Call it: the law of unintended consequences. A few weeks ago, when Toronto's city council was trying to quarantine scandal-plagued Mayor Rob Ford, it took away most of his powers, including the power to direct the city's response in the event of an emergency. But it neglected to remove his power actually to declare an emergency. Big mistake!
Last week, the city and its surrounding area, known as the GTA (Greater Toronto Area), took the brunt of a huge ice storm. About one third of the homes in the city itself lost power, transit and roads were thrown into chaos, and so on. Seven days later, a few poor souls are still freezing in the dark, but the response of the emergency services to the crisis has been commendable, with hundreds of linemen giving up their Christmases, power workers coming in from as far way as Manitoba, and so on.
But Mayor Ford has refused all entreaties to declare the situation to be an emergency. And why? Because as soon as he did so, he'd have been sidelined, since all the emergency powers now belong to his funereally-visaged deputy, Norm Kelly. Instead, Ford has been hogging all the TV time, very obviously trying to emulate Calgary Mayor Naheed Nenshi, who became a national cult figure earlier in the year when his city was flooded.
Then again, does it really matter if an emergency is formally declared? It doesn't make any difference what you call it, as long as you do something about it, and everything possible has been done over the past week to get the lights back on. There's certainly no reason to think that Ford himself has any discernible skills as an electrician -- something for which, given his weight, the city's utility poles must be profoundly grateful.
Interestingly, Ford is not the only local politician to be blasted by the media as the crisis has dragged on. The afore-mentioned Norm Kelly scandalized the press by disappearing off to Florida at the height of the blackout. His critics were barely mollified when it emerged that he was only away for 24 hours, and had travelled only for the purpose of visiting his seriously ill sister.
And just down the lake in Oshawa, Mayor John Henry had the temerity to fly off on vacation to Jamaica, just hours before the ice storm hit and took out the power in parts of his city. He has rejected any suggestion that he should come home early. Like Messrs Ford and Kelly, Mayor Henry could have made no practical contribution to solving the crisis, but there's every possibility that the self-righteous electors of Oshawa will punish him when the municipal elections roll around next October. Still, at least that means he'll be able to take his vacation next winter in peace.
Saturday 28 December 2013
Tuesday 24 December 2013
Durables and junk
Data for US durable good orders in November were released this morning, and very strong they were, too, adding to the gathering impression that the US economy is set for strong growth in 2014. Durables orders rose by 3.5% in the month, the strongest gain since January.
The report prompted a business reporter on one of the Canadian TV networks to claim that the data meant that US consumer goods spending would be strong in the early part of next year. No, it doesn't! This interpretation is wrong in at least two important ways.
First, the durables report is clearly about investment, not consumption. The fact that companies are stepping up orders for durables may suggest that they're confident that somebody will buy the stuff once it's made. But they could be wrong: if consumers don't step up to the plate, there'll be a whole lot of inventory sitting around, which would in due course act as a serious drag on growth. (This relates to a very venerable economics concept referred to as the "accelerator", if you care.) Moreover, as the name should suggest, durables goods take a lot of time to produce, so goods being ordered today won't be produced for many months -- even years in some cases, such as aircraft.
And that's the second flaw in the reporter's analysis. If he'd bothered to look at the details of the report, he might have noticed that the strongest gains were posted by orders for non-defense aircraft (up 21%; Boeing had a banner month) and defense aircraft (up 10%). Unless you imagine that the super-rich are going on a plane-buying splurge, these items are never going to register in the consumption data.
I once told a colleague that one of the main functions of an economist in a dealing room was to make sure that the traders weren't bamboozled by all of the junk analysis that appeared within minutes of every important data release. Seems that's just as true today as it's ever been.
* * * * *
Merry Christmas and best wishes for the New Year to all readers of the blog!!
The report prompted a business reporter on one of the Canadian TV networks to claim that the data meant that US consumer goods spending would be strong in the early part of next year. No, it doesn't! This interpretation is wrong in at least two important ways.
First, the durables report is clearly about investment, not consumption. The fact that companies are stepping up orders for durables may suggest that they're confident that somebody will buy the stuff once it's made. But they could be wrong: if consumers don't step up to the plate, there'll be a whole lot of inventory sitting around, which would in due course act as a serious drag on growth. (This relates to a very venerable economics concept referred to as the "accelerator", if you care.) Moreover, as the name should suggest, durables goods take a lot of time to produce, so goods being ordered today won't be produced for many months -- even years in some cases, such as aircraft.
And that's the second flaw in the reporter's analysis. If he'd bothered to look at the details of the report, he might have noticed that the strongest gains were posted by orders for non-defense aircraft (up 21%; Boeing had a banner month) and defense aircraft (up 10%). Unless you imagine that the super-rich are going on a plane-buying splurge, these items are never going to register in the consumption data.
I once told a colleague that one of the main functions of an economist in a dealing room was to make sure that the traders weren't bamboozled by all of the junk analysis that appeared within minutes of every important data release. Seems that's just as true today as it's ever been.
* * * * *
Merry Christmas and best wishes for the New Year to all readers of the blog!!
Friday 20 December 2013
So far, so good
The Federal Reserve must be greatly relieved that equity markets have reacted positively to this week's decision to start to "taper" its quantitative easing (QE) program. The rise in stock prices suggests that the market's remorseless advance to record highs this year has been mostly in response to improving prospects for the US economy, rather than just a reaction to Ben Bernanke's monthly helicopter drops.
It's certainly more difficult now to deny that the US economy is moving onto a firmer footing. Today it was announced that GDP growth in Q3 had been revised upward to an annual rate of 4.1%. This is the strongest performance since 2011, and is particularly remarkable considering that the latter part of Q3 was dominated by mounting fears of a US debt default and government shutdown. Although growth for the full year will be far below 2012's pace, the economy has a solid base for growth in 2014, which suggests that the FOMC, which must have been aware of the imminent upward revision to the GDP data, was right to start the taper.
All good then? Well, maybe, but one key sentence in Chairman Bernanke's post-FOMC statement may produce a little queasiness in anyone who remembers the first decade of the new millennium: "The Committee also clarified its guidance on interest rates, emphasizing that the current near-zero range for the federal funds rate target likely will remain appropriate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal."
If there's one lesson that should have been learned from the performance of the Greenspan Fed, it's that cheap money leads to reckless investment decisions, and eventually to a financial crisis. There's nothing anywhere in the post-FOMC statement to suggest that the Fed even acknowledges that risk. We really don't need to go down that road again, do we?
It's certainly more difficult now to deny that the US economy is moving onto a firmer footing. Today it was announced that GDP growth in Q3 had been revised upward to an annual rate of 4.1%. This is the strongest performance since 2011, and is particularly remarkable considering that the latter part of Q3 was dominated by mounting fears of a US debt default and government shutdown. Although growth for the full year will be far below 2012's pace, the economy has a solid base for growth in 2014, which suggests that the FOMC, which must have been aware of the imminent upward revision to the GDP data, was right to start the taper.
All good then? Well, maybe, but one key sentence in Chairman Bernanke's post-FOMC statement may produce a little queasiness in anyone who remembers the first decade of the new millennium: "The Committee also clarified its guidance on interest rates, emphasizing that the current near-zero range for the federal funds rate target likely will remain appropriate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal."
Tuesday 17 December 2013
Pension puzzles
A meeting between Canadian federal and provincial finance ministers has failed to agree on a deal to improve Canada's meager public pensions. Most of the provinces, led by Ontario, argue that improvements to the Canada Pension Plan (CPP) are essential in order to avoid rising poverty levels as baby boomers enter retirement. The federal government argues, as it has for the past half decade, that the economy cannot currently sustain the higher employee and employer contributions that would be required. Who's right?
Let's start with the federal claim that higher pension contributions would be a "job killer". Can businesses afford to pay more. or would they have to cut back on investment in order to do so? For larger companies the answer is very clear. As Mark Carney famously said when he was at the Bank of Canada, Canadian corporations are sitting on hoards of cash -- "dead money" -- and refusing to undertake new investments anyway. Raising pension contributions and allowing the CPP administrators to invest the extra cash would arguably liberate some of that cash. Small businesses may have a harder time of it, but the scale of any contribution increase would likely be too small to have any major impact on job creation.
What about consumers? Economic theories of consumption behaviour don't generally posit that current consumption spending is driven entirely by current income. Other factors -- time of life, the nature of income at any particular time, and so on -- also play a role. It's true that higher pension contributions reduce current income. However, most economists would argue that in the absence of adequate pension provision, rational individuals will curb their current consumption and increase their savings in an effort to provide for their needs in later life.
That word "rational" is doing a lot of work there. Much mainstream economic theory is based on the assumption that individuals act rationally, in their own best interests. It can often seem like a heroic assumption, and the facts as they relate to Canadians' efforts to provide for their own retirement place it under extreme stress, to put it mildly. Consider:
* The individual savings rate has fallen from about 20% of income a couple of decades to about a quarter of that now.
* Only about a third of workers contribute to tax-efficient personal retirement plans, known in Canada as RSPs, even though such plans have been around for better than three decades, and even as the inadequacy of both public and company pensions has become more and more apparent.
* Those who do contribute to RSPs don't contribute anything close to the allowable maximum. The aggregate RSP "pot" is less than 10% of the size it would theoretically be if everyone had "maxed out" each year.
* The average individual RSP portfolio is only about $37000, or only about two-thirds of the average annual wage. That's not a pension "pot" -- more of a thimble.
So how are new retirees coping? Tales of outright poverty are mercifully few, but there's plenty of evidence that a large number of boomers are continuing to work past normal retirement age in order to make ends meet. That's certainly the case in our own geezer-heavy neighbourhood. So is the time-honoured practice of cashing out on the family home in the city and moving to something cheaper and more bijou out in the sticks. Whether that can continue to work as the flood of retiring boomers starts to outnumber the cohort of young workers looking to buy city homes remains to be seen.*
Given that many boomers have ignored decades of advice to save more, you can easily argue that it's nobody's fault but their own if they find themselves strapped for cash in retirement. But boomers vote, so politicians have to pay attention. Ontario has reacted to the failure of this week's ministerial conference by pledging to start its own pension plan to supplement the CPP. The Liberal government will no doubt make this a central plank of its campaign for the election that's expected in the spring, and woe betide the opposition party that dares to say nay.
We can only hope that the Liberals resist the temptation to buy boomer votes with millenials' money. Piling higher pension contributions on the young in order to pay for their own far-off retirement is one thing, but penalizing them in order to cosset their feckless elders is something else altogether.**
*Especially as a lot of younger workers seem to want to live in downtown condos rather than the big suburban family homes that the boomers will be selling.
** In case this is your first time reading this blog, and in case you think I'm "talking my own book" here, be advised that I will be 64 years old on my next birthday, which is a month from now.
Let's start with the federal claim that higher pension contributions would be a "job killer". Can businesses afford to pay more. or would they have to cut back on investment in order to do so? For larger companies the answer is very clear. As Mark Carney famously said when he was at the Bank of Canada, Canadian corporations are sitting on hoards of cash -- "dead money" -- and refusing to undertake new investments anyway. Raising pension contributions and allowing the CPP administrators to invest the extra cash would arguably liberate some of that cash. Small businesses may have a harder time of it, but the scale of any contribution increase would likely be too small to have any major impact on job creation.
What about consumers? Economic theories of consumption behaviour don't generally posit that current consumption spending is driven entirely by current income. Other factors -- time of life, the nature of income at any particular time, and so on -- also play a role. It's true that higher pension contributions reduce current income. However, most economists would argue that in the absence of adequate pension provision, rational individuals will curb their current consumption and increase their savings in an effort to provide for their needs in later life.
That word "rational" is doing a lot of work there. Much mainstream economic theory is based on the assumption that individuals act rationally, in their own best interests. It can often seem like a heroic assumption, and the facts as they relate to Canadians' efforts to provide for their own retirement place it under extreme stress, to put it mildly. Consider:
* The individual savings rate has fallen from about 20% of income a couple of decades to about a quarter of that now.
* Only about a third of workers contribute to tax-efficient personal retirement plans, known in Canada as RSPs, even though such plans have been around for better than three decades, and even as the inadequacy of both public and company pensions has become more and more apparent.
* Those who do contribute to RSPs don't contribute anything close to the allowable maximum. The aggregate RSP "pot" is less than 10% of the size it would theoretically be if everyone had "maxed out" each year.
* The average individual RSP portfolio is only about $37000, or only about two-thirds of the average annual wage. That's not a pension "pot" -- more of a thimble.
So how are new retirees coping? Tales of outright poverty are mercifully few, but there's plenty of evidence that a large number of boomers are continuing to work past normal retirement age in order to make ends meet. That's certainly the case in our own geezer-heavy neighbourhood. So is the time-honoured practice of cashing out on the family home in the city and moving to something cheaper and more bijou out in the sticks. Whether that can continue to work as the flood of retiring boomers starts to outnumber the cohort of young workers looking to buy city homes remains to be seen.*
Given that many boomers have ignored decades of advice to save more, you can easily argue that it's nobody's fault but their own if they find themselves strapped for cash in retirement. But boomers vote, so politicians have to pay attention. Ontario has reacted to the failure of this week's ministerial conference by pledging to start its own pension plan to supplement the CPP. The Liberal government will no doubt make this a central plank of its campaign for the election that's expected in the spring, and woe betide the opposition party that dares to say nay.
We can only hope that the Liberals resist the temptation to buy boomer votes with millenials' money. Piling higher pension contributions on the young in order to pay for their own far-off retirement is one thing, but penalizing them in order to cosset their feckless elders is something else altogether.**
*Especially as a lot of younger workers seem to want to live in downtown condos rather than the big suburban family homes that the boomers will be selling.
** In case this is your first time reading this blog, and in case you think I'm "talking my own book" here, be advised that I will be 64 years old on my next birthday, which is a month from now.
Thursday 12 December 2013
There he goes again
I'm not sure whether it's me that's starting to sound like a broken record, or whether it's Bank of Canada Governor Stephen Poloz. Once again the Governor has presented a startlingly downbeat view on the Canadian economy, full of fears about deflation, and once again I find myself wondering why he seems so badly out of synch with the rest of the global fraternity of central bankers.
In the US, markets are again trembling at the thought that the Fed might decide to "taper" its quantitative easing program as soon as next week, when the FOMC is set to meet. Recent economic data have been generally upbeat, and the labour market is looking a bit more robust. A move this month would allow Ben Bernanke to take any flak that may fly when the deed is done, while waiting until early in 2014 might allow incoming Fed Chairman Yellen to allay fears that she is too dovish by half. One way or another, the start of the taper is not far away.
Over in London, Bank of England Governor Mark Carney was compelled just last month to amend his much-vaunted "forward guidance" to markets, amid clear signs that the UK recovery is strengthening and deepening. It looks likely that the unemployment rate will fall to 7%, which Carney had earlier identified as a key level for the Bank, some time in 2014, with a tightening move presumably not far behind. This week Gov. Carney has also felt moved to reassure markets that the Bank would act to prevent the housing market from reaching "warp speed". Perhaps Mrs Carney, who famously complained about the cost of housing when the family moved to London at mid-year, has had a word in his ear.
