Monday 29 October 2012

Phoney Tony wants a new job

Tony Blair says the EU needs an elected President.  I wonder if he has any candidates in mind.

Storm surge

The news media in these parts are giving wall-to-wall coverage to the "Frankenstorm", Hurricane Sandy, which is headed for Southern Ontario by way of Atlantic City.  This morning the three nice folks who hector me at breakfast time from our local talk radio station, CKTB, were expressing amazement at the reaction of some of the locals.

It seems that during the weekend, the Mayor of Niagara Falls ventured to suggest that if citizens happened to see a buildup of fallen leaves blocking the storm drains, they might consider shovelling them out of the way in order to avoid flooding when the predicted rains arrive.  Cue outrage, on the lines of "I pay my taxes, why should I have to keep the storm drains clear?"

With a natural disaster looming, I don't think I'd be inclined to stand too firmly on that point of principle.  If one of these anti-social types suffers a heart attack during the storm, you wonder how they'll feel if their neighbour refuses to offer first aid, on the basis that "we pay taxes for doctors and nurses to do that kind of thing".

Further thoughts, 30 October:

*  Just to show not all Canadians are like Outraged of Niagara Falls, the Toronto local newscast yesterday evening showed a resident of the low-lying Beach neighbourhood using a snow shovel to clear leaves from storm drains all around the area -- well done that man!

* Amid all the mayhem, a small miracle courtesy of Hurricane Sandy.  The usually insufferable Piers Morgan was on CNBC in his usual mid-evening slot yesterday, anchoring the coverage of the storm, and managed to  do a good job -- none of the customary smirking and bombast. Bet it won't last!


Thursday 25 October 2012

UK economy bounces back: that's got to be bad news!

The UK economy emerged from its "double dip" recession in Q3, posting much better than expected GDP growth of 1% over the previous quarter. So everything in the garden's lovely now, right? Well, no, actually.  If you're determined to be pessimistic, there are now two things for you to worry about.  Choose your poison!

First, since much of the expansion in the latest quarter was directly attributable to the impact of the London Olympic Games, the economy is bound to come to a screeching halt now that the Games are receding into the past: bring on the triple dip! Unconvinced? Well how about this alternative scenario:  if the economy really is getting its groove back, as George Osborne would certainly like to believe, then the UK must be in for a fearsome bout of inflation because of all that QE-created money sloshing about the place.

The simple fact is that in one quarter, the UK economy has recouped all of the loss in GDP sustained during the much-hyped double dip.  That should be cause for celebration, but you'd never know it from most of the media commentary, or from the reaction of trade bodies like the British Chambers of Commerce.  A small cheer, then, for Iain Martin over at the Telegraph website, for trying to see the brighter side of the situation.  However,  I fear it's going to take a lot more good news to dispel the economic pessimism that has become so pervasive over the last few months, not just in the UK but throughout the world.  

Tuesday 23 October 2012

The flipside of Coyne

James Coyne, who was Governor of the Bank of Canada from 1955 to 1961, passed away earlier this month in Winnipeg at the venerable age of 102.  Coyne is best remembered for a territorial dispute with the government of John G. Diefenbaker and his Finance Minister, Donald Fleming, a dispute that has passed into history as the "Coyne affair".  The Chief wanted the Bank to do more to stimulate the flagging Canadian economy; the Governor refused.  Coyne then voted himself a big pension increase (!), at which point an enraged government passed a law declaring the position of Bank governor vacant (!!).

Coyne resigned the next day, but in effect won the battle for Bank autonomy, as his chosen successor, Louis Rasminsky, refused to take up the post until he was assured he would be free from government interference.  Coyne, then, can be seen as a standard-bearer for the breed of aloof and untouchable central bank head that became commonplace by the end of the last century.  Recall that it was only in 1997, with the election of the Blair government, that the Bank of England finally achieved full operational independence.

In fact, Coyne was even more of a fore-runner of the modern central banker than the bare bones story above would suggest.  Although the common recollection is that he quit over the principle of Bank independence, his disputes with the government of the day were much more wide-ranging.  Dief and Fleming were anxious to use loose fiscal policy to boost the economy.  Coyne opposed this, and did not hesitate to make his views public, thereby straying well beyond the established limits of his responsibility.

