So Toronto’s financial sphere does not look vastly different than before the crisis and the attendant hype about this country.

In fact, while respondents to the latest 2013 Global Financial Centre Index survey put Toronto among the cities most likely to become more significant, the actual survey showed the city fell in the financial centre rankings as growth in other centres was faster.

The findings put Toronto in 12th spot, between Chicago and San Francisco. That’s down two spots from 2012. Vancouver, Montreal and Calgary rank 15, 16 and 17, respectively.

Building the city’s foreign exchange capabilities is a way to keep Toronto grinding higher.

Canada’s banks do not rank in the top 10 globally in foreign exchange market share. Royal Bank of Canada was the only one to crack the top 20 in the benchmark Euromoney survey, coming in at No. 18. It’s hard to make that happen when your home currency is only the seventh-most traded currency globally (that was a 2010 number, from the last completed Bank for International Settlements triennial survey) and your home country is the world’s 11th most active foreign currency market by average daily volume.

Getting in early on the yuan market is unlikely to be a game changer, but it is the kind of small win that keeps Toronto on the right path.

(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)

 

[DBA]

Actually, the research will get done ~ and about 85%+ of it (pure research) will get done thanks to government funding. The biggest research fund provider is the US government, largely through the defence budget. The country that pays for research tends to reap many benefits: its universities attract more and better researchers who, in their turn, produce more "outputs" that have eventual development possibilities. This is a major driver of productivity. The countries, like Canada, that are stingy with research funding attract fewer and fewer talented people and see - as we have for many decades - see lower and lower levels of productivity.

Productivity is, mainly, a management issue - and Canada has, traditionally, nurtured timid managers - but there is one place where government can make a positive contribution: research. Not "research and development," because development is and ought to be a commercial enterprise - government cannot, because they don't know how to "pick winners." But pure research is neutral and it has many peripheral benefits even when it doesn't appear to lead anywhere in particular.

The NRC has always had an industry and agricultural focus. This focus was strengthen not created in 2013.  An excerpt from the NRC Act 1985:

(c) undertake, assist or promote scientific and industrial research, including, without restricting the generality of the foregoing,

    (i) the utilization of the natural resources of Canada,

    (ii) researches with the object of improving the technical processes and methods used in the industries of Canada, and of discovering processes and methods that may promote the expansion of existing or the development of new industries,

    (iii) researches with the view of utilizing the waste products of those industries,

    (iv) the investigation and determination of standards and methods of measurements, including length, volume, weight, mass, capacity, time, heat, light, electricity, magnetism and other forms of energy, and the investigation and determination of physical constants and the fundamental properties of matter,

    (v) the standardization and certification of the scientific and technical apparatus and instruments for the Government service and for use in the industries of Canada, and the determination of the standards of quality of the materials used in construction of public works and of the supplies used in the various branches of the Government service,

    (vi) the investigation and standardization, at the request of any of the industries of Canada, of the materials used or usable in, or the products of, the industries making the request, and

    (vii) researches, the object of which is to improve conditions in agriculture;

 

[foresterab]

An interesting gamble by a town....

http://www.cbc.ca/news/canada/edmonton/story/2013/07/17/technology-gigabit-internet-olds.html

Small Alta. town gets massive 1,000 Mbps broadband boost
Rural community of Olds builds its own fibre network and starts its own ISP
By Emily Chung, CBC News Posted: Jul 18, 2013 12:45 PM MT Last Updated: Jul 18, 2013 2:11 PM MT 
Olds is a rural community of 8,500 people about 80 kilometres north of Calgary. (Courtesy Olds Institute for Community and Regional Development) Related
Related Stories
Ultrafast internet service launched by Vancouver startup
INTERACTIVE | Broadband costs across Canada
Why do Canadian broadband rates vary so much?
External Links
O-Net
Olds Institute
Olds College
(Note:CBC does not endorse and is not responsible for the content of external links.)
Ultrafast internet speeds that most Canadian city dwellers can only dream of will soon be available to all 8,500 residents in a rural Alberta community for as little as $57 a month, thanks to a project by the town's non-profit economic development foundation.

"We'll be the first 'gig town' in Canada," said Nathan Kusiek, director of marketing for O-Net, the community-owned internet service provider that runs the fibre optic network being built by the non-profit Olds Institute for Community and Regional Development in Olds, Alta., about 90 kilometres north of Calgary.