An interesting sideline here, by the way, is that one of the B of E's MPC members, Martin Weale, has expressed doubts about both the forward guidance policy and the significance of a 7% unemployment rate. The uber-confident Carney is not known for tolerating dissent, so Weale can no doubt expect a visit to the woodshed, or worse, in the very near future.
So why are things different in Canada, at least in Gov. Poloz's opinion? His fears of deflation relate mainly to the potential impact of price discounting by retailers, in the face of an invasion by US big box stores (WalMart, Target). There's no doubt this is having an effect: two weeks before Christmas, just about every item in the main department store close by us was discounted by at least 40%. However, the weakening Canadian dollar should mean that this is a short-lived phenomenon.
As for the real economy, the Governor does not see a return to full capacity for another two years, thanks in part to an unexpectedly slow recovery in business investment. Evidently Mark Carney's complaints, when he was at the Bank of Canada, about corporations hoarding "dead money" must have fallen on dead ears -- and it's hard to see how Poloz's incessant doom and gloom musings will loosen up the purse strings.
Most commentators would say that the main risk the Bank faces in pledging to keep rates low is that the housing market could overheat, as everyone from the IMF to Nouriel Roubini has warned. However, it seems that the Bank remains of the view that the excesses in the housing market, and the concomitant rise in household debt, will gradually resolve themselves without any crisis. We shall see.
It's interesting to wonder what the Federal government is making of the new Governor. Until a few months ago, it was a proud boast often heard both from the politicians and former Governor Carney that Canada had weathered the financial crisis and its aftermath much better than any other developed country. It's always seemed likely that the Harper Tories would fight the next election on their economic and fiscal record. If events really do pan out the way Gov Poloz appears to expect, that might not be such a great strategy.
In the US, markets are again trembling at the thought that the Fed might decide to "taper" its quantitative easing program as soon as next week, when the FOMC is set to meet. Recent economic data have been generally upbeat, and the labour market is looking a bit more robust. A move this month would allow Ben Bernanke to take any flak that may fly when the deed is done, while waiting until early in 2014 might allow incoming Fed Chairman Yellen to allay fears that she is too dovish by half. One way or another, the start of the taper is not far away.
Over in London, Bank of England Governor Mark Carney was compelled just last month to amend his much-vaunted "forward guidance" to markets, amid clear signs that the UK recovery is strengthening and deepening. It looks likely that the unemployment rate will fall to 7%, which Carney had earlier identified as a key level for the Bank, some time in 2014, with a tightening move presumably not far behind. This week Gov. Carney has also felt moved to reassure markets that the Bank would act to prevent the housing market from reaching "warp speed". Perhaps Mrs Carney, who famously complained about the cost of housing when the family moved to London at mid-year, has had a word in his ear.
An interesting sideline here, by the way, is that one of the B of E's MPC members, Martin Weale, has expressed doubts about both the forward guidance policy and the significance of a 7% unemployment rate. The uber-confident Carney is not known for tolerating dissent, so Weale can no doubt expect a visit to the woodshed, or worse, in the very near future.
So why are things different in Canada, at least in Gov. Poloz's opinion? His fears of deflation relate mainly to the potential impact of price discounting by retailers, in the face of an invasion by US big box stores (WalMart, Target). There's no doubt this is having an effect: two weeks before Christmas, just about every item in the main department store close by us was discounted by at least 40%. However, the weakening Canadian dollar should mean that this is a short-lived phenomenon.
As for the real economy, the Governor does not see a return to full capacity for another two years, thanks in part to an unexpectedly slow recovery in business investment. Evidently Mark Carney's complaints, when he was at the Bank of Canada, about corporations hoarding "dead money" must have fallen on dead ears -- and it's hard to see how Poloz's incessant doom and gloom musings will loosen up the purse strings.
Most commentators would say that the main risk the Bank faces in pledging to keep rates low is that the housing market could overheat, as everyone from the IMF to Nouriel Roubini has warned. However, it seems that the Bank remains of the view that the excesses in the housing market, and the concomitant rise in household debt, will gradually resolve themselves without any crisis. We shall see.
It's interesting to wonder what the Federal government is making of the new Governor. Until a few months ago, it was a proud boast often heard both from the politicians and former Governor Carney that Canada had weathered the financial crisis and its aftermath much better than any other developed country. It's always seemed likely that the Harper Tories would fight the next election on their economic and fiscal record. If events really do pan out the way Gov Poloz appears to expect, that might not be such a great strategy.
Sunday 8 December 2013
Use your disillusion
The Toronto Star* is currently running a tremendous series of articles on the breakdown of social cohesion in Canada. The research has been led by Michael Valpy, who is now an academic but was at one time, if memory serves, an occasional commentator on religious issues. I hope he wouldn't be offended by my saying that there's a deep religious sensibility running just below the surface of these articles.
The pieces published so far have already looked at a wide range of cohesion issues: the problems faced by aboriginal peoples, the difficulties immigrants encounter in trying to make their way in a new land, the age-old issue of "what does Quebec want?", and so on. However, as an economist and baby boomer I'm most interested in the growing wealth gap between older Canadians and the young. Indeed, it's an issue I've posted about many times on this blog, most recently just a couple of posts ago ("Pay it backward").
In an article titled "The young will inherit a future they didn't choose", Valpy and his team identify a cohort they dub "Spectators". They're mostly male, mostly under the age of 35, and they've made the decision effectively to turn their backs on participation in mainstream Canadian society, because they've concluded the game has been rigged against them. As one "Spectator" puts it, "(people) are caught in a yoke by the richies ... The gap between the rich and the poor is getting bigger and the rich are putting in mechanisms to stop anybody else from getting rich.”
Ouch. I'm a retired boomer with a son who falls into the "Spectator" age bracket. I'd never allow anyone to claim that I got my education and made my money easily, but I'm appalled at how much harder it now is for people my son's age to get themselves established in the workforce, even with the benefit of a university degree. To quote from the study again, “In a decade or two.....the younger voters will be in the prime of their lives and paying for the political choices of their now departed grandparents which are not likely to reflect the priorities or, one could speculate, the needs of next Canada.”
Indeed so. There are few signs that my generation, which votes en masse, is prepared to stop awarding itself all sorts of prizes and baubles and passing the bill on to its descendants. (Unlike our own parents, we don't even have the tattered excuse that "we were in the war". We just feel entitled.) Sadly, there are even fewer signs that the "Spectators" can be persuaded that the only way to prevent this from happening is to start turning out on election day themselves. They know they've got a problem, but they have no real idea of what they can do about it.
The Star hasn't announced whether the full Atkinson series will be published as one of its e-books or in a conventional paper format, or will remain as a series of pieces in the daily paper. It's sufficiently sobering and important to merit a much wider audience -- both within Canada and elsewhere, because these problems are common to every advanced nation today.
* Like a lot of other newspapers, the Star now has a paywall, but non-subscribers can read up to ten articles a month free of charge, which will be enough to give you the flavour of this series.
The pieces published so far have already looked at a wide range of cohesion issues: the problems faced by aboriginal peoples, the difficulties immigrants encounter in trying to make their way in a new land, the age-old issue of "what does Quebec want?", and so on. However, as an economist and baby boomer I'm most interested in the growing wealth gap between older Canadians and the young. Indeed, it's an issue I've posted about many times on this blog, most recently just a couple of posts ago ("Pay it backward").
In an article titled "The young will inherit a future they didn't choose", Valpy and his team identify a cohort they dub "Spectators". They're mostly male, mostly under the age of 35, and they've made the decision effectively to turn their backs on participation in mainstream Canadian society, because they've concluded the game has been rigged against them. As one "Spectator" puts it, "(people) are caught in a yoke by the richies ... The gap between the rich and the poor is getting bigger and the rich are putting in mechanisms to stop anybody else from getting rich.”
Ouch. I'm a retired boomer with a son who falls into the "Spectator" age bracket. I'd never allow anyone to claim that I got my education and made my money easily, but I'm appalled at how much harder it now is for people my son's age to get themselves established in the workforce, even with the benefit of a university degree. To quote from the study again, “In a decade or two.....the younger voters will be in the prime of their lives and paying for the political choices of their now departed grandparents which are not likely to reflect the priorities or, one could speculate, the needs of next Canada.”
Indeed so. There are few signs that my generation, which votes en masse, is prepared to stop awarding itself all sorts of prizes and baubles and passing the bill on to its descendants. (Unlike our own parents, we don't even have the tattered excuse that "we were in the war". We just feel entitled.) Sadly, there are even fewer signs that the "Spectators" can be persuaded that the only way to prevent this from happening is to start turning out on election day themselves. They know they've got a problem, but they have no real idea of what they can do about it.
The Star hasn't announced whether the full Atkinson series will be published as one of its e-books or in a conventional paper format, or will remain as a series of pieces in the daily paper. It's sufficiently sobering and important to merit a much wider audience -- both within Canada and elsewhere, because these problems are common to every advanced nation today.
* Like a lot of other newspapers, the Star now has a paywall, but non-subscribers can read up to ten articles a month free of charge, which will be enough to give you the flavour of this series.
Wednesday 4 December 2013
Walking the tightrope
Bank of Canada Governor Stephen Poloz, in the job for just under six months, has firmly established his credentials as the world's most dovish central banker. As expected, the Bank has again maintained its reference rate at 1 percent (or "a rock bottom 1 percent", as the media would have it). However, the tone of its commentary is becoming ever more bleak, and this is starting to trigger some speculation that the Bank might be considering aping the recent unexpected rate cut by the ECB.
What's worrying the Bank is not the absence of growth. Real GDP growth accelerated to a two-year high of 2.7% (annualized rate) in Q3, and growth forecasts for 2014 are being marked sharply higher, mainly on expectations that continuing expansion in the US will pull the Canadian economy along. However, the Bank is very worried about the continuing -- and largely unpredicted -- fall in the inflation rate, which slipped to only 0.7% in October, far below the official 2% target. Did I say Target?? The Bank appears to believe that the arrival of US discount chains, including Target, in the Canadian marketplace is leading to heightened price competition and keeping the measured inflation rate subdued. Most Canadians would say that's a good thing (and ironically, Target is reportedly falling way short of its sales projections), but for the Bank it's apparently a real cause for concern.
What happens next? As the linked article notes, some Bay Street experts think that the Bank is trying to achieve monetary easing without actually cutting rates, by talking the dollar down. If that's the plan, it seems to be working. The currency's months-long slide from above parity with the US dollar is gathering pace; it's now near the 93-cent level, and plenty of experts see it falling below 90-cents in early 2014. A weaker dollar helps the Bank out in many ways. It gives a boost to the beleaguered manufacturing sector, which has been hollowed out by the currency's strength in recent years. It adds directly to the cost of imported goods, and by making cross-border shopping less attractive, it gives local retailers more room to boost prices. As these effects play out, the weakness in inflation is likely to reverse quite sharply in the months ahead.
The interesting question, of course, is this: if the Bank is really so concerned about the risks of deflation, why doesn't it just bite the bullet and cut rates? The answer to this lies in the state of the housing market and the growth of consumer indebtedness. The Bank persists in denying that there are any signs of a bubble in the housing market, but all the evidence suggests that the cheap-money-fueled boom in the condo market is leading to serious oversupply in the country's biggest cities. At the same time, consumer debt is stubbornly high, with the debt/disposable income ratio close to the levels that led to disaster in the US half a decade ago.
A weak dollar may be just what Gov. Poloz needs in the short term. At some point, however, the Bank will have no choice but to start thinking about raising rates. When that happens, a lot of consumers (and a lot of condo owners who have bought properties as an investment) will start to feel pain very quickly.
What's worrying the Bank is not the absence of growth. Real GDP growth accelerated to a two-year high of 2.7% (annualized rate) in Q3, and growth forecasts for 2014 are being marked sharply higher, mainly on expectations that continuing expansion in the US will pull the Canadian economy along. However, the Bank is very worried about the continuing -- and largely unpredicted -- fall in the inflation rate, which slipped to only 0.7% in October, far below the official 2% target. Did I say Target?? The Bank appears to believe that the arrival of US discount chains, including Target, in the Canadian marketplace is leading to heightened price competition and keeping the measured inflation rate subdued. Most Canadians would say that's a good thing (and ironically, Target is reportedly falling way short of its sales projections), but for the Bank it's apparently a real cause for concern.
What happens next? As the linked article notes, some Bay Street experts think that the Bank is trying to achieve monetary easing without actually cutting rates, by talking the dollar down. If that's the plan, it seems to be working. The currency's months-long slide from above parity with the US dollar is gathering pace; it's now near the 93-cent level, and plenty of experts see it falling below 90-cents in early 2014. A weaker dollar helps the Bank out in many ways. It gives a boost to the beleaguered manufacturing sector, which has been hollowed out by the currency's strength in recent years. It adds directly to the cost of imported goods, and by making cross-border shopping less attractive, it gives local retailers more room to boost prices. As these effects play out, the weakness in inflation is likely to reverse quite sharply in the months ahead.
The interesting question, of course, is this: if the Bank is really so concerned about the risks of deflation, why doesn't it just bite the bullet and cut rates? The answer to this lies in the state of the housing market and the growth of consumer indebtedness. The Bank persists in denying that there are any signs of a bubble in the housing market, but all the evidence suggests that the cheap-money-fueled boom in the condo market is leading to serious oversupply in the country's biggest cities. At the same time, consumer debt is stubbornly high, with the debt/disposable income ratio close to the levels that led to disaster in the US half a decade ago.
A weak dollar may be just what Gov. Poloz needs in the short term. At some point, however, the Bank will have no choice but to start thinking about raising rates. When that happens, a lot of consumers (and a lot of condo owners who have bought properties as an investment) will start to feel pain very quickly.
Friday 29 November 2013
Pay it backward
A recent OECD report reveals that Canadian seniors receive a much lower proportion of their income from public pension schemes than do seniors in most other advanced economies. Although the OECD acknowledges that the rate of senior poverty in Canada is much lower than the OECD average, the report is putting more pressure on the federal government to improve the Canada Pension Plan (CPP).
The Federal Finance Minister, Jim Flaherty, has steadfastly resisted calls for the government to increase employee and employer contributions to the plan in order to boost CPP payouts. He has argued that the weak economic recovery makes any such addition to employment costs, and drain on after tax incomes, a risky proposition. In response, some of the Provinces, notably Ontario, are musing about setting up their own pension plans, if the Feds won't play ball. (Quebec already has its own, very well run pension scheme, completely separate from the CPP).