Forty years after the Coyne affair, it had become commonplace for central bank heads to pontificate about anything and everything.  None took advantage of the bully pulpit more actively than Fed Chairman Alan Greenspan.  The Maestro was vehemently opposed to what he perceived as lax fiscal policy during the Clinton years, yet did a remarkable swerve to offer full public support for major tax cuts when the Bush Jr. administration came to office.  Without Greenspan's intervention those tax cuts, which paved the way for the dire fiscal mess the US finds itself in today, might never have been enacted.

The noughties, then, were the apotheosis of the independent central banker, from Washington to Frankfurt to London.  How do you think that went?  It's not hard to make the case that, in sitting by and watching as the greatest asset bubble in history formed, the central bankers suffered one of the most remarkable collective failures, either of intellect or of will, in modern times.  So, it should be said, did the politicians, analysts and economists who mostly acted as cheerleaders even as the excesses reached absurd proportions; but it's the central bankers, who are tasked with preventing this kind of nonsense, who must take most of the blame.  

We live in world where a sports coach can get fired if his team loses two games in a row, but remarkably, no such fate has befallen the central bankers.  Ben Bernanke at the Fed? Still in post.  Mervyn King at the Bank of England?  Ditto.  Jean Claude Trichet at the ECB?  Moved smoothly into a comfortable retirement at the end of his assigned term. Having wrought the crisis, the same gang has been given the job of fixing it.

There isn't even much discussion of altering the powers of the central banks, aside from some extremist mutterings in the US, where there is always an audience for Fed-bashing.  (Hi there, Ron Paul!)  Indeed, both the Bank of England and the ECB are in the process of gaining additional powers.  A number of years ago, the former UK Chancellor, Ken Clarke, would occasionally muse out loud about how things were better when UK politicians could push the BoE around a bit.  There's very little sympathy for that view these days, even though it's hard to see how even the most feckless of politicians could have arranged things much worse that the "professionals" at the central banks did in the half-decade or so before the financial crisis.

It seems evident that the complexity and inter-dependence of financial markets has made central banking an almost impossible job.  The professionals at the banks have to run hard to keep up with the pace of innovation, while the politicians, having rid themselves of responsibility for this crucial but treacherous area of  public policy, have no desire to get back in the firing line.  It's hard to imagine that this is what James Coyne envisaged when he squared off with John Diefenbaker, but he's part of the long history that has brought us to where we are today.    

Monday 15 October 2012

From Queenston Heights to Tehran

Remember "the Canadian caper"?  When Ayatollah Khomeini was in power in Iran, a gang of students attacked the US embassy and took a large number of hostages.  A small number of US diplomats managed to evade the students and lived in fear for their lives for a few days,  until they were covertly given shelter by the Canadian embassy, led by Ambassador Ken Taylor.  At great risk to themselves, Taylor and his staff (and family) kept the Americans safe until a plan was put together to get them all out of Tehran, by providing them with fake Canadian identities.  Once the Americans were away, Taylor and his staff also fled the country before the balloon went up.

As an aside, it was a miracle that the Iranians did not rumble what was going on, as it was an open secret in Ottawa.  I vividly recall a mid-level official at the Department of Finance, with whom I used to deal, dropping heavy hints about "what a great job Ken Taylor is doing on behalf of the Americans in Tehran".  How many others must have known?

In any case, Hollywood has now got around to making a movie about the whole affair:  Argo, directed by and starring Ben Affleck.  And guess what?  The role played by the Canadians, without whom none of this would have been possible,  has been virtually airbrushed out of the frame.  It's now a rip-roaring thriller in which the CIA, turned into good guys for once, drive the whole rescue themselves.  By all accounts it's a great show and an early runner for the Oscars, but it's raised more than a few hackles north of the border.  Ken Taylor, now in his late 70s and living in New York,  was given a special screening and voiced a few concerns, to which Ben Affleck responded by amending a brief narrative screen at the end of the movie -- when everyone is standing up and putting their coats on -- to give Canada just a smidge more credit.  Merci, Ben!