On Thursday, the board of O-Net gave approval for residents to get access to a full gigabit (or 1,000 megabits) per second of bandwidth for the same price that they currently pay for a guaranteed download speed of 100 megabits per second — $57 to $90 a month, depending on whether they have bundled their internet with TV and phone service.

'Because we're a community owned project we get to balance out profitability versus what's best for the community.'
—Nathan Kusiek, O-Net"Essentially, we have the capacity. It will actually be a really good experiment to see what people use," Kusiek said.

O-Net had been thinking about making all the bandwidth fully available to residents for some time, he added.

"Because we're a community-owned project we get to balance out profitability versus what's best for the community."

One gigabit per second is the same speed offered by Google Fiber, as a pilot project, in Kansas City, Mo., and Kansas City, Kans., for $70 a month — a service that is envied by residents of many other U.S. cities, if the internet buzz is any indication.

With that kind of bandwidth, Google says you can stream at least five high-definition videos at the same time (allowing multiple people to watch and download different things in different rooms of a house), among other things.

Read about the new ISP offering gigabit internet in Vancouver
A gigabit of bandwidth is considerably higher than the high-speed 175 to 250 megabits per second typically offered by fibre internet packages in big cities from internet providers such as Bell, Rogers or Shaw, typically for $115 to $226 per month. And it's blazingly fast compared to the average Canadian internet download speed of just 16.6 megabits per second for an average of about $54 a month, according to a recent report from internet metrics company Ookla.

Rural internet typically slow, expensive
The Olds project is a rarity. Most rural communities across Canada have to make do with internet service — often delivered by dial-up or satellite — that is slow or expensive, or both.

Broadband costs Compare internet services across Canada Not too long ago, Olds was in that boat. Some businesses were even threatening to leave town because of the challenges posed by the sluggish internet.

"We had engineering companies here who were sending memory chips by courier because there wasn't enough bandwidth to deal with their stuff," recalls Joe Gustafson, who spearheaded the project to bring a fibre network to Olds.

Read why Canadian broadband rates vary so much
Gustafson is head of the technology committee for the Olds Institute, which was started a decade ago as a partnership among the Town of Olds, Olds College, the Olds and District Chamber of Commerce and the Olds Agricultural Society.

At that time, the town realized that it couldn't attract technology-based businesses and that bandwidth was a challenge even to ordinary businesses. It came up with a plan — it would install a fibre network throughout the town that would connect to the larger inter-community network being built by the government at that time — the Alberta Supernet.

The Olds Institute managed to secure a $2.5 million grant from the Alberta government to plan its network and build a community facility at the library, making use of the network. That facility included a video conference centre and 15 terminals for residents without their own access to computers.

The institute also managed to get a $6 million loan from the town of Olds to build the network itself.

Established providers refused to use town's network
There were some speed bumps along the way. The town had trouble finding skilled labour to install the fibre cables between people's property lines and their homes, putting the project behind schedule.

Building the network was a challenge, partly due to a shortage of skilled labour, but it is expected to reach every home and business in town within the next year. (Courtesy O-Net)But eventually installation progressed and the Olds Institute began inviting large, commercial internet providers to offer their services via the new network. All of them refused to use a network they had not installed themselves, Gustafson said.

The community was undeterred. It came up with a new plan.

"We said, 'Well I guess if we're going to do this, we have to do our own services,'" Gustafson recalled.

The Olds Institute spent $3.5 million to buy the necessary electronic equipment to run internet and other services on the network and to build a central office to house it all. Last July, it launched O-Net.

The community-owned service offers not just internet, but also phone and IPTV services — TV signals carried on the network that includes dozens of SD and HD channels, and movies on demand that can be paused and later resumed.

All told, the project will probably have cost $13 million to $14 million when it's complete, Gustafson said.

"It's a very gutsy thing on behalf of council here in Olds to approve something like that," he added.

100 per cent coverage expected in 2014
About 60 per cent of homes and businesses in Olds, located almost midway between Calgary and Red Deer to the north, already have access to the town's fibre network, which is still under construction.

"Over the next year, we'll have the whole town covered," Kusiek said.