It's hard to see how this ends well, because the whole effort is coming too late. The people clamouring for the increase in public pensions are the baby boom cohort, now reaching retirement age and realizing that, despite decades of urging from governments and financial planners alike, they haven't set aside nearly enough to sustain their lavish, debt-fueled lifestyles. If Ontario proceeds with a pension plan of its own, it's dollars to donuts that it will start paying out immediately to all those seniors who have never contributed a penny toward the scheme. Premiums will be collected from employers and from current employees, adding to the financial burdens they already face as a result of their parents' profligacy.
There's been a lot of coverage in the media in recent months about rising economic inequality since the financial crisis. The problem is worst in the United States, but the same phenomenon is evident in Canada also. A big part of this rising disparity in incomes and wealth is surely age-related. One way or another, pensions are a claim on income. If you defer consumption during your working years, either by yourself or as part of a pension scheme, then you're making a claim on your own lifetime income. If you spent every paycheck and then some, then the pension you demand is a claim on someone else's income.
A large percentage of baby boomers have never exhibited any qualms about hijacking the income of future generations for their own purposes. Ontario Premier Kathleen Wynne, a youngish boomer herself, well knows that these folks turn out to vote in much larger numbers than do the young. With a finely-balanced provincial election just months away, she may well be tempted to offer up yet another unfunded inter-generational wealth transfer.
The Federal Finance Minister, Jim Flaherty, has steadfastly resisted calls for the government to increase employee and employer contributions to the plan in order to boost CPP payouts. He has argued that the weak economic recovery makes any such addition to employment costs, and drain on after tax incomes, a risky proposition. In response, some of the Provinces, notably Ontario, are musing about setting up their own pension plans, if the Feds won't play ball. (Quebec already has its own, very well run pension scheme, completely separate from the CPP).
It's hard to see how this ends well, because the whole effort is coming too late. The people clamouring for the increase in public pensions are the baby boom cohort, now reaching retirement age and realizing that, despite decades of urging from governments and financial planners alike, they haven't set aside nearly enough to sustain their lavish, debt-fueled lifestyles. If Ontario proceeds with a pension plan of its own, it's dollars to donuts that it will start paying out immediately to all those seniors who have never contributed a penny toward the scheme. Premiums will be collected from employers and from current employees, adding to the financial burdens they already face as a result of their parents' profligacy.
There's been a lot of coverage in the media in recent months about rising economic inequality since the financial crisis. The problem is worst in the United States, but the same phenomenon is evident in Canada also. A big part of this rising disparity in incomes and wealth is surely age-related. One way or another, pensions are a claim on income. If you defer consumption during your working years, either by yourself or as part of a pension scheme, then you're making a claim on your own lifetime income. If you spent every paycheck and then some, then the pension you demand is a claim on someone else's income.
A large percentage of baby boomers have never exhibited any qualms about hijacking the income of future generations for their own purposes. Ontario Premier Kathleen Wynne, a youngish boomer herself, well knows that these folks turn out to vote in much larger numbers than do the young. With a finely-balanced provincial election just months away, she may well be tempted to offer up yet another unfunded inter-generational wealth transfer.
Saturday 23 November 2013
Get ready to rumble -- at 35000 feet
On a business trip a decade or more ago, a colleague of mine decided to try out all of the ring tones on his new cellphone. On a Eurostar from Brussels to London, while passing through the Channel Tunnel. Looking around at the irate expressions on the faces of our fellow passengers, I had the distinct impression that we would be lucky to make it back to London in one piece, but fortunately my colleague soon tired of the game and stashed the phone away.
Fast forward to today, and we learn that the FAA in Washington is giving serious consideration to allowing cellphone use during passenger flights. The technical issues that led to the ban on the use of these devices were resolved (or debunked) some time ago, and a few international airlines, including Emirates, are already permitting their use.
Unions representing cabin staff are aghast, and rightly so. Phone usage in flight is likely to be very expensive, which may deter kids from calling all their pals to announce "I'm on the plane", but cost is unlikely to be an issue for the armies of bankers and hedge fund managers up at the front of the bus, just salivating for a new opportunity to bray into their iPhones.
How long before inconsiderate phone use triggers an all-out brawl in business class? I'd say before breakfast time on the first day the restrictions are lifted. Just one more reason to be glad I don't fly much any more.
Fast forward to today, and we learn that the FAA in Washington is giving serious consideration to allowing cellphone use during passenger flights. The technical issues that led to the ban on the use of these devices were resolved (or debunked) some time ago, and a few international airlines, including Emirates, are already permitting their use.
Unions representing cabin staff are aghast, and rightly so. Phone usage in flight is likely to be very expensive, which may deter kids from calling all their pals to announce "I'm on the plane", but cost is unlikely to be an issue for the armies of bankers and hedge fund managers up at the front of the bus, just salivating for a new opportunity to bray into their iPhones.
How long before inconsiderate phone use triggers an all-out brawl in business class? I'd say before breakfast time on the first day the restrictions are lifted. Just one more reason to be glad I don't fly much any more.
Thursday 21 November 2013
On spreads and rates
The "business" section of the Toronto Star is not usually a place you'd turn to for serious analysis. It's normally full of articles about how banks or utilities are gouging their clients for unjustified fees, or profiles of individuals whose poor financial management has got them into trouble. Remarkably, however, today's print issue has two weighty articles about the kind of topic that I used to get paid to analyze, back in the day. Let's scrape off some of the rust and take a look.
We begin with an article about whether the City of Toronto's borrowing costs have been affected by the Rob Ford circus. I approached this with some trepidation: remember how, at the height of the Eurozone crisis, there were almost daily scare stories about how Italy would be unable to service its debts if its bond yields reached 7 percent? The specific number seemed to be plucked out of the ether, and the authors never seemed to note the fact that, since most of the country's borrowings were for long terms at fixed rates, it would require market rates to stay at or above the 7 percent level for many years before Italy's actual debt service costs would even begin to approach that level.
It's good to be able to report that the Star's piece avoids any such errors. It correctly points out that the city's borrowing costs are fixed, and further notes that since no further bond issuance is likely until mid-2014, any short-term move in Toronto's bond "spread" (the gap between the yield on the city's debt and that of the Government of Canada) is effectively insignificant. The article even ventures to suggest that changes in Toronto's bond spread may be driven not by events at City Hall, but by changes in the spread for Ontario bonds, since the Province is seen as the "backstop" for Toronto's debt. It's a sensible and informative piece of work, so kudos to the writer, Dana Flavelle.
Let's now turn to a piece on the Bank of Canada, which was warned this week by the OECD that it might need to start raising interest rates before the end of 2014. The Bank's new governor, Stephen Poloz, has been much more reticent than his predecessor, Mark Carney, about predicting (sorry, "providing guidance") about where rates might be heading, but he has been quick to react to the OECD's suggestion. He doesn't agree that rates will need to rise that soon, based on the Bank's own analysis of the degree of slack in the economy and its view that inflation, currently at 1.1%*, is "lower than the Bank would like it to be".
That's the sort of statement that still gives me the heeby-jeebies, what with me having spent more than half of my professional career watching central banks struggling mightily to get inflation under control. It will be interesting to see whether Poloz is right about this. The aforementioned Mark Carney is sounding less confident about keeping UK rates on hold for as long as he had previously expected, and the latest FOMC minutes have got US and global markets fretting again about a possible end to QE as early as December. (For what it's worth, I don't think that will happen. I think it will be left to new Fed chief Janet Yellen to initiate the QE "taper", which would help her to allay market fears that she's too wedded to cheap momey).
As the Star article points out, the Canadian dollar fell in response to Gov. Poloz's comments, and it can only fall further as the inevitable end of US QE comes into view. That would quickly give Poloz the higher inflation he appears to crave, and start the countdown toward a tightening cycle in Canada. The first rate move probably won't come before the end of 2014, but it's unlikely to be much later than that.
*UPDATE, November 23: But hey, what do I know? The day after I posted this, StatsCan reported that inflation fell to 0.7% in October -- something which Poloz presumably knew when he made his comment about the rate being too low.
We begin with an article about whether the City of Toronto's borrowing costs have been affected by the Rob Ford circus. I approached this with some trepidation: remember how, at the height of the Eurozone crisis, there were almost daily scare stories about how Italy would be unable to service its debts if its bond yields reached 7 percent? The specific number seemed to be plucked out of the ether, and the authors never seemed to note the fact that, since most of the country's borrowings were for long terms at fixed rates, it would require market rates to stay at or above the 7 percent level for many years before Italy's actual debt service costs would even begin to approach that level.
It's good to be able to report that the Star's piece avoids any such errors. It correctly points out that the city's borrowing costs are fixed, and further notes that since no further bond issuance is likely until mid-2014, any short-term move in Toronto's bond "spread" (the gap between the yield on the city's debt and that of the Government of Canada) is effectively insignificant. The article even ventures to suggest that changes in Toronto's bond spread may be driven not by events at City Hall, but by changes in the spread for Ontario bonds, since the Province is seen as the "backstop" for Toronto's debt. It's a sensible and informative piece of work, so kudos to the writer, Dana Flavelle.
Let's now turn to a piece on the Bank of Canada, which was warned this week by the OECD that it might need to start raising interest rates before the end of 2014. The Bank's new governor, Stephen Poloz, has been much more reticent than his predecessor, Mark Carney, about predicting (sorry, "providing guidance") about where rates might be heading, but he has been quick to react to the OECD's suggestion. He doesn't agree that rates will need to rise that soon, based on the Bank's own analysis of the degree of slack in the economy and its view that inflation, currently at 1.1%*, is "lower than the Bank would like it to be".
That's the sort of statement that still gives me the heeby-jeebies, what with me having spent more than half of my professional career watching central banks struggling mightily to get inflation under control. It will be interesting to see whether Poloz is right about this. The aforementioned Mark Carney is sounding less confident about keeping UK rates on hold for as long as he had previously expected, and the latest FOMC minutes have got US and global markets fretting again about a possible end to QE as early as December. (For what it's worth, I don't think that will happen. I think it will be left to new Fed chief Janet Yellen to initiate the QE "taper", which would help her to allay market fears that she's too wedded to cheap momey).
As the Star article points out, the Canadian dollar fell in response to Gov. Poloz's comments, and it can only fall further as the inevitable end of US QE comes into view. That would quickly give Poloz the higher inflation he appears to crave, and start the countdown toward a tightening cycle in Canada. The first rate move probably won't come before the end of 2014, but it's unlikely to be much later than that.
*UPDATE, November 23: But hey, what do I know? The day after I posted this, StatsCan reported that inflation fell to 0.7% in October -- something which Poloz presumably knew when he made his comment about the rate being too low.
Monday 18 November 2013
Said it before and I'll say it again
Whoop-de-doo and jump for joy! US stock indices are advancing to new highs, with the DJIA moving above 16000 for the first time ever. This has triggered a certain amount of soul-searching on CNBC and the like, about whether things are getting just the teensiest bit bubbly here. The general conclusion: Naaah! Valuations are in normal ranges, companies are sitting on piles of cash, and so on.
But what's driven the markets to these fresh highs? Just last week there was a very disappointing Empire State report on the factory sector, and incoming Fed Chairman Janet Yellen told her Congressional inquisitors that the national unemployment rate, at 7.3%, is still too high, so it can't be economic fundamentals that are moving the market.
The upward pressure on stock prices is, of course, driven by the likelihood that the Fed, under Ms Yellen's guidance from January onwards, will keep its QE program running full-tilt for several more months. Whether this is really needed at this point in the recovery is debatable, but what's beyond dispute is that ultra cheap money leads to an increasingly desperate search for returns, which in turn leads to the mispricing of assets, setting the stage for the next financial crisis.
So it's worth repeating that we'll only know whether QE has been successful, other than as a Band-Aid, when we see how the global economy copes without it. Right now, we still don't even know how the Fed expects to bring about the long-awaited "taper" of its asset buying program. The higher stocks go, the greater the likelihood that the taper, when it comes, will be messy.
But what's driven the markets to these fresh highs? Just last week there was a very disappointing Empire State report on the factory sector, and incoming Fed Chairman Janet Yellen told her Congressional inquisitors that the national unemployment rate, at 7.3%, is still too high, so it can't be economic fundamentals that are moving the market.
The upward pressure on stock prices is, of course, driven by the likelihood that the Fed, under Ms Yellen's guidance from January onwards, will keep its QE program running full-tilt for several more months. Whether this is really needed at this point in the recovery is debatable, but what's beyond dispute is that ultra cheap money leads to an increasingly desperate search for returns, which in turn leads to the mispricing of assets, setting the stage for the next financial crisis.
So it's worth repeating that we'll only know whether QE has been successful, other than as a Band-Aid, when we see how the global economy copes without it. Right now, we still don't even know how the Fed expects to bring about the long-awaited "taper" of its asset buying program. The higher stocks go, the greater the likelihood that the taper, when it comes, will be messy.
Wednesday 13 November 2013
Unguided
Mark Carney's attempts to introduce "forward guidance" into UK monetary policy just after he arrived at the Bank of England in mid-year attracted a certain amount of skepticism, from market participants and pundits alike. His decision to tie possible monetary tightening to a specific indicator, the unemployment rate, was widely seen as a hostage to fortune -- and that's how it seems to be turning out.
When Carney showed up on Threadneedle Street, fixed income markets in a number of countries were starting to price in monetary tightening quite aggressively, resulting in rising bond yields. The trend toward higher rates was triggered by musings from the Fed that it was starting to think about tapering its QE program -- something which, in the event, has not happened yet, and may not now transpire until well into 2014.
Carney's response to a similar emerging trend in the UK Gilts market went beyond anything he had attempted while at the Bank of Canada. He declared that rather than focusing on growth trends per se, the Bank would closely observe levels of slack in the economy, specifically the unemployment rate. Other things being equal, the Bank would not begin to tighten its policy settings until unemployment fell to 7%. Coupled with the Bank's own economic projections, this implied to markets and media alike that the Bank would be on hold until 2016. Even at the time, however, there were plenty of suggestions that trends in the economy would force its hand much sooner than that.
Fast forward a few months, and the UK economy is growing much faster than the Bank expected -- "robustly", as Carney put it in his latest presentation. As a consequence, the unemployment rate has already fallen to 7.6%. Suggestions are now starting to emerge that the economy will overheat unless the Bank starts to tighten in 2014, and most expectations, including the Bank's own, now seem to be that tightening will come no later than 2015.
However, as this piece from The Guardian suggests, the Bank is keeping its options open -- which can only lead to further doubts about the usefulness of its "forward guidance" in the first place.
As a footnote, back in Ottawa, Carney's successor at the Bank of Canada, Stephen Poloz, seems to have backed away altogether from providing specific guidance to markets about future policy. Even without such guidance, however, it seems very likely that Canadian rates will stay on hold longer than those in the UK.
When Carney showed up on Threadneedle Street, fixed income markets in a number of countries were starting to price in monetary tightening quite aggressively, resulting in rising bond yields. The trend toward higher rates was triggered by musings from the Fed that it was starting to think about tapering its QE program -- something which, in the event, has not happened yet, and may not now transpire until well into 2014.