Does any of this matter?  I mean, we're all wearily accustomed to the American mass media rewriting history in order to put more bums in seats.  But let's consider an earlier example that has a particular resonance right now: the War of 1812, which began with a last, ill-fated attempt by the newly-formed United States to grab Canada from those pesky loyalists.  Know much about that?  If you're American, chances are the only thing you might be able to summon up is a folky little number called "The Battle of New Orleans".

You know the one -- "In eighteen-fourteen we took a little trip".  Yes, the war dragged on for two years, even though the main issue was settled much earlier; the reason the entirely inconsequential skirmish in New Orleans made it into song was that it took that long for the American side to scare up a victory.   Prior to that, an alliance of British, Canadian and native forces had inflicted a series of defeats on the invaders all around the Niagara region.  Further, the British had captured Detroit and even sallied up the Potomac to set fire to Washington, just to show they could.

If all of this has been largely written out of history Stateside, be sure nothing could be further from the truth in Canada.  My new hometown of Niagara on the Lake bristles with Bicentennial flags (you buy them at the municipal offices -- very Canadian!) and just this past weekend there was a re-enactment of the pivotal "Battle of Queenston Heights".  The CBC pitched in with a factual but irreverent documentary "War of 1812: been there, won that", which is unlikely to show up any time soon on PBS.

These days, Queenston is best known as the Canadian side of one of the three bridges that carry traffic between the US and Canada in the Niagara region.  Appropriately, the tone of the Canadian remembrance of these events is very much one of celebrating the subsequent 200 years of amity between the two countries. But there's a lesson for Ben Affleck here: you can try to rewrite history to make your team look like the good guys, but the good guys have very long memories.

Thursday 11 October 2012

History mystery

When I moved to Canada for the first time, back in the mid 1970s, my wife was anxious for me to visit one of Toronto's most "historic" buildings, Casa Loma.  It's a rich man's baroque folly, and as the name suggests, it is indeed a house on a hill.  I wasn't unduly impressed: the house was only completed around 1920.  As I pointed out to my wife, my parents' house in London was a full quarter of a century older, and nobody had ever been moved to call it historic.

Within days of our return to Canada, there was a fresh reminder of how shallow the pool of history can seem on this side of the Atlantic.  The Federal and Nova Scotia governments have stumped up a good chunk of change to refurbish and refloat the "historic" schooner Bluenose II, and the relaunch in Lunenberg attracted large crowds and coast to coast media coverage.  Bluenose II was first constructed in 1963!  She's a handsome vessel, but she's not exactly historic in the same sense as HMS Victory or the Vasa, is it?  Even the original Bluenose, of which the current ship is a replica, was only built in the early 1920s.  

Still, there are some bits of genuine history that can stir passions in these parts.  Aside from the Bluenose, the other big media story that greeted us on our arrival was a plan for Canada to share diplomatic facilities in a small number of locations with the UK.  This sort of thing goes on all the time without any fanfare, but some bright spark decided to make an announcement about it, mainly to give a bit of substance to a visit to Ottawa by the UK Foreign Secretary, William "the Mekon" Hague.

Bad idea! From the public reaction, you'd have though that Canada was planning a tryst with Satan. The public outcry was muddled, to put it mildly -- one letter writer referred to the Brits as the "tea and crumpets crowd", while others denounced their bellicosity -- but it was sufficiently heartfelt that the big announcement was hastily buried, though no doubt the actual sharing of fax machines and doormen in obscure foreign capitals will go ahead anyway.  The facts -- that Canada has been effectively independent since 1867, that the two countries have fought numerous wars together, are members of the Commonwealth and the G8, and enjoy innumerable family ties -- counted as nothing against the perceived slight to Canada's sovereignty and its delicate sense of self esteem.

There is, of course, one thing that can offend Canadians even more readily than a run-in with the old colonial power, and that's being dissed by the United States.  And there's a fresh instance of that going on right now -- which will be the subject of the next posting.    

I'm baaaack!

Back in Canada, back online and back to the blog.  Remember the old days, when you could get a phone line installed in 24 hours?  We've moved on from there -- it now takes two weeks, because the process is so much more complicated, what with the broadband connection, cable TV and all the other stuff to be attended to.

Anyway, all this delay gave me plenty of time to think about what to write about once connectivity with the universe was restored, so the first real posting will follow very shortly.  Thanks for your patience, and thanks for stopping by.