The Olds Institute managed to secure a $2.5 million grant from the Alberta government to plan its network and to build a community facility at the library making use of the network, including a video conference centre and 15 terminals for residents without their own access to computers. (Olds Municipal Library & Community Engagement Site) (Olds Municipal Library & Community Engagement Site)At that point, while everyone should be able to subscribe to O-Net's services if they want to, they will also have the option of choosing lower-speed internet service with other telecommunications companies.

Under O-Net's new plans, residential users will share the gigabit of bandwidth among all the households on the same network access point. However, Kusiek estimates there would "never be more than four of five people on a connection that would be fighting over a gig."

Businesses in town can buy access to a dedicated, guaranteed gigabit per second of bandwidth for $5,000 a month. Gustafson said the network's launch last fall has helped stabilized local businesses.

"Now there's no talk about people leaving because of bandwidth challenges."

The engineering firm that used to send thumb drives by courier now sends "massive amounts of data just over the internet."

College transformation
The network is also transforming Olds College. The agricultural-based college, which emphasizes hands-on learning, had previously been limping along with 40 megabits of bandwidth for its 4,000 full- and part-time students.

Now that it has the bandwidth available, Olds College, an agricultural-based college, will be issuing iPads to every new student starting in September and putting a greater emphasis on mobile learning. (Olds College)Jason Dewling, the vice-president for academic and research at the college, said the number of devices connected to the campus's WiFi network had doubled in each of the past three Septembers compared to the one before, and connectivity was spotty.

"You couldn't have a whole class on WiFi at the same time."

That made it impossible to push any kind of mobile learning — something that the college was starting to get into with initiatives such as an entrepreneurship course that required students to play an online game as part of its requirements.

Now, every space on campus allows each student to connect two devices at the same time. This September, every new student will receive an iPad and all textbooks will be web-based.

Dewling said the college is projecting a 10 per cent increase in the number of first year students this September, although it's hard to say how much of that is the result of the improved internet availability or the iPad program.

Olds is also hoping its network will attract new businesses in the future.

"We certainly have companies that are looking at us," Gustafson said. But he added that the fibre network only started operating last fall. "It's taking a while for people to understand, of course, what we have here."

Kusiek said the original goal of the project, to connect the entire town with a fibre network, was to attract new businesses and residents.

"I really think that now it is enough that [for] anyone looking to resettle, this is definitely a selling feature for Olds."



This is of interest as IT usuage in traditional "rural" occupations is skyrocketting...and may be a foreshadow of the modern version of Canada's "hewers of wood and miners of the earth" resource economy.    Whether it's GPS equiped crop sprayers to D12 bulldozers doing highway grade leveling to feller bunchers using it for locations in cutblock IT and internet communications are becoming much more prevelent.
  Unfortunately not all small downs have a college nearby which would drastically affect the possibilities of this occuring nationwide but might be the start of an larger advanced professional field tied into the rural/remote/isolated communities allowing for retention of both local skilled trades + educated IT based economies.  Small scattered communities tied into larger centers may allow for better intergration nationwide.

 

[a_majoor]

While this is very cool from a technical POV, my spider senses are tingling. We have seen lots of boondoggles over the years being promoted as "investments" (usually things like downtown arenas, performing arts centers and convention centers), all built using the taxpayer's money and all promising impressive ROI's, but generally sucking back taxpayer subsidies and bailouts instead.

Generally, the correct answer to proponents of such schemes should be: "if it is such a great idea/business/investment. why hasn't it already been done?"

While high speed fiber to the desktop may seem to be a somewhat more sensible investment than a hockey arena, you should be asking why a private business hasn't done this, and if not, why not? There may be many good and sufficient reasons (here is a link to an article that demonstrates that in the US, at least, high speed broadband is a victim of regulatory failure). I would also be interested to see the projected paybacks and profit figures of this project. I will be most pleased if it has a rapid payback (and even better if it is profitable, especially if it is profitable enough to displace taxes and lower the residential taxes of the town).

 

[Dissident]

While no expert, I did do work (design) on the Alberta Supernet about ten years ago. I am ambivalent about anything which would rely on it as a backbone.

While Olds might be close enough to Calgary for it not to be that big of a factor but: I know some of the smaller town/Native reserve were so bare bones that there is NO room for scalability in the hardware/infrastructure.