Carney's response to a similar emerging trend in the UK Gilts market went beyond anything he had attempted while at the Bank of Canada. He declared that rather than focusing on growth trends per se, the Bank would closely observe levels of slack in the economy, specifically the unemployment rate. Other things being equal, the Bank would not begin to tighten its policy settings until unemployment fell to 7%. Coupled with the Bank's own economic projections, this implied to markets and media alike that the Bank would be on hold until 2016. Even at the time, however, there were plenty of suggestions that trends in the economy would force its hand much sooner than that.
Fast forward a few months, and the UK economy is growing much faster than the Bank expected -- "robustly", as Carney put it in his latest presentation. As a consequence, the unemployment rate has already fallen to 7.6%. Suggestions are now starting to emerge that the economy will overheat unless the Bank starts to tighten in 2014, and most expectations, including the Bank's own, now seem to be that tightening will come no later than 2015.
However, as this piece from The Guardian suggests, the Bank is keeping its options open -- which can only lead to further doubts about the usefulness of its "forward guidance" in the first place.
As a footnote, back in Ottawa, Carney's successor at the Bank of Canada, Stephen Poloz, seems to have backed away altogether from providing specific guidance to markets about future policy. Even without such guidance, however, it seems very likely that Canadian rates will stay on hold longer than those in the UK.
Tuesday 12 November 2013
War is too important to be left to the politicians
This angry and moving piece from OpenDemocracy is well worth a few minutes of your time. The writer, Adam Ramsay, is appalled that the Cameron government in the UK seems poised to re-write the history of World War I to suit its own political purposes. Remarkably, in the midst of its ongoing austerity drive, the British Government has come up with 50 million pounds to fund a Golden Jubilee-style "celebration" next year, marking the centenary of the start of the conflict. The irascible Jeremy Paxman has been moved to observe that "anyone who wants to celebrate war is a moron".
Quite so, and sadly the morons are not confined to that side of the Atlantic. Here in Canada, the Harper government has poured large sums of money into commemoration of the relatively small-scale (though historically pivotal) War of 1812. This may have been good for tourism in my neck of the woods, even if the last thing we need here is even more tourists, but it's an odd priority for a government that's much more committed to fiscal rectitude than David Cameron's.
It's not just about commemoration, though. Even as Harper's team cuts social spending and eviscerates decades of federal-provincial co-operation, it's trying to recapture some of the Canadian military's past glories. The three services, which had been merged into a single "Canadian Armed Forces" as an economy measure, have been separated again, and restored to distinct, colonial-style uniforms, with UK-inspired ranks. The government has even taking to talking tough, for example taking a much tougher line on negotiations with Iran than any of the countries that are actually involved. It's all quite bizarre, especially as it's almost entirely for show; Canada's actual military capabilities are little more than risible.
Yesterday's Remembrance Day ceremonies, in the customary gloom and sleet of an Ottawa November morning, focused on the undoubted bravery of the fallen, with no mention of the idiocy of the politicians and generals who sent them to their deaths. Take the infamous Dieppe raid, for example, in August 1942, in which 60% of the Canadian forces personnel involved were killed, wounded or captured, and both the RAF and the Royal Navy took severe losses. (As it happens, my father was coxswain on one of the RN landing craft that survived the slaughter). A new book suggests that this raid, long explained as a tester for D-Day, was in fact an attempt to capture a new type of German cipher machine. Earl Mountbatten took the "credit" for the fiasco, but it appears that the author of the plan was none other than Ian Fleming, the creator of James Bond. It's probably not a major part of his memoirs.
It's important that we not forget those who died in war. but it's equally important that we don't fall for mythical accounts of why they were sent to die. And we need to remind our political leaders that the only real way to honour the fallen is to make sure we don't keep adding to their numbers.
Quite so, and sadly the morons are not confined to that side of the Atlantic. Here in Canada, the Harper government has poured large sums of money into commemoration of the relatively small-scale (though historically pivotal) War of 1812. This may have been good for tourism in my neck of the woods, even if the last thing we need here is even more tourists, but it's an odd priority for a government that's much more committed to fiscal rectitude than David Cameron's.
It's not just about commemoration, though. Even as Harper's team cuts social spending and eviscerates decades of federal-provincial co-operation, it's trying to recapture some of the Canadian military's past glories. The three services, which had been merged into a single "Canadian Armed Forces" as an economy measure, have been separated again, and restored to distinct, colonial-style uniforms, with UK-inspired ranks. The government has even taking to talking tough, for example taking a much tougher line on negotiations with Iran than any of the countries that are actually involved. It's all quite bizarre, especially as it's almost entirely for show; Canada's actual military capabilities are little more than risible.
Yesterday's Remembrance Day ceremonies, in the customary gloom and sleet of an Ottawa November morning, focused on the undoubted bravery of the fallen, with no mention of the idiocy of the politicians and generals who sent them to their deaths. Take the infamous Dieppe raid, for example, in August 1942, in which 60% of the Canadian forces personnel involved were killed, wounded or captured, and both the RAF and the Royal Navy took severe losses. (As it happens, my father was coxswain on one of the RN landing craft that survived the slaughter). A new book suggests that this raid, long explained as a tester for D-Day, was in fact an attempt to capture a new type of German cipher machine. Earl Mountbatten took the "credit" for the fiasco, but it appears that the author of the plan was none other than Ian Fleming, the creator of James Bond. It's probably not a major part of his memoirs.
It's important that we not forget those who died in war. but it's equally important that we don't fall for mythical accounts of why they were sent to die. And we need to remind our political leaders that the only real way to honour the fallen is to make sure we don't keep adding to their numbers.
Thursday 7 November 2013
Toronto, the needy city
It's no surprise that the Mayor Rob Ford drugs/video/drunken stupor scandal has been dominating the local media for the past week and more. The Toronto Star, in particular, has gone completely overboard, with front page headlines in gigantic type and numerous "special editions". Some days, the scuzzy saga has pushed just about every other news story out of the paper completely.
However, one story has appeared regularly, despite the Ford mania. What do you think that might be? The Senate expenses scandal? The Syrian conflict?? US gubernatorial elections??? No, none of the above. After the Rob Ford scandal itself, the second-biggest story has been.....how global media have been covering the Rob Ford scandal!! The newspapers have printed collages of screen captures about the Ford saga from the BBC, CNN, Al-Jazeera, El Pais and so on, while the local broadcast media have endlessly recycled clips from the BBC World Service, US current affairs shows and even the late night talk show circuit.
It's all symptomatic of Toronto's remarkable immaturity. It may just have surpassed Chicago to become the third most populous city in North America, but it remains as needy as a toddler. Just ahead of Mayor Ford's bizarre press conference on Tuesday, the Star's sports columnist, Cathal Kelly, tweeted that Toronto was finally about to enjoy a "global moment". People may be mercilessly mocking the city, but hey, at least they're talking about us!!
Instead of just tallying up the mentions it's getting in the global media, the city really needs to listen to what's being said. Last night Anderson Cooper discussed the scandal at length with a heavyweight panel that included Christiane Amanpour, PJ O'Rourke and Andrew Sullivan. They were joined on video from Toronto by one of the journalists who has done the most to uncover the scandal, the Star's babe-tastic civic affairs reporter, Robyn Doolittle.
There was a lot of chortling about the Mayor's transgressions, but as Ms Doolittle attempted to explain how he was able to cling to office, and how nobody could compel him to resign, the panelists' expressions changed from amusement to amazement. They were at a loss to understand how Canada has no equivalent to the US "recall" procedure for dealing with out-of-control politicians. It's not as if political bad boys are unknown in this country, but there's nothing more robust than the honour system to deal with miscreants.
In the case of Mayor Ford, that's very obviously not enough. The media are belatedly awakening to the need to equip municipalities, or even better, the citizenry, with an enforceable mechanism to deal with this sort of thing in the future. Another Rob Ford may not show up any time soon -- to quote SJ Perelman, "before they made him, they broke the mould" -- but it's abundantly clear that changes should be made, and quickly. Even if that does mean that Toronto will no longer get the attention it craves.
However, one story has appeared regularly, despite the Ford mania. What do you think that might be? The Senate expenses scandal? The Syrian conflict?? US gubernatorial elections??? No, none of the above. After the Rob Ford scandal itself, the second-biggest story has been.....how global media have been covering the Rob Ford scandal!! The newspapers have printed collages of screen captures about the Ford saga from the BBC, CNN, Al-Jazeera, El Pais and so on, while the local broadcast media have endlessly recycled clips from the BBC World Service, US current affairs shows and even the late night talk show circuit.
It's all symptomatic of Toronto's remarkable immaturity. It may just have surpassed Chicago to become the third most populous city in North America, but it remains as needy as a toddler. Just ahead of Mayor Ford's bizarre press conference on Tuesday, the Star's sports columnist, Cathal Kelly, tweeted that Toronto was finally about to enjoy a "global moment". People may be mercilessly mocking the city, but hey, at least they're talking about us!!
Instead of just tallying up the mentions it's getting in the global media, the city really needs to listen to what's being said. Last night Anderson Cooper discussed the scandal at length with a heavyweight panel that included Christiane Amanpour, PJ O'Rourke and Andrew Sullivan. They were joined on video from Toronto by one of the journalists who has done the most to uncover the scandal, the Star's babe-tastic civic affairs reporter, Robyn Doolittle.
There was a lot of chortling about the Mayor's transgressions, but as Ms Doolittle attempted to explain how he was able to cling to office, and how nobody could compel him to resign, the panelists' expressions changed from amusement to amazement. They were at a loss to understand how Canada has no equivalent to the US "recall" procedure for dealing with out-of-control politicians. It's not as if political bad boys are unknown in this country, but there's nothing more robust than the honour system to deal with miscreants.
In the case of Mayor Ford, that's very obviously not enough. The media are belatedly awakening to the need to equip municipalities, or even better, the citizenry, with an enforceable mechanism to deal with this sort of thing in the future. Another Rob Ford may not show up any time soon -- to quote SJ Perelman, "before they made him, they broke the mould" -- but it's abundantly clear that changes should be made, and quickly. Even if that does mean that Toronto will no longer get the attention it craves.
Tuesday 5 November 2013
Regulating the Bank of Mom and Dad
Canada's policymakers, both at the Department of Finance and the Bank of Canada, have taken steps in recent years to prevent the housing market from overheating. Most notably, downpayment requirements were notably increased, in an effort to ensure that first-time buyers were not enticed into the market by low initial carrying costs, only to run into trouble when mortgage rates began to rise again. This has remained a largely theoretical risk until now, and with the Bank of Canada set to stay on the sidelines for many more months yet, it's likely to remain that way for some time, but the concern is a valid one.
Although home prices in Toronto and Vancouver have still managed to rise to dizzying heights, these measures have for the most part had the desired effect. Canada has avoided the banking system problems that have afflicted most other developed nations, and the rapid growth in personal indebtedness that was in evidence before the financial crisis has decelerated sharply.
There is, however, one lender that the regulators have no power to influence: the Bank of Mom and Dad. And as this article in the Toronto Star explains, loans or gifts from parents, or even outright purchases of starter homes by baby boomers for their offspring, are a major factor at the more affordable end of the housing market in Canada's largest city. CIBC economist Benjamin Tal asserts, doubtless correctly, that the support provided by parents to get their kids into their first home is the key reason why first time buying has remained resilient in the face of tightened mortgage rules.
There's a paradox here, though. Imagine that the Bank of Mom and Dad had never existed, and all of that baby boomer moolah had not flowed into the housing market. Starter house prices would surely have moved sharply lower, almost certainly to the point where the kids would have been able to afford their first home through the more traditional combination of their own savings and a bank mortgage.
So the Bank of Mom and Dad stands charged with keeping house prices artificially high and maybe giving the Governor of the Bank of Canada a few sleepless nights. Still, although you have to feel sorry for young people whose parents aren't in a position to give them a hand up, the implications for the housing market are probably positive. Unlike the banks, Mom and Dad are unlikely to demand their money back at the worst possible moment, which suggests that the risk of a sudden correction in house prices has been somewhat mitigated. Sadly, though, neither the regulators, nor the banks, nor Mom and Dad seem to be doing much to solve Canada's real housing problem: a lack of construction of affordable, purpose-built rental units in the larger cities.
Although home prices in Toronto and Vancouver have still managed to rise to dizzying heights, these measures have for the most part had the desired effect. Canada has avoided the banking system problems that have afflicted most other developed nations, and the rapid growth in personal indebtedness that was in evidence before the financial crisis has decelerated sharply.
There is, however, one lender that the regulators have no power to influence: the Bank of Mom and Dad. And as this article in the Toronto Star explains, loans or gifts from parents, or even outright purchases of starter homes by baby boomers for their offspring, are a major factor at the more affordable end of the housing market in Canada's largest city. CIBC economist Benjamin Tal asserts, doubtless correctly, that the support provided by parents to get their kids into their first home is the key reason why first time buying has remained resilient in the face of tightened mortgage rules.
There's a paradox here, though. Imagine that the Bank of Mom and Dad had never existed, and all of that baby boomer moolah had not flowed into the housing market. Starter house prices would surely have moved sharply lower, almost certainly to the point where the kids would have been able to afford their first home through the more traditional combination of their own savings and a bank mortgage.
So the Bank of Mom and Dad stands charged with keeping house prices artificially high and maybe giving the Governor of the Bank of Canada a few sleepless nights. Still, although you have to feel sorry for young people whose parents aren't in a position to give them a hand up, the implications for the housing market are probably positive. Unlike the banks, Mom and Dad are unlikely to demand their money back at the worst possible moment, which suggests that the risk of a sudden correction in house prices has been somewhat mitigated. Sadly, though, neither the regulators, nor the banks, nor Mom and Dad seem to be doing much to solve Canada's real housing problem: a lack of construction of affordable, purpose-built rental units in the larger cities.
Friday 1 November 2013
Ford focus
There can't be many readers of this blog who are unaware that Toronto police have now revealed that they are in possession of a long-rumoured video showing the city's ursine mayor, Rob Ford, inhaling from what looks like a crack pipe. The story went around the world in minutes yesterday, featuring on CNN and the BBC, and providing the basis for a stunningly unfunny gag by Jay Leno on the Tonight Show. A #robford hashtag attracted 44,000 tweets on Thursday alone.
Naturally the Canadian media have gone completely gaga about the latest developments. The Toronto Star had something like twenty pages on all things Ford today, plus an editorial calling on Ford to resign. The other Toronto papers echoed that demand. For those who still feel they need to know more about the story, there's a fairly unsensationalized timeline on the CBC website.
The OTT coverage in the Star should have surprised no-one. The paper has been out to get Ford for years and broke the crack video story back in May. However, the gloating tone of today's articles is more than slightly unseemly: one columnist, the self righteous Joe Fiorito, has even taken it upon himself to call out specific readers who have quibbled with the paper's past coverage, belittle them and demand they apologize.