 

[a_majoor]

Since governments are determined to strip away savings and wealth through inflation and redistribution, people should be realigning their personal lives to become more efficient and get more from every dollar and hour (without handing it over to governments or crony's). Here are two ideas to get started (although there are plenty more; even growing a "Victory garden" and telecommuting or car pooling would do wonders). Specifics on US retirement accounts have analogies with Canadian pensions, TFSAs and RRSPs, make sure you know the rules:

http://nextbigfuture.com/2013/07/if-you-were-being-ripped-off-overpaying.html

If you were being ripped off overpaying for iphone docks or are willing to use 3D printed Orthotics then 3D printers can save a lot of money

A Michigan University researchers feels the typical family can already save a great deal of money by making things with a 3D printer instead of buying them off the shelf.

The big savings are for things like orthotics (custom insoles for shoes), iPhone docks, IPad stands and showers heads.

The likely scenario is that the prices of certain things where we are being ripped off will drop in price.

Pearce and his team chose 20 common household items listed on Thingiverse (a catalog of free designs).

Then they used Google Shopping to determine the maximum and minimum cost of buying those 20 items online, shipping charges not included.

Next, they calculated the cost of making them with 3D printers. The conclusion: it would cost the typical consumer from $312 to $1,944 to buy those 20 things compared to $18 to make them in a weekend.

Open-source 3D printers for home use have price tags ranging from about $350 to $2,000. Making the very conservative assumption a family would only make 20 items a year, Pearce’s group calculated that the printers would pay for themselves quickly, in a few months to a few years.

and

http://nextbigfuture.com/2013/07/saving-lot-of-expenses-and-extreme.html
Multiple links inside article, follow link to see original

Saving a lot of expenses and extreme early retirement

People could look to new 3D printing to save money but there are likely many conventional ways to save money that they could choose.

There are also ways to aggressively pursue early retirement.

It may be unorthodox to retire at age 50 but not impossible. It may take unorthodox strategies to execute though. For many, it may be worth the effort since there are multiple benefits of retiring early.

1. Save substantially more. There are only two ways to save more – increase earnings and cut spending. The current savings rate in the U.S. of 3.7% won’t cut it. In order to retire early, the mantra needs to be “save as much as you can and spend the minimum” following the lead of the proponents of the early retirement extreme movement who live on 25% of their income and save 75%.

2. Drastically reduce major expenses in retirement. When looking to cut expenses, housing and taxes should be at the top of the list. Housing costs typically take up to 30 – 35% of an average household budget. Moving to an inexpensive part of the country such as Spokane, Washington, Modesto, California, or Knoxville, Tennessee, while downsizing at the same time is a huge cost save. Also, move to a state with low state taxes. Reduced housing costs and lower taxes eliminates the necessity of about $575k in retirement assets for most typical americans.

3. Barter or trade services for luxury items and lifestyle. Use your expertise and talents to volunteer or barter and trade for services in retirement.

4. Control every expense you can. Move to a town with reliable and inexpensive public transportation to go down to one car or get rid of your car altogether. College towns like Davis, California, which houses the University of California campus, have excellent bus systems that are subsidized. Taking public transportation on a regular basis and renting a car on an as needed basic can provide substantial savings. There are new car sharing services and services like Zipcar.

5. Plan for the gap. Don’t get trapped into early withdrawal fees from retirement plans. Traditional IRAs and the earnings in a Roth IRA cannot be withdrawn without a penalty until age 59 ½ and 401(k) plan assets are not available without a penalty until age 55 (if you retire from your company after that age.) Non-retirement assets are needed to bridge this gap with one exception–the principal (although not the earnings) invested in a Roth IRA can be withdrawn without penalty,as can the principal from a Roth conversion (after five years). Home equity is suited to tap into for early retirement since the timing is perfect to sell and downsize at retirement. The IRS allows a married couple who have lived in their primary residence two out of the last five years to exclude $500,000 in gains from the sale of their home from income tax (single taxpayers $250,000.)

Extreme Early Retirement has ways to save on many different areas. Pick and choose what is comfortable for you (multiple links in article)

Extreme early retirement has financial guides for lowering and controlling costs.

Early retirement extreme has wiki guides to saving money and lowering expenses.

They have a 21 day makeover plan

Guides to saving money relatively painlessly

There are several online checklists for lowering your monthly expenses. There are many simple options like getting your insurance right and not wasting energy.

Some of the advice overlaps but it is worthwhile to review several lists to make sure you do not miss something worthwhile.

* Refinance your home mortgage
* Appeal property taxes. If your house has lost value since it was last assessed
* Get rid of your private mortgage insurance.

Lower Your Utility Bills
* Use a programmable thermostat.
* Unplug electronics when they’re not in use.
* Launder everything in cold water and air dry where possible

Lower Your Transportation Costs
* adopt hypermiling techniques
* try not to go over 60 mph on highway and have more moderate acceleration
* Use the (Gasbuddy app to find the lowest cost gas prices

 

[Edward Campbell]

Two article, both reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, which I think (hope) will provoke some thinking and, maybe, some reaction:

http://www.theglobeandmail.com/commentary/employment-insurance-time-to-put-policy-ahead-of-politics/article13655224/#dashboard/follows/

Employment Insurance: Time to put policy ahead of politics

GRANT BISHOP
Special to The Globe and Mail

Published Thursday, Aug. 08 2013

The present Employment Insurance system is a glaring example of politics holding policy hostage. What is an essential component of our income security framework has long been a vehicle for politicians’ electoral self-interest.

This has been to the detriment of both economic efficiency in labour markets and the program’s core insurance aims. Governments – of both Conservative and Liberal stripes – have used the EI piggy-bank to fund regional subsidies, pet projects and general deficit reduction. And, beset by these politics, EI has resisted persistent calls for reform.

The Atlantic premiers have bristled at recently-enacted requirements for workers on EI to accept “suitable employment.” However, this is a constructive change, consistent with the insurance aims of the EI system.

Another flare-up concerns the apparent “bounty hunting” exercise on which the current government has embarked, assigning numerical targets for EI fraud to EI investigators.

The Auditor General recently expressed concerns about almost $300-million in annual EI overpayments, more than $110-million of which owed to fraud and misrepresentation. However, quotas are a wrong-headed enforcement measure and provide perverse incentives for front-line public servants.

This heavy-handed approach nonetheless highlights a nagging problem. Particularly in regions with seasonal industries, EI’s present design is prone to repeat use and diminishes the incentive to migrate in search of a better job.

There are good economic reasons for insuring workers’ income during unexpected unemployment. Employees typically have scant information about the financial health and prospects of their employers. Nor can workers predict the trajectory of their local economy. Most workers would rationally trade off a portion of their income while employed to have some income stability if unemployed.

There is also a case for differentiating the length of benefits on a regional basis and tying benefits to how difficult it is to find a new job. A region may face a temporary economic shock – for example, a swing in commodity prices or technological change that makes a town’s factory redundant.

Insuring workers against these risks makes sense: there are costs to relocate and waves of “for sale” signs only further depress the local economy. Workers will first search for new jobs locally but matching takes time, especially when many others are looking for work.

In the face of such a downturn, EI can also provide some automatic “macro-stabilization” by buoying personal income and consumption when households would otherwise cut their spending. Again this can also be socially beneficial, providing insurance both for workers and for the broader economy.

However, an EI eligibility threshold based simply on the regional unemployment rate is a recipe for over-use.

While we want to enable a temporarily depressed region to rebound, we also want workers to migrate to parts of the country where labour is in demand. Yet, even when a region’s unemployment is persistently high, the current system encourages workers to stay put.

The system also perversely encourages repeat use by seasonal workers, for whom the duration of employment may be scheduled to just meet the EI entrance requirements. This represents an effective wage subsidy to seasonal industries. Such subsidies bias businesses towards hiring low-wage seasonal workers rather than investing in productivity-enhancing equipment.

These features also make the system more costly than necessary, resulting in elevated EI premiums that distort employers’ hiring decisions.

These criticisms of the present EI system are not new. The C.D. Howe Institute , the Mowat Centre’s EI Task Force and the Canadian Chamber of Commerce have all outlined these issues extensively. And there is no shortage of public policy literature around workable solutions – for instance, risk-weighted EI premiums or reduced benefits for frequent claimants.