Ford has made it clear that he has no intention of resigning, and it's likely that one reason for his unapologetic stance is that he knows that the Star's hysterical approach to this whole tawdry mess may yet work in his favour. I imagine I may be typical of a lot of people when I say that, given his rabidly right wing politics, I can't imagine ever voting for Ford*, and I'm quite certain that he's a naughty boy with some very unsavoury buddies -- but at the same time, I'd like the media, and especially the Star, to back off.
The Star is very firmly in the Liberal camp politically, with occasional bows toward the more socialist NDP at the local level. But Ford's low tax, anti-establishment stance proved very popular with Toronto voters in the last mayoral election, and his base of support has remained remarkably stable. The Star is mortified and mystified by this, and seems to have chosen an all-out ad hominem attack on the man's character to compensate for the fact that it can't seem to undermine his policies. It's nigh on impossible to imagine the Star doing anything similar to a senior Liberal politician who went astray in his or her private life, short of evidence of something truly grotesque such as pedophilia**.
For all of Ford's initial bluster about staying on, it's hard to see how he can survive in the near term. City councillors are lining up to distance themselves from him, and the city's administration is likely to grind to a standstill if Ford digs in. However, he can't be counted out. If he recuses himself temporarily from his post, apologizes to the voters and seeks some form of rehab....well, the next mayoral election is just a year away. And if a reborn and contrite Ford runs and gets re-elected, his first "thank you" on election night should be to the editor of the Toronto Star.
* I can't anyway, as I don't live in Toronto.
** The callow Liberal leader, Justin Trudeau, has admitted to smoking marijuana, yet the story has gained no traction at all in the Star.
Naturally the Canadian media have gone completely gaga about the latest developments. The Toronto Star had something like twenty pages on all things Ford today, plus an editorial calling on Ford to resign. The other Toronto papers echoed that demand. For those who still feel they need to know more about the story, there's a fairly unsensationalized timeline on the CBC website.
The OTT coverage in the Star should have surprised no-one. The paper has been out to get Ford for years and broke the crack video story back in May. However, the gloating tone of today's articles is more than slightly unseemly: one columnist, the self righteous Joe Fiorito, has even taken it upon himself to call out specific readers who have quibbled with the paper's past coverage, belittle them and demand they apologize.
Ford has made it clear that he has no intention of resigning, and it's likely that one reason for his unapologetic stance is that he knows that the Star's hysterical approach to this whole tawdry mess may yet work in his favour. I imagine I may be typical of a lot of people when I say that, given his rabidly right wing politics, I can't imagine ever voting for Ford*, and I'm quite certain that he's a naughty boy with some very unsavoury buddies -- but at the same time, I'd like the media, and especially the Star, to back off.
The Star is very firmly in the Liberal camp politically, with occasional bows toward the more socialist NDP at the local level. But Ford's low tax, anti-establishment stance proved very popular with Toronto voters in the last mayoral election, and his base of support has remained remarkably stable. The Star is mortified and mystified by this, and seems to have chosen an all-out ad hominem attack on the man's character to compensate for the fact that it can't seem to undermine his policies. It's nigh on impossible to imagine the Star doing anything similar to a senior Liberal politician who went astray in his or her private life, short of evidence of something truly grotesque such as pedophilia**.
For all of Ford's initial bluster about staying on, it's hard to see how he can survive in the near term. City councillors are lining up to distance themselves from him, and the city's administration is likely to grind to a standstill if Ford digs in. However, he can't be counted out. If he recuses himself temporarily from his post, apologizes to the voters and seeks some form of rehab....well, the next mayoral election is just a year away. And if a reborn and contrite Ford runs and gets re-elected, his first "thank you" on election night should be to the editor of the Toronto Star.
* I can't anyway, as I don't live in Toronto.
** The callow Liberal leader, Justin Trudeau, has admitted to smoking marijuana, yet the story has gained no traction at all in the Star.
Tuesday 29 October 2013
Senatus populusque Canadensis
Canadian political life is now completely paralyzed, thanks to the scandal surrounding the upper house of Parliament, the Senate. The government is trying to turf out a number of senators who are accused of padding their expense accounts, but the senators in question -- Mike Duffy, Pamela Wallin and Patrick Brazeau -- are refusing to go quietly.
The story is evolving all the time, but the one thing that can safely be asserted is that everyone involved is lying. All three senators were untruthful about their place of primary residence, in order to be able to claim tens of thousands of dollars in travel and housing allowances. And Prime Minister Stephen Harper, under ferocious attack from Duffy in particular, is changing his side of the story by the day, as he tries desperately to maintain control and avoid irreparable damage to his ability to govern.
It's all good dirty fun, but it's leading more and more people to question whether we really need a Senate as a chamber of "sober second thought". The Senate was established in 1867 as part of the constitutional deal that set up the Canadian confederation, but it was a bit of a Frankenstein creation from the outset.
The UK, as the colonial power driving the constitutional process at the time, had a second chamber, in the shape of the House of Lords, so it was only natural that it would want to set up something similar for Canada. However, the House of Lords was an entirely hereditary assembly back then, and there was no basis for replicating that in Canada.
Looking south of the border, the "fathers of confederation" could see that the US had established a Senate with the explicit aim of providing equal representation for each state (by giving them two seats each, regardless of population). However, back in 1867 only four territories joined the new Canadian confederation (Ontario, Quebec, New Brunswick and Nova Scotia), so that model was not really applicable. There was also little appetite for having a second elected chamber.
The result was that the Senate was set up with the intention of providing a balancing function akin to that of the US, but on an unelected basis, like the House of Lords. Except, of course, that in the absence of an aristocracy to fill the benches, it was left to the governments of the day to select the members. This process that has been shamelessly abused ever since, as successive governments have packed the second chamber with their placemen and toadies.
Which is exactly how Duffy, Wallin and Brazeau landed there, back in 2010, when Stephen Harper decided to pad the place out a little with some high-profile Tory loyalists. Duffy and Wallin, who were both prominent TV journalists back in the day, mutated into highly partisan attack dogs for the government, racking up massive expenses as they gallivanted around doing Harper's dirty work. However, contrary to the rules of the Senate, neither of them was truly resident in the Province they purported to represent (PEI in the case of Duffy; Saskatchewan in the case of Wallin), and it was this that proved their undoing when questions began to be asked.
This being Canada, reforming the Senate would in all likelihood be an impossible task: either Quebec or the Western provinces would undoubtedly feel they were getting short-changed. But it's hard to see how it can ever regain what little credibility it may have had at one time, so getting rid of it altogether is very possibly the best option. As Oliver Cromwell famously said to the "rump Parliament" more than three and a half centuries ago, “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”
The story is evolving all the time, but the one thing that can safely be asserted is that everyone involved is lying. All three senators were untruthful about their place of primary residence, in order to be able to claim tens of thousands of dollars in travel and housing allowances. And Prime Minister Stephen Harper, under ferocious attack from Duffy in particular, is changing his side of the story by the day, as he tries desperately to maintain control and avoid irreparable damage to his ability to govern.
It's all good dirty fun, but it's leading more and more people to question whether we really need a Senate as a chamber of "sober second thought". The Senate was established in 1867 as part of the constitutional deal that set up the Canadian confederation, but it was a bit of a Frankenstein creation from the outset.
The UK, as the colonial power driving the constitutional process at the time, had a second chamber, in the shape of the House of Lords, so it was only natural that it would want to set up something similar for Canada. However, the House of Lords was an entirely hereditary assembly back then, and there was no basis for replicating that in Canada.
Looking south of the border, the "fathers of confederation" could see that the US had established a Senate with the explicit aim of providing equal representation for each state (by giving them two seats each, regardless of population). However, back in 1867 only four territories joined the new Canadian confederation (Ontario, Quebec, New Brunswick and Nova Scotia), so that model was not really applicable. There was also little appetite for having a second elected chamber.
The result was that the Senate was set up with the intention of providing a balancing function akin to that of the US, but on an unelected basis, like the House of Lords. Except, of course, that in the absence of an aristocracy to fill the benches, it was left to the governments of the day to select the members. This process that has been shamelessly abused ever since, as successive governments have packed the second chamber with their placemen and toadies.
Which is exactly how Duffy, Wallin and Brazeau landed there, back in 2010, when Stephen Harper decided to pad the place out a little with some high-profile Tory loyalists. Duffy and Wallin, who were both prominent TV journalists back in the day, mutated into highly partisan attack dogs for the government, racking up massive expenses as they gallivanted around doing Harper's dirty work. However, contrary to the rules of the Senate, neither of them was truly resident in the Province they purported to represent (PEI in the case of Duffy; Saskatchewan in the case of Wallin), and it was this that proved their undoing when questions began to be asked.
This being Canada, reforming the Senate would in all likelihood be an impossible task: either Quebec or the Western provinces would undoubtedly feel they were getting short-changed. But it's hard to see how it can ever regain what little credibility it may have had at one time, so getting rid of it altogether is very possibly the best option. As Oliver Cromwell famously said to the "rump Parliament" more than three and a half centuries ago, “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”
Tuesday 22 October 2013
Baffled of Bobcaygeon
This letter on the recently unveiled Canada-EU trade deal, which received pride of place on the Toronto Star's opinion page today, is worth quoting in full:
Thank you for drawing attention to the potential folly of the EU trade deal. In all “deals” there is a winner and a loser. There are never two winners. In recent decades China has been a consistent winner, with the rest of the world accumulating prodigious debts. In this case, the workforces of Canada and of the EU will be redeployed.
Where does one start? Evidently the writer has never heard of a win-win deal, which makes one wonder how he even does his grocery shopping each week. I mean, buying food is a "deal", right? You want the food, and the store wants your money. It's an exchange in which you both give up something you have so as to get something you want. How is there a winner and a loser?
If we upscale this reasoning to international trade, the same principle applies. Canadian drivers want BMWs and Europeans want Canadian lumber, so by trading, we both end up with something we want. The added insight that economics brings is that even if both we and our trading partners can in theory produce all the same things, there's still a benefit to trading. If Canada produces lumber more efficiently and the Europeans are better at making cars, both countries are better off doing what they do best and then trading for what the other guy does best. It's known as "comparative advantage".
Because of this, it's a fallacy to assert, as the Star's correspondent does, that "the total consumption of goods in the EU/Canada bloc remains the same". If free trade means that Canadians spend less on cheese and BMWs in the future, that frees up purchasing power and creates demand for other goods. If Europeans can buy Canadian lumber and pork more cheaply, they too have more cash to spend elsewhere.
It's because of the expected net gains for the economy as a whole that Stephen Harper feels he can promise to compensate the losers.
We still need to see the details before deciding whether this particular deal is a fair one for both sides, but one thing we can already be sure of is that it's not actually "free trade" that we're talking about. Take cheese, for example, which bizarrely seems to have occupied most of the column inches since the deal was announced. European producers aren't getting unfettered access to the Canadian market: they're getting a bigger quota, but one that will still limit them to much less than 10% of the market. The dairy supply management regime, which is the reason I pay three times as much for milk as I would if I drove a few miles across the (Niagara) river to shop each week, will remain firmly in place.
The Star's correspondent hopes that provincial leaders will "reject this folly". Looks very unlikely: most of them seem to be onside with the deal already, while expressing concerns over some of the details and vowing to hold the PM to his promise of compensation. "Baffled of Bobcaygeon" certainly has some allies, including the irritating Maude Barlow and some of the trade unions, but it seems all but certain that this deal will be put into effect in the second half of the decade.
Thank you for drawing attention to the potential folly of the EU trade deal. In all “deals” there is a winner and a loser. There are never two winners. In recent decades China has been a consistent winner, with the rest of the world accumulating prodigious debts. In this case, the workforces of Canada and of the EU will be redeployed.
More cheese makers there; fewer here. More autoworkers here; fewer there — and so on. The total consumption of goods in the Canada/EU bloc remains the same. However, some potential increases in efficiency will produce a net loss of jobs, in both places.
Stephen Harper plans to compensate the Canadian losers at taxpayers’ expense. Taxes will go up and jobs will go down. How does that help us?
The only people to gain from free trade are the traders themselves. Greed always wins.
At one time politicians could get a little boost from this kind of deal. Now they just look naive and inept. Let us not give Harper that boost. And let us hope that the provincial leaders reject this folly.
Where does one start? Evidently the writer has never heard of a win-win deal, which makes one wonder how he even does his grocery shopping each week. I mean, buying food is a "deal", right? You want the food, and the store wants your money. It's an exchange in which you both give up something you have so as to get something you want. How is there a winner and a loser?
If we upscale this reasoning to international trade, the same principle applies. Canadian drivers want BMWs and Europeans want Canadian lumber, so by trading, we both end up with something we want. The added insight that economics brings is that even if both we and our trading partners can in theory produce all the same things, there's still a benefit to trading. If Canada produces lumber more efficiently and the Europeans are better at making cars, both countries are better off doing what they do best and then trading for what the other guy does best. It's known as "comparative advantage".
Because of this, it's a fallacy to assert, as the Star's correspondent does, that "the total consumption of goods in the EU/Canada bloc remains the same". If free trade means that Canadians spend less on cheese and BMWs in the future, that frees up purchasing power and creates demand for other goods. If Europeans can buy Canadian lumber and pork more cheaply, they too have more cash to spend elsewhere.
It's because of the expected net gains for the economy as a whole that Stephen Harper feels he can promise to compensate the losers.
We still need to see the details before deciding whether this particular deal is a fair one for both sides, but one thing we can already be sure of is that it's not actually "free trade" that we're talking about. Take cheese, for example, which bizarrely seems to have occupied most of the column inches since the deal was announced. European producers aren't getting unfettered access to the Canadian market: they're getting a bigger quota, but one that will still limit them to much less than 10% of the market. The dairy supply management regime, which is the reason I pay three times as much for milk as I would if I drove a few miles across the (Niagara) river to shop each week, will remain firmly in place.
The Star's correspondent hopes that provincial leaders will "reject this folly". Looks very unlikely: most of them seem to be onside with the deal already, while expressing concerns over some of the details and vowing to hold the PM to his promise of compensation. "Baffled of Bobcaygeon" certainly has some allies, including the irritating Maude Barlow and some of the trade unions, but it seems all but certain that this deal will be put into effect in the second half of the decade.
Friday 18 October 2013
Cheese and whine
Canadian PM Stephen Harper was in Brussels today to announce that Canada and the EU have agreed on a free trade deal -- details here. Final terms are still to be worked out, but the deal will cover a wide range of goods and services. With the EU poised to start negotiations on a much bigger free trade deal with the United States, today's announcement eases the Harper government's fears that the long-running negotiations might get shelved.
In true Canadian fashion, initial responses to the deal have focused on the probable losers. The most wide-ranging condemnation has come from the always negative Maude Barlow of the "Council of Canadians", who has said that there is no case to be made for any such deal. Jim Stanford, the thoughtful economist at trade union Unifor, has estimated that the deal could cost Canada up to 150,000 jobs, in sharp contrast to the government's own claim that it could produce 80-100,000 new ones.