The problem is politics. No federal government wants to own the necessary reforms. The Chrétien Liberals introduced “intensity provisions” in 1996 to counter repeat use of the system. However, reaping backlash from the Maritimes in the 1997 election, the Liberals promised repeal of these provisions in their 2000 campaign.

Last year, the Harper Conservatives passed amendments to require acceptance of “suitable employment” by frequent EI claimants if the worker is qualified or could become qualified for the given job. This is a laudable first step, although Prime Minister Stephen Harper has continued to insist that the changes won’t impact seasonal workers.

The Atlantic Premiers were outraged and other federal parties called for repeal of these changes. Yet, while they have been quick to lambast the government, the Liberals and NDP seem to argue merely for a return to the status quo rather than advocating for other reforms.

EI reform has languished on the back-burner for too long, dragging on the national economy. Even if certain self-interested voters are wed to the previous regime, the government should be commended for its “suitable employment” requirement. Indeed, EI must be further amended to remedy inefficiencies. A federal government must put principled policy ahead of political opportunism.

Grant Bishop is a graduate from law at the University of Toronto and previously served as an economist at a major Canadian financial institution

And

http://www.theglobeandmail.com/commentary/a-nation-of-100000-firefighters/article13647608/#dashboard/follows/

A nation of $100,000 firefighters

MARGARET WENTE
The Globe and Mail

Published Thursday, Aug. 08 2013

Everyone loves firefighters. They save lives. They are strong and competent. They look good on calendars. People are always happy when they show up.

But municipalities do not love firefighters. Across Canada, towns and cities are getting hosed by the skyrocketing costs of their fire departments. Thanks to arbitration settlements, your firefighters are the best paid (and possibly the most underworked) guys in town. Firefighters have been getting raises that are twice as high what other public sector workers have been getting, at a time when municipalities are strapped for funds and raises are just a memory for most of us.

Here in Toronto, firefighters recently won a 14-per-cent wage increase over five years, which means that by next year, a first-class firefighter will be making $90,000. But it’s the small towns that are hit worst. Tiny Owen Sound, Ont. (population 32,092), has 29 full-time fire professionals. Last year, 25 of them made more than $100,000. The median full-time income of people who live in Owen Sound is less than half that.

For smaller cities, the fire department is typically the largest item in the budget. It accounts for upward of a quarter of their costs. But municipalities are powerless to control firefighters’ salaries, because negotiations with the union almost always wind up in arbitration. And arbitrators aren’t obliged to give much weight to a town’s ability to pay. Instead, they simply match the settlements that everybody else got, including police. So the costs spiral ever upward, and towns are forced to cut back on libraries and roads. As Toronto city manager Joe Pennachetti told the Toronto Sun: “We feel like we’re banging our heads against the wall.”

There’s no good reason for salaries to go up so much, argues John Saunders, a consultant with Hicks Morley who advises dozens of municipalities. Firefighting is an extremely desirable job, and vacancies are scarce because people rarely quit. Last year, for example, there were more than 500 applicants for 20 firefighting jobs in the Ontario communities of Cambridge, Kitchener and Waterloo. In Cambridge, a first-class firefighter earns up to $99,397 a year, plus benefits and overtime. Yet despite the high demand for their jobs, firefighters get “retention” payments for not quitting.

Working conditions are pretty sweet too. Thanks to modern safety standards, there are very few fires left to fight. These days, most fire department calls are medical. To prove that they’re still needed, fire departments have been adding defibrillators and Jaws of Life, and frantically expanding their repertoires to respond to even minor non-fire emergencies. Still, there’s an awful lot of what we shall euphemistically call “down time,” which firemen fill by preparing meals, sleeping, watching television, polishing the trucks and rewinding the hoses.

It’s long past time to roll back firefighting costs, as cities across the United States have been forced to do. But in Canada, costs continue to escalate as unions demand even better benefits, shorter work weeks and highly desirable 24-hour shifts. Firefighters love 24-hour shifts because it gives them plenty of time off for their other jobs. Theoretically, they’re required to work seven or eight of these shifts in a 28-day period, but workers with plenty of seniority can wind up working just five or six shifts, according to Mr. Saunders. Some critics refer to the 24-hour arrangement as “a well-paid part-time job.” (As for how it’s possible to work 24 hours in a row, the answer is “down time.”)