Then there are the specific industries that could be severely affected. One is wine, a particularly important sector of the economy hereabouts, where a switch from an ad valorem tariff to a flat rate could make European wines more competitive at the higher price points. Potentially even more seriously affected is the cheese industry, which faces a more-than-doubling of the quota assigned to European producers. Cheese makers in Quebec seem to be particularly alarmed.
It's never easy to predict exactly how a free trade deal will play out, but there's one factor worth keeping in mind here: Canadians are world-class cheapskates*. Here in the Niagara region, a key feature of every newscast is a report of how long the lines are at the three bridges into the US. People are happy to line up for hours to save a few dollars on their weekly grocery shop, to the despair of local retailers.
Niagara is also wine country, with upwards of sixty producers in a smallish geographical area. If you go to a comparable area in Europe -- the Loire Valley in France, for example, or the Veneto in Italy -- you find that local stores and restaurants not only stock very few wines from outside the country, the don't even stock many from outside the immediate area. In Niagara, by contrast, local product is still heavily outgunned on store shelves and on menus by imported wines, despite the best efforts of the provincial liquor board (and the rising quality of the wines themselves).
Whether it's in deciding where to shop or deciding which wine to buy, most Canadians choose to ignore the fact that "shopping foreign" is putting their neighbours' livelihoods at risk, and always go for the cheapest product. It's a difficult mindset to overcome, and if I were a cheese or wine maker, I'd be worried too.
* Old Florida joke:
Q: What's the difference between a canoe and a Canadian?
A: A canoe tips.
In true Canadian fashion, initial responses to the deal have focused on the probable losers. The most wide-ranging condemnation has come from the always negative Maude Barlow of the "Council of Canadians", who has said that there is no case to be made for any such deal. Jim Stanford, the thoughtful economist at trade union Unifor, has estimated that the deal could cost Canada up to 150,000 jobs, in sharp contrast to the government's own claim that it could produce 80-100,000 new ones.
Then there are the specific industries that could be severely affected. One is wine, a particularly important sector of the economy hereabouts, where a switch from an ad valorem tariff to a flat rate could make European wines more competitive at the higher price points. Potentially even more seriously affected is the cheese industry, which faces a more-than-doubling of the quota assigned to European producers. Cheese makers in Quebec seem to be particularly alarmed.
It's never easy to predict exactly how a free trade deal will play out, but there's one factor worth keeping in mind here: Canadians are world-class cheapskates*. Here in the Niagara region, a key feature of every newscast is a report of how long the lines are at the three bridges into the US. People are happy to line up for hours to save a few dollars on their weekly grocery shop, to the despair of local retailers.
Niagara is also wine country, with upwards of sixty producers in a smallish geographical area. If you go to a comparable area in Europe -- the Loire Valley in France, for example, or the Veneto in Italy -- you find that local stores and restaurants not only stock very few wines from outside the country, the don't even stock many from outside the immediate area. In Niagara, by contrast, local product is still heavily outgunned on store shelves and on menus by imported wines, despite the best efforts of the provincial liquor board (and the rising quality of the wines themselves).
Whether it's in deciding where to shop or deciding which wine to buy, most Canadians choose to ignore the fact that "shopping foreign" is putting their neighbours' livelihoods at risk, and always go for the cheapest product. It's a difficult mindset to overcome, and if I were a cheese or wine maker, I'd be worried too.
* Old Florida joke:
Q: What's the difference between a canoe and a Canadian?
A: A canoe tips.
Thursday 17 October 2013
No flipping
For the past year and more, the Canadian federal government has been running a shamelessly partisan advertising campaign touting "Canada's Economic Action Plan", a ragbag of policies that have supposedly kept the economy afloat while the rest of the world has been mired in recession. With the next election no more than two years away, yesterday's Throne Speech to open the new session of Parliament unveiled a bit of a change of course: the Tories are going all populist on us.
Truth to tell, it's another ragbag of stuff. The government plans to force cable TV companies to let customers pick and choose the channels they want, rather than having to buy bizarrely "bundled" services that include all sorts of dreck that nobody wants. (For example, if you want something like Bloomberg TV or BBC World, you'll probably find you have to pay for something like Nickelodeon or Homes and Gardens TV as well). Phone companies are to be forced to reduce roaming charges (though there's to be no action against the peculiar pricing regime that requires you to pay for incoming calls and messages on your cell phone). Companies that charge customers extra for paper bills, as opposed to electronic ones, will be required to cease and desist. The government even wants to ensure that Canadians shopping at home pay the same prices that they would pay for the same goods in the US, which frankly seems like a completely unattainable goal.
It's an amazingly interventionist agenda for a government that loudly trumpets its opposition to excessive regulation of the private sector. It's also a real volte face for the Harper Tories: as the opposition NDP has been quick to point out, Harper has consistently voted against any and all such pro-consumer measures that have been suggested in the past.
It's also an agenda that's largely irrelevant to the economy's real problem: inadequate employment. Although it's true that Canada has done better than the rest of the G8 in the last half-decade or so, the job market is in poor shape. The most recent monthly employment data showed rising numbers of young people becoming discouraged about finding work. Stories about unpaid internships fill the media. Increasing numbers of workers in all age groups find themselves unable to find anything other than short-term contract work. Thousands of the notionally "employed", especially in retailing, now have no guaranteed hours of work each week.
These depressing trends have gathered pace even as the ballyhooed "Economic Action Plan" has unfolded. With the government restating its fiscal austerity stance and its determination to eliminate the budget deficit by the time of the next election, there's nothing in the Throne Speech to give the unemployed and underemployed much hope.
Truth to tell, it's another ragbag of stuff. The government plans to force cable TV companies to let customers pick and choose the channels they want, rather than having to buy bizarrely "bundled" services that include all sorts of dreck that nobody wants. (For example, if you want something like Bloomberg TV or BBC World, you'll probably find you have to pay for something like Nickelodeon or Homes and Gardens TV as well). Phone companies are to be forced to reduce roaming charges (though there's to be no action against the peculiar pricing regime that requires you to pay for incoming calls and messages on your cell phone). Companies that charge customers extra for paper bills, as opposed to electronic ones, will be required to cease and desist. The government even wants to ensure that Canadians shopping at home pay the same prices that they would pay for the same goods in the US, which frankly seems like a completely unattainable goal.
It's an amazingly interventionist agenda for a government that loudly trumpets its opposition to excessive regulation of the private sector. It's also a real volte face for the Harper Tories: as the opposition NDP has been quick to point out, Harper has consistently voted against any and all such pro-consumer measures that have been suggested in the past.
It's also an agenda that's largely irrelevant to the economy's real problem: inadequate employment. Although it's true that Canada has done better than the rest of the G8 in the last half-decade or so, the job market is in poor shape. The most recent monthly employment data showed rising numbers of young people becoming discouraged about finding work. Stories about unpaid internships fill the media. Increasing numbers of workers in all age groups find themselves unable to find anything other than short-term contract work. Thousands of the notionally "employed", especially in retailing, now have no guaranteed hours of work each week.
These depressing trends have gathered pace even as the ballyhooed "Economic Action Plan" has unfolded. With the government restating its fiscal austerity stance and its determination to eliminate the budget deficit by the time of the next election, there's nothing in the Throne Speech to give the unemployed and underemployed much hope.
Monday 14 October 2013
Ruling out all options
In common with a lot of other jurisdictions, the Province of Ontario is moving to phase out the use of coal in power generation. It's also gradually reducing the role of the existing (and aging) fleet of nuclear plants, and reconsidering plans to build new ones. Gas generating plants are still under construction, but not in areas where the power is actually needed: in a long-running scandal, the taxpayer is on the hook for more than a billion dollars in connection with a couple of plants, already under construction, that were moved from the Toronto area ahead of the last provincial election.
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Friday 11 October 2013
Cameron's triumphant giveaway
I see UK Prime Minister David Cameron is crowing over the success of the controversial part-privatization of the Royal Mail.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
Wednesday 9 October 2013
The least logical tax EVER!
We stayed in a hotel in Toronto for one night this week. At checkout I questioned an unexplained item for just under ten bucks that appeared on the bill, described only as "DMP charge". Turns out that it's one of those almost ubiquitous fees designed to finance the local tourism authority.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Friday 4 October 2013
Over-determined
The US government shutdown, now rapidly being subsumed into the much more serious wrangle about increasing the debt ceiling, shows no sign of ending any time soon. President Obama clearly regrets allowing the debt ceiling to become the centerpiece of innumerable fiscal disputes in his first term, and is refusing to negotiate on the issue at all. Republicans are determined to use the leverage that they feel the looming US default gives them to drive a hard bargain on the future direction of fiscal policy. "Obamacare", the proximate cause of the shutdown, has faded into the background, as most senior Republicans seem willing to admit that prospects for its repeal are non-existent.
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Monday 30 September 2013
Germany discovers it's not easy (or cheap) being green
To the surprise of (I'm guessing) nobody, the latest report on climate change from the IPCC says the same as all of its earlier reports: the earth's climate is changing, and it's your fault.
The scientists have reached this conclusion despite the fact that global temperatures seem to have stopped rising in about 1998. Their response to "deniers" who say this means the climate change consensus may need rethinking is interesting: they point out that the past decade was on average warmer than the decade before. You probably don't need a degree in advanced statistics to figure out that such a statement is fully compatible with the possibility that warming stopped dead in 1998: it's just a "baseline effect".
Anyway, when the climate scientists deign to admit that maybe things haven't been going as forecast for the last decade and more, they refer to the apparent slowing in global warming as a "hiatus". It's not one that they predicted, but don't you dare suggest that the science might need a tweak. In fact, there's now a favoured hypothesis to explain the "hiatus": all the extra energy being produced by man's depredations is being stored in the deep oceans, a process that can't go on for ever. There's no evidence whatsoever to support this hypothesis, and again it's something that nobody forecast, but that isn't stopping the experts from attempting to stifle further debate by asserting that "the science is settled' -- which always strikes me as being a profoundly unscientific thing to say.
Be that as it may, it looks as though the UN will summon its members together sometime next year to try to strong-arm them into taking action to prevent the supposedly looming climatic disaster. Good luck persuading China or India or any other rapidly-industrialising country to go along with that. Richer countries may be easier to persuade, however, and indeed one -- Germany -- is already hurtling along the green path. And as this recent article from the New York Times makes clear, it's not a pretty sight.
Chancellor Merkel's government, under pressure from the country's sizeable Green Party, has set a goal of closing all the country's nuclear plants, phasing out the use of coal and moving to 80% renewable energy by mid-century. The costs are staggering, and they're leading to real changes in ordinary people's lifestyles -- like that of the man who told the NYT that high energy bills compelled him to use only one 5 watt light in his home and to stay out of his unheated living room! The engineering challenge of connecting all of the renewables to the grid is proving formidable, even for the Germans, and businesses are fretting about losing their competitiveness.
And here's the real killer point: it isn't working. As the article points out, Germany's carbon emissions actually rose last year, because coal-fired plants have to be fired up on the very frequent occasions when it's not sunny enough or windy enough for the renewable sources to be effective. Unless someone comes up with a whole new way of storing energy efficiently, this will always be the case.
If you want to eliminate fossil fuel-based power generation, there's a tested and reliable alternative out there: nuclear. But Germany has already ruled that out, and there's little enthusiasm for it in the rest of the developed world either, so we face a future of expensive and inherently unreliable energy supplies. The fact a major determinant of energy policies these days seems to be the Fukushima disaster -- which was caused by a catastrophic Act of God, and has led to precisely no radiation-related casualties -- is simply insane.
The scientists have reached this conclusion despite the fact that global temperatures seem to have stopped rising in about 1998. Their response to "deniers" who say this means the climate change consensus may need rethinking is interesting: they point out that the past decade was on average warmer than the decade before. You probably don't need a degree in advanced statistics to figure out that such a statement is fully compatible with the possibility that warming stopped dead in 1998: it's just a "baseline effect".
Anyway, when the climate scientists deign to admit that maybe things haven't been going as forecast for the last decade and more, they refer to the apparent slowing in global warming as a "hiatus". It's not one that they predicted, but don't you dare suggest that the science might need a tweak. In fact, there's now a favoured hypothesis to explain the "hiatus": all the extra energy being produced by man's depredations is being stored in the deep oceans, a process that can't go on for ever. There's no evidence whatsoever to support this hypothesis, and again it's something that nobody forecast, but that isn't stopping the experts from attempting to stifle further debate by asserting that "the science is settled' -- which always strikes me as being a profoundly unscientific thing to say.
Be that as it may, it looks as though the UN will summon its members together sometime next year to try to strong-arm them into taking action to prevent the supposedly looming climatic disaster. Good luck persuading China or India or any other rapidly-industrialising country to go along with that. Richer countries may be easier to persuade, however, and indeed one -- Germany -- is already hurtling along the green path. And as this recent article from the New York Times makes clear, it's not a pretty sight.
Chancellor Merkel's government, under pressure from the country's sizeable Green Party, has set a goal of closing all the country's nuclear plants, phasing out the use of coal and moving to 80% renewable energy by mid-century. The costs are staggering, and they're leading to real changes in ordinary people's lifestyles -- like that of the man who told the NYT that high energy bills compelled him to use only one 5 watt light in his home and to stay out of his unheated living room! The engineering challenge of connecting all of the renewables to the grid is proving formidable, even for the Germans, and businesses are fretting about losing their competitiveness.
And here's the real killer point: it isn't working. As the article points out, Germany's carbon emissions actually rose last year, because coal-fired plants have to be fired up on the very frequent occasions when it's not sunny enough or windy enough for the renewable sources to be effective. Unless someone comes up with a whole new way of storing energy efficiently, this will always be the case.
If you want to eliminate fossil fuel-based power generation, there's a tested and reliable alternative out there: nuclear. But Germany has already ruled that out, and there's little enthusiasm for it in the rest of the developed world either, so we face a future of expensive and inherently unreliable energy supplies. The fact a major determinant of energy policies these days seems to be the Fukushima disaster -- which was caused by a catastrophic Act of God, and has led to precisely no radiation-related casualties -- is simply insane.
Friday 27 September 2013
Who are "the one percent"? Mark Steyn elucidates for you
"Everybody knows the game is fixed
the poor get poor and the rich get rich.
That's how it goes; everybody knows".
(Leonard Cohen, "Everybody knows")
Nowadays, just about everybody knows that the rich in America are getting exponentially richer, while the middle and working classes are finding it harder than ever to make ends meet. And if you asked most people who's fixing the game, they'd point to the rich, with their lawyers and their lobbyists. And if you asked them to name some rich people, they'd probably identify a Larry Ellison, or a Jamie Dimon, or a Carl Icahn, or just say, "Wall Streeters and hedge fund managers".
But if you asked Mark Steyn, you'd get a different answer altogether. This is from one of his columns written in the past few days, as the US lurches toward a government shutdown and possible debt default.
In 2012, the top 10 percent were taking home 50.4 percent of the nation’s income. That’s an all-time record, beating out the 49 percent they were taking just before the 1929 market crash. With government redistributing more money than ever before, we’ve mysteriously wound up with greater income inequality than ever before. Across the country, “middle-class” Americans have accumulated a trillion dollars in college debt in order to live a less-comfortable life than their high school-educated parents and grandparents did in the Fifties and Sixties. That’s banana republic, too: no middle class, but only a government elite and its cronies, and a big dysfunctional mass underneath, with very little social mobility between the two.
Got that? Inequality is rising because the Obama government is trying to redistribute income; and the rich are federal public servants and their "cronies". It's hard to imagine that Steyn really believes this, but then again, it's hard to imagine that he really believes a lot of the stuff that he writes. Still, if this really is the way that Tea Partiers and others on the right think, then they're even crazier than the rest of us thought they were.
the poor get poor and the rich get rich.
That's how it goes; everybody knows".
(Leonard Cohen, "Everybody knows")
Nowadays, just about everybody knows that the rich in America are getting exponentially richer, while the middle and working classes are finding it harder than ever to make ends meet. And if you asked most people who's fixing the game, they'd point to the rich, with their lawyers and their lobbyists. And if you asked them to name some rich people, they'd probably identify a Larry Ellison, or a Jamie Dimon, or a Carl Icahn, or just say, "Wall Streeters and hedge fund managers".
But if you asked Mark Steyn, you'd get a different answer altogether. This is from one of his columns written in the past few days, as the US lurches toward a government shutdown and possible debt default.
In 2012, the top 10 percent were taking home 50.4 percent of the nation’s income. That’s an all-time record, beating out the 49 percent they were taking just before the 1929 market crash. With government redistributing more money than ever before, we’ve mysteriously wound up with greater income inequality than ever before. Across the country, “middle-class” Americans have accumulated a trillion dollars in college debt in order to live a less-comfortable life than their high school-educated parents and grandparents did in the Fifties and Sixties. That’s banana republic, too: no middle class, but only a government elite and its cronies, and a big dysfunctional mass underneath, with very little social mobility between the two.
Got that? Inequality is rising because the Obama government is trying to redistribute income; and the rich are federal public servants and their "cronies". It's hard to imagine that Steyn really believes this, but then again, it's hard to imagine that he really believes a lot of the stuff that he writes. Still, if this really is the way that Tea Partiers and others on the right think, then they're even crazier than the rest of us thought they were.
Tuesday 24 September 2013
The wonders of science
Saw a Bell Canada truck in a shopping mall parking lot today, with a sign on the side advertising the company's new "Fibe" TV service. The sign read: "Wireless TV. Yes, really".
Wow, you mean the pictures materialize on your screen right out of the air? No cables or anything?? What will they think of next?
***
PS -- Should have my "real" PC reconnected and be back to normal blogging by the end of this week.
Wow, you mean the pictures materialize on your screen right out of the air? No cables or anything?? What will they think of next?
***
PS -- Should have my "real" PC reconnected and be back to normal blogging by the end of this week.
Wednesday 18 September 2013
The Bernanke put
If printing money were the key to economic success, Weimar Germany would have been the richest country in the world back in the 1920s, and Zimbabwe would be at the top of the rich list today. And of course, the US would now be booming merrily away, fueled by the Fed's $85 billion a month of "quantitative easing".
It hasn't quite happened like that. The US economy is moving ahead, but apparently the rate of progress, particularly in terms of employment, is still insufficient for the Federal Reserve's liking. In consequence, and defying most pundits' predictions, the Fed has decided to maintain the QE program at its existing level for the time being. Markets have breathed a big sigh of relief, propelling equity indices to fresh all-time highs.
The good times may not last long. With the Republican party almost entirely in thrall to the Tea Party, and President Obama vowing no compromise, it seems certain that the next few months will see a series of bruising fiscal battles. A government shutdown seems almost unavoidable, and some Republicans are perfectly willing to see the United States default on its debts for the first time since the Civil War. The Fed cited the possibility of fiscal mayhem as one of its reasons for standing pat on the monetary front for now.
Looking further ahead, it's at least possible that the tapering of QE is now many months away. The fiscal follies will last through the fall, and by year-end Ben Bernanke's term at the head of the Fed will have just a couple of months to run. He may well be disinclined to make a major shift in policy at that point, particularly if his successor is to be Janet Yellen, who is perceived to be more open to maintaining monetary ease.
We will not be able to judge whether QE has been a success until we see how the US economy (and that of the rest of the world) copes without it. After today's decision, it seems we may have to wait quite a while longer to find out.
It hasn't quite happened like that. The US economy is moving ahead, but apparently the rate of progress, particularly in terms of employment, is still insufficient for the Federal Reserve's liking. In consequence, and defying most pundits' predictions, the Fed has decided to maintain the QE program at its existing level for the time being. Markets have breathed a big sigh of relief, propelling equity indices to fresh all-time highs.
The good times may not last long. With the Republican party almost entirely in thrall to the Tea Party, and President Obama vowing no compromise, it seems certain that the next few months will see a series of bruising fiscal battles. A government shutdown seems almost unavoidable, and some Republicans are perfectly willing to see the United States default on its debts for the first time since the Civil War. The Fed cited the possibility of fiscal mayhem as one of its reasons for standing pat on the monetary front for now.
Looking further ahead, it's at least possible that the tapering of QE is now many months away. The fiscal follies will last through the fall, and by year-end Ben Bernanke's term at the head of the Fed will have just a couple of months to run. He may well be disinclined to make a major shift in policy at that point, particularly if his successor is to be Janet Yellen, who is perceived to be more open to maintaining monetary ease.
We will not be able to judge whether QE has been a success until we see how the US economy (and that of the rest of the world) copes without it. After today's decision, it seems we may have to wait quite a while longer to find out.
Saturday 14 September 2013
Bad debts
It seems former Bank of Canada Governor Mark Carney may have spoken too soon when he asserted that Canadian household indebtedness was starting to decline from recent record levels. Statistics Canada reported this week that the ratio of household debt to disposable income rose to a new record high of 163.4 percent in the second quarter of this year, after falling very marginally in the two preceding quarters.
Mark Carney, his successor Stephen Poloz, Finance Minister Jim Flaherty and just about every economist in the country have been warning for months that debt levels will start to become a serious burden as soon as interest rates start to rise. You can maybe understand why the average Canadian might not entirely get the message: cheap money is cheap money, so why not take advantage? But you'd surely think the banks would know better than to keep shoveling out money to people who are all but certain to start defaulting in ever-increasing numbers as rates move back toward more historically normal levels.
Easy credit is artificially inflating house prices in Toronto and Vancouver, and setting up people all across the country for a nasty financial mess in the not-too-distant future. Do these guys never learn?
Mark Carney, his successor Stephen Poloz, Finance Minister Jim Flaherty and just about every economist in the country have been warning for months that debt levels will start to become a serious burden as soon as interest rates start to rise. You can maybe understand why the average Canadian might not entirely get the message: cheap money is cheap money, so why not take advantage? But you'd surely think the banks would know better than to keep shoveling out money to people who are all but certain to start defaulting in ever-increasing numbers as rates move back toward more historically normal levels.
Easy credit is artificially inflating house prices in Toronto and Vancouver, and setting up people all across the country for a nasty financial mess in the not-too-distant future. Do these guys never learn?
Friday 13 September 2013
Apologies for the hiatus!
I have been unable to post here for the last ten days or so because our heating and a/c system has failed and is being replaced. A lot of the very messy work is taking place in my home office, so my main computer is temporarily out of commission. This situation is likely to last for another week or two.
In the meantime, if you want something to read, can I recommend an excellent piece on the Guardian website, marking the fifth anniversary of the Lehman Bros. collapse. Here's a link:
www.theguardian.com/business/2013/sep/13/lehman-brothers-collapse
In the meantime, if you want something to read, can I recommend an excellent piece on the Guardian website, marking the fifth anniversary of the Lehman Bros. collapse. Here's a link:
www.theguardian.com/business/2013/sep/13/lehman-brothers-collapse
Saturday 7 September 2013
Looks like a lump of labour
I've written here once or twice before about the "lump of labour fallacy". Supposedly, most economists think it is wrong to assume that there is demand for a fixed amount of labour in an economy. After all, employed people spend their earnings, and that demand creates more jobs for other people. This reasoning leads the majority of economists to favour immigration and increased female participation in the workforce, and to reject measures like shortening the workweek (as France did a few years ago) as being unlikely to lower the unemployment rate.
The lump of labour fallacy keeps coming to mind when I hear about older workers hanging on to their jobs because they can't afford to retire. If "lump of labour" really is a fallacy, this shouldn't make it harder for young people to get a job. After all, the oldies are earning and spending, right? At the very least, however, it seems to me that the greying of the workforce must change the type of jobs the young can get. If the CFO is planning to hang around until he's 70, there's a knock-on effect right through the finance department; down at the bottom there's no immediate need to take on a new graduate trainee. Instead, that guy or gal winds up at Starbucks, making the CFO's skinny latte each morning*.
That's serious enough in itself. This week, however, Avery Shenfeld at CIBC has put out a short piece arguing that the problem is worse than that. As he puts it, "Why can't your precious Tyler and Chloe find an after school job? Because you're in it." Avery didn't get to be head of CIBC's economics department by parroting fallacies. So maybe, like me, he's wondering whether the "lump of labour" really isn't a fallacy at all.
* The CFO knows you must never drink latte or cappuccino later in the day.
The lump of labour fallacy keeps coming to mind when I hear about older workers hanging on to their jobs because they can't afford to retire. If "lump of labour" really is a fallacy, this shouldn't make it harder for young people to get a job. After all, the oldies are earning and spending, right? At the very least, however, it seems to me that the greying of the workforce must change the type of jobs the young can get. If the CFO is planning to hang around until he's 70, there's a knock-on effect right through the finance department; down at the bottom there's no immediate need to take on a new graduate trainee. Instead, that guy or gal winds up at Starbucks, making the CFO's skinny latte each morning*.
That's serious enough in itself. This week, however, Avery Shenfeld at CIBC has put out a short piece arguing that the problem is worse than that. As he puts it, "Why can't your precious Tyler and Chloe find an after school job? Because you're in it." Avery didn't get to be head of CIBC's economics department by parroting fallacies. So maybe, like me, he's wondering whether the "lump of labour" really isn't a fallacy at all.
* The CFO knows you must never drink latte or cappuccino later in the day.
Wednesday 4 September 2013
Name and shame
Courtesy of our local talk radio station, CKTB, we learn of a new initiative from a climate change lobby group called 350.org. They are raising a petition to demand that hurricanes and major storms, currently given alternating male and female names according to a pre-set list. should instead be named after politicians who deny climate change. This whole movement really is turning into an intolerant cult, isn't it? What's next, tarring and feathering?
Anyway, great timing, guys. At the time of writing, we have now gone longer into any Atlantic hurricane season since records were kept, without a single tropical storm reaching hurricane strength. It's also been an unusually long time since any hurricane hit the US mainland*.
So it certainly seems as if the climate is changing. Just not in the way that 350.org seems to believe.
* Sandy, last November, was only a tropical storm when it made landfall. That's why the media hastily renamed it "Superstorm Sandy".
Anyway, great timing, guys. At the time of writing, we have now gone longer into any Atlantic hurricane season since records were kept, without a single tropical storm reaching hurricane strength. It's also been an unusually long time since any hurricane hit the US mainland*.
So it certainly seems as if the climate is changing. Just not in the way that 350.org seems to believe.
* Sandy, last November, was only a tropical storm when it made landfall. That's why the media hastily renamed it "Superstorm Sandy".
Tuesday 3 September 2013
Old money
Before taking his leave of the Bank of Canada to take up his new post in the UK, Mark Carney noted a welcome deceleration in the growth of consumer credit. A fascinating new report by the consumer credit rating agency, Equifax, largely confirms this: growth in consumer indebtedness in Canada is indeed slowing (though not to the degree seen in the United States) and both delinquencies and bankruptcies have been heading steadily lower in the past few years.
There is one exception to this trend, however, and it's a worrying one. Canadians over the age of 65 are continuing to accumulate debt. Seniors' average borrowings rose by 6.5% in the year to mid-2013, and have been growing faster than the debts of other age cohorts for the past several years, although for now they remain lower than the average for all other groups apart from the credit-starved under 25s. It looks as if baby boomers, having failed to put aside enough savings during their high earning years, are now borrowing to maintain the lifestyle to which they consider themselves entitled.
You can maybe see why seniors would want to do this, but it's a bit harder to see why lenders are so willing to accommodate them. It's true that more and more people are working beyond traditional retirement age, but it remains the case that this is a group of people on incomes that are largely fixed. It may be some time before interest rates start to rise in Canada, but once that happens, indebted seniors will be among the first to feel the pinch. Of course, a lot of seniors have assets to pledge against their debts, mainly the family homestead, but that shouldn't give bankers too much comfort. You wouldn't want to be the first banker that starts to turn delinquent seniors out onto the streets in order to sell the home and recover the debt. The squawking would be heard from coast to coast, and since seniors vote in much larger numbers than the young. politicians would be quick to tell the banks to back off.
Then there are the societal implications. For a good many generations now, Canadians have been passing on to their heirs much greater wealth than they inherited from their own forebears. It's unlikely the baby boomers will be doing the same: the next generation, those now approaching middle age, are likely to find that the house and everything else that their parents leave behind is encumbered six ways to Sunday, with little net value left once all the creditors have been satisfied.
Did you ever drive down the highway behind a huge Winnebago with a bumper sticker bragging that 'We're spending our kids' inheritance"? Indeed they are, and at least here in Canada, there's no sign they're about to stop.
There is one exception to this trend, however, and it's a worrying one. Canadians over the age of 65 are continuing to accumulate debt. Seniors' average borrowings rose by 6.5% in the year to mid-2013, and have been growing faster than the debts of other age cohorts for the past several years, although for now they remain lower than the average for all other groups apart from the credit-starved under 25s. It looks as if baby boomers, having failed to put aside enough savings during their high earning years, are now borrowing to maintain the lifestyle to which they consider themselves entitled.
You can maybe see why seniors would want to do this, but it's a bit harder to see why lenders are so willing to accommodate them. It's true that more and more people are working beyond traditional retirement age, but it remains the case that this is a group of people on incomes that are largely fixed. It may be some time before interest rates start to rise in Canada, but once that happens, indebted seniors will be among the first to feel the pinch. Of course, a lot of seniors have assets to pledge against their debts, mainly the family homestead, but that shouldn't give bankers too much comfort. You wouldn't want to be the first banker that starts to turn delinquent seniors out onto the streets in order to sell the home and recover the debt. The squawking would be heard from coast to coast, and since seniors vote in much larger numbers than the young. politicians would be quick to tell the banks to back off.