Not even the smallest effort to control costs goes unchallenged. In Windsor, the union grieved a decision to pull a fire truck out of service in 2008, saying that the administration had promised to leave it in service until the new contract was settled, which still hasn’t happened. The arbitrator sided with the union and told the city to cough up $381,000 in theoretically lost overtime – $1,328 for each member of the fire department. Meanwhile, in Toronto, the firefighters’ union continues its endless war against Emergency Medical Services, claiming that a decision to stop dispatching million-dollar pumpers to lower-level 911 calls puts lives at risk. A consultants’ report said that a merger of fire and EMS could save the city significant money – but the tribal warfare is so bitter that it will never happen.

I have nothing against firefighters, personally. But times have changed. We can’t go on like this. I could write the same column about the police. You guys are supposed to protect us. But we can’t afford you any more.

 

[Brad Sallows]

I would really like to see the EI social spending agenda funded out of general revenue - where all welfare programs belong - but have almost given up hope that the CPC will tackle it (and have no belief whatsoever that the LPC or NDP would).

What happens with arbitration in the public sector - firefighters' compensation being perhaps the most egregious example - just makes me laugh, because the alternative is to cry.  For example, I was told - but have been unable to verify - that Kamloops firefighters have some sort of contractual link to Vancouver firefighters (the former get whatever the latter get) - notwithstanding the obvious cost-of-living differential.

Any group providing a service for which government (whatever level) can not allow them to cool their heels on strike for at least six months, should not have the right to withhold or impede services, period.  The alternative is simply extortion.

 

[mariomike]

What happens with arbitration in the public sector - firefighters' compensation being perhaps the most egregious example - just makes me laugh, because the alternative is to cry.  For example, I was told - but have been unable to verify - that Kamloops firefighters have some sort of contractual link to Vancouver firefighters (the former get whatever the latter get) - notwithstanding the obvious cost-of-living differential.

This news story my be relevant.

“We’ve ( Kamloops ) had contract parity with Vancouver as long as I can remember.”
http://www.kamloopsthisweek.com/news/162951306.html

 

[Edward Campbell]

I would really like to see the EI social spending agenda funded out of general revenue - where all welfare programs belong - but have almost given up hope that the CPC will tackle it (and have no belief whatsoever that the LPC or NDP would).

What happens with arbitration in the public sector - firefighters' compensation being perhaps the most egregious example - just makes me laugh, because the alternative is to cry.  For example, I was told - but have been unable to verify - that Kamloops firefighters have some sort of contractual link to Vancouver firefighters (the former get whatever the latter get) - notwithstanding the obvious cost-of-living differential.

Any group providing a service for which government (whatever level) can not allow them to cool their heels on strike for at least six months, should not have the right to withhold or impede services, period.  The alternative is simply extortion.

Indeed, but see my comments in the Segregation of Messes thread ~ we, the big, national "we," agreed to have public sector unions, with all the baggage that attends them.

 

[Brad Sallows]

The notion that "we" agree is a pleasant fiction which is window dressing for a hard reality: not everything can be put to a plebiscite, for practical and moral reasons.  The fact is that a small subset of "we", delegated by the larger "we", at some point in time, in a moment of weakness or ideological stubbornness, decided to allow public sector unions - or was it a keystone election issue in the election prior to the undertaking?  The existence of one group of employees permitted to withhold labour is insufficient cause to allow all who choose to do so.  "Essential" implies "can not be done without".  "Essential" is irreconcilable with the practice of withholding or reducing duties of employment, and creates a situation ripe for extortion.

The fact that a privilege can be granted by some governing party means it can be revoked by some governing party.  Whether or not it has gone on as long as any particular person can remember is irrelevant.  Compensation is a mix of factors, including what the local economy will bear.  This is a fact recognized indirectly by the tax code and some policies regarding allowances.  Essential service employees should either be fully employed, or fully released any time they decline to fulfill their duties.  I know no compelling reason any essential employee should be any freer to decline duty than any soldier.

The fat and happy "win" and "tradesies" horsesh!t has gone on long enough.  If everyone could be paid a uniform salary, we could do so and all notion of bargaining could go out the window.  But economic, social, human reality is: we can't.  So although the total "pie" can be grown (or shrunk) by broad policy, at any point in time the growth of someone's personal "pie" comes at the expense of someone else's.