Then there are the societal implications. For a good many generations now, Canadians have been passing on to their heirs much greater wealth than they inherited from their own forebears. It's unlikely the baby boomers will be doing the same: the next generation, those now approaching middle age, are likely to find that the house and everything else that their parents leave behind is encumbered six ways to Sunday, with little net value left once all the creditors have been satisfied.
Did you ever drive down the highway behind a huge Winnebago with a bumper sticker bragging that 'We're spending our kids' inheritance"? Indeed they are, and at least here in Canada, there's no sign they're about to stop.
Friday 30 August 2013
Media as judge and jury
I hesitate to post again about the recent police shooting incident in Toronto, for a couple of reasons. First, the story has undoubtedly fallen off the news pages in most of the world, and the majority of readers of this blog live outside Canada. Second, it remains a very emotive issue in the Toronto area, and it's very hard to say anything without running the risk of offending someone.
Still and all, this disgraceful opinion piece by Rosie DiManno in today's Toronto Star cannot be allowed to pass unremarked. It's interesting to note that the paper's website is not allowing any reader comments, which suggests that the article may have prompted some intemperate responses.
And it would be hard to be surprised if that were the case. What DiManno has done is to voice the possibility, in the complete and utter absence of even a shred of evidence, that the police officer now facing second degree murder charges, James Forcillo, may have been under the influence of drugs at the time of the shooting. Oh sure, the article says a couple of times, and in bold print yet, that there's no evidence for this, but if that's the case, why run the story? This unsubstantiated insinuation has now been, to use a legal expression, "read into the record", there to sit and fester for the many months it is likely to take for this tragic matter to come to trial.
Lawyers have already warned that Forcillo's defense counsel may attempt to besmirch the character of the victim, Sammy Yatim. Given that Yatim exposed himself on a streetcar and threatened the passengers with a knife, and given that the terrified passenger who summoned the police told the despatcher "a guy on a streetcar just tried to kill me", you might not think such a tactic would be necessary. That hasn't stopped the Star, in particular, from running numerous hagiographic articles about Yatim; now, it seems, they want to tip the scales of justice further by stirring up hatred for the accused.
We see far too much of this garbage in the Toronto Star these days. Toronto Mayor Rob Ford is the paper's favoured target when it comes to smear tactics, but it looks as if Constable Forcillo and his family had better prepare themselves for a steady tide of abuse as the trial date approaches. It's just about the lowest form of journalism, and the Star should be ashamed of itself.
Still and all, this disgraceful opinion piece by Rosie DiManno in today's Toronto Star cannot be allowed to pass unremarked. It's interesting to note that the paper's website is not allowing any reader comments, which suggests that the article may have prompted some intemperate responses.
And it would be hard to be surprised if that were the case. What DiManno has done is to voice the possibility, in the complete and utter absence of even a shred of evidence, that the police officer now facing second degree murder charges, James Forcillo, may have been under the influence of drugs at the time of the shooting. Oh sure, the article says a couple of times, and in bold print yet, that there's no evidence for this, but if that's the case, why run the story? This unsubstantiated insinuation has now been, to use a legal expression, "read into the record", there to sit and fester for the many months it is likely to take for this tragic matter to come to trial.
Lawyers have already warned that Forcillo's defense counsel may attempt to besmirch the character of the victim, Sammy Yatim. Given that Yatim exposed himself on a streetcar and threatened the passengers with a knife, and given that the terrified passenger who summoned the police told the despatcher "a guy on a streetcar just tried to kill me", you might not think such a tactic would be necessary. That hasn't stopped the Star, in particular, from running numerous hagiographic articles about Yatim; now, it seems, they want to tip the scales of justice further by stirring up hatred for the accused.
We see far too much of this garbage in the Toronto Star these days. Toronto Mayor Rob Ford is the paper's favoured target when it comes to smear tactics, but it looks as if Constable Forcillo and his family had better prepare themselves for a steady tide of abuse as the trial date approaches. It's just about the lowest form of journalism, and the Star should be ashamed of itself.
Tuesday 27 August 2013
Learning and earning
The folks at CIBC World Markets are getting a bit of media coverage from a new report that seems to show that the financial benefits of getting a degree in Canada are dwindling, and that young Canadians are not choosing to study the subjects that are likely to bring them the biggest earnings boost when they move out into the job market.
I've no doubt all the numbers in the study are accurate, but the whole thing strikes me as unsatisfactory, on a number of levels. Most basically, it's wrong both for society and for individual students to see education as nothing more than a road to riches.
Let's look at the idea that students are failing to gravitate to the courses of study that will maximise their earnings potential. The CIBC study specifically contrasts engineering and medieval history. (Are you reading this, Linda???) The truth is that the skill sets and interests of people choosing university courses don't allow them to pick from anything on the curriculum.
There are very few people who, even by the age of 18 to 20, would see themselves as being equally competent to study for a degree in either engineering or medieval history. I was pretty good at scientific subjects when I was at high school, and I knew that doctors made good money, but it never occurred to me for even a nanosecond to apply for med school. I simply had no interest in doing that for the rest of my life. In fact, if my only choices back then had been engineering or medieval history, I would definitely have chosen the "wrong " one.
I think it's reasonable to postulate that the reason why doctors and lawyers out-earn the average Canadian, and the reason why more young people don't pursue those subjects at university, are one and the same. Law and medicine require longer and more difficult courses of study than most other subjects. That in itself deters many people from entering them, which serves to push up the rewards for those take on the challenge.
Turning back to the CIBC study, we learn that
The proportion of adults in Canada with a post-secondary education is the highest among all OECD countries, and the cost of that education is roughly double the OECD average. Yet, more and more of those degree holders fall behind in the earnings scale. The share of Canadian university graduates who make less than half the national median income is the largest among all OECD countries.
The first thought that comes into my mind when I read that is "I guess that means we're sending too many people to university". The study shows that it's not quite that simple. Many of the graduates looking for work in Canada are immigrants, with degrees from foreign universities. Those people are frequently unable to find work in their chosen field in Canada -- they're the taxi-driving PhDs that you sometimes hear about -- and that fact tends to pull down average earnings for all people who report themselves as graduates.
Along with that, though, there's the problem that always arises when you use averages and medians to draw conclusions. Think about this: if every Canadian had a degree, then by definition half of all graduates would have to be making less than the median income. The more graduates you produce, the more likely you make it that some will fall below the median in earnings terms. It doesn't mean education is a waste of time and resources, unless (as this study's authors seem to do), you think knowledge and money are virtually equivalent.
This is not just a Canadian issue, by the way. From no less a source than Mark Steyn, quoting a recent piece in the WSJ, we learn that there are over 100,000 janitors in the US with university degrees!
I've no doubt all the numbers in the study are accurate, but the whole thing strikes me as unsatisfactory, on a number of levels. Most basically, it's wrong both for society and for individual students to see education as nothing more than a road to riches.
Let's look at the idea that students are failing to gravitate to the courses of study that will maximise their earnings potential. The CIBC study specifically contrasts engineering and medieval history. (Are you reading this, Linda???) The truth is that the skill sets and interests of people choosing university courses don't allow them to pick from anything on the curriculum.
There are very few people who, even by the age of 18 to 20, would see themselves as being equally competent to study for a degree in either engineering or medieval history. I was pretty good at scientific subjects when I was at high school, and I knew that doctors made good money, but it never occurred to me for even a nanosecond to apply for med school. I simply had no interest in doing that for the rest of my life. In fact, if my only choices back then had been engineering or medieval history, I would definitely have chosen the "wrong " one.
I think it's reasonable to postulate that the reason why doctors and lawyers out-earn the average Canadian, and the reason why more young people don't pursue those subjects at university, are one and the same. Law and medicine require longer and more difficult courses of study than most other subjects. That in itself deters many people from entering them, which serves to push up the rewards for those take on the challenge.
Turning back to the CIBC study, we learn that
The proportion of adults in Canada with a post-secondary education is the highest among all OECD countries, and the cost of that education is roughly double the OECD average. Yet, more and more of those degree holders fall behind in the earnings scale. The share of Canadian university graduates who make less than half the national median income is the largest among all OECD countries.
The first thought that comes into my mind when I read that is "I guess that means we're sending too many people to university". The study shows that it's not quite that simple. Many of the graduates looking for work in Canada are immigrants, with degrees from foreign universities. Those people are frequently unable to find work in their chosen field in Canada -- they're the taxi-driving PhDs that you sometimes hear about -- and that fact tends to pull down average earnings for all people who report themselves as graduates.
Along with that, though, there's the problem that always arises when you use averages and medians to draw conclusions. Think about this: if every Canadian had a degree, then by definition half of all graduates would have to be making less than the median income. The more graduates you produce, the more likely you make it that some will fall below the median in earnings terms. It doesn't mean education is a waste of time and resources, unless (as this study's authors seem to do), you think knowledge and money are virtually equivalent.
This is not just a Canadian issue, by the way. From no less a source than Mark Steyn, quoting a recent piece in the WSJ, we learn that there are over 100,000 janitors in the US with university degrees!
Sunday 25 August 2013
Unhealthy
The US Congress doesn't seem to be doing very much these days, or at least, it's doing nothing linked to its supposed raison d'etre. Partisanship is at an all time high. Republicans are terrified of being unseated by Tea Party activists, and so are moving hard to the right; Democrats are rallying around President Obama, while secretly nursing thoughts that alas, he's turning (or has already turned) into a bit of a letdown.
About the only thing that is happening in Congress is a relentless campaign by the Republicans to repeal or sabotage the Affordable Care Act, more commonly known as Obamacare. The Democrats repeatedly knock these attempts back, so it's all completely pointless, but there's no prospect of it stopping any time soon.
It's hard to find any Republican in Congress who can articulate just what it is that the party so hates about Obamacare, aside from the Obama part. And actually, a lot of it wasn't even Obama's idea in the first place. He borrowed a lot of it from the health plan that Mitt Romney introduced when he was Governor of Massachusetts, though that's not something that Mitt can afford to take any credit for now, unless he wants the Tea Party hounding him out of politics.
For insights into the right's "thinking" we have to turn to the commentariat. One columnist on healthcare who's never short of an opinion (though often short of facts) is Mark Steyn. He has possibly penned more misleading and outright mendacious words on this topic than on any other in recent years, which is really saying something.
I know it's bad form to quote yourself, but here's something I wrote in response to a Steyn piece back in July 2009, before Obamacare made it onto the statute books:
Steyn is spectacularly (and maybe deliberately) missing the point of Obama's reforms. He notes that life expectancies are very similar not only in the US and "socialized" Europe, but even in countries such as Bosnia/Herzegovina. His take on this fact is that there would be no real health benefit for the US in moving toward a more European health care model. But surely the real question is this: if Bosnia achieves a life expectancy of 78 years while spending a small percentage of its small GDP on health care, what good does it do the US to spend 16% of its much higher GDP to achieve the exact same outcome?
Steyn's back at it again this week, in his regular column on National Review Online. A lot of it is the usual knockabout stuff, but this paragraph really jumped out at me:
The parallel public/private systems of Continental Europe cost about 10 percent of GDP. The Obamacare monstrosity blends all the worst aspects of a private system (bureaucracy, restricted access, co-pays) with all the worst aspects of a government system (bureaucracy, restricted access, IRS agents) and sucks up twice as much GDP, ever less of which is spent on “health care” and ever more on the intervening layers of third, fourth, fifth, and sixth parties.
I don't know how that reads to you, but to me it seems as if Steyn is contriving to lay the blame for the bloated cost of the US healthcare system on Obamacare That's nothing short of outrageous, though very much par for the course where Steyn et al are concerned.
Obamacare is starting to have some perverse and undesirable effects, as Steyn is quick to point out. Most notably, workers at the lower end of the pay scale are finding their terms of employment are being manipulated so that their employers don't have to take on the burden of contributing to their health care. But if, as it appears, the authors of the Affordable Care Act underestimated the venality of the business sector, is that a reason to conclude that no reform of the health care system should be attempted?
Even Steyn does not appear to want to go that far. In his final paragraph, he bemoans the total absence of any real thinking on the subject on the part of the Republicans. And he muses about whether Obamacare might have been set up to fail, so that voters would be ready to embrace "single payer health care" (i.e, a government system) by the time the 2016 election rolls around. That's far-fetched, but as an aging population puts ever more pressure on already bloated US health care costs, something almost as drastic is going to have to be done, sooner rather than later
About the only thing that is happening in Congress is a relentless campaign by the Republicans to repeal or sabotage the Affordable Care Act, more commonly known as Obamacare. The Democrats repeatedly knock these attempts back, so it's all completely pointless, but there's no prospect of it stopping any time soon.
It's hard to find any Republican in Congress who can articulate just what it is that the party so hates about Obamacare, aside from the Obama part. And actually, a lot of it wasn't even Obama's idea in the first place. He borrowed a lot of it from the health plan that Mitt Romney introduced when he was Governor of Massachusetts, though that's not something that Mitt can afford to take any credit for now, unless he wants the Tea Party hounding him out of politics.
For insights into the right's "thinking" we have to turn to the commentariat. One columnist on healthcare who's never short of an opinion (though often short of facts) is Mark Steyn. He has possibly penned more misleading and outright mendacious words on this topic than on any other in recent years, which is really saying something.
I know it's bad form to quote yourself, but here's something I wrote in response to a Steyn piece back in July 2009, before Obamacare made it onto the statute books:
Steyn is spectacularly (and maybe deliberately) missing the point of Obama's reforms. He notes that life expectancies are very similar not only in the US and "socialized" Europe, but even in countries such as Bosnia/Herzegovina. His take on this fact is that there would be no real health benefit for the US in moving toward a more European health care model. But surely the real question is this: if Bosnia achieves a life expectancy of 78 years while spending a small percentage of its small GDP on health care, what good does it do the US to spend 16% of its much higher GDP to achieve the exact same outcome?
Steyn's back at it again this week, in his regular column on National Review Online. A lot of it is the usual knockabout stuff, but this paragraph really jumped out at me:
The parallel public/private systems of Continental Europe cost about 10 percent of GDP. The Obamacare monstrosity blends all the worst aspects of a private system (bureaucracy, restricted access, co-pays) with all the worst aspects of a government system (bureaucracy, restricted access, IRS agents) and sucks up twice as much GDP, ever less of which is spent on “health care” and ever more on the intervening layers of third, fourth, fifth, and sixth parties.
I don't know how that reads to you, but to me it seems as if Steyn is contriving to lay the blame for the bloated cost of the US healthcare system on Obamacare That's nothing short of outrageous, though very much par for the course where Steyn et al are concerned.
Obamacare is starting to have some perverse and undesirable effects, as Steyn is quick to point out. Most notably, workers at the lower end of the pay scale are finding their terms of employment are being manipulated so that their employers don't have to take on the burden of contributing to their health care. But if, as it appears, the authors of the Affordable Care Act underestimated the venality of the business sector, is that a reason to conclude that no reform of the health care system should be attempted?
Even Steyn does not appear to want to go that far. In his final paragraph, he bemoans the total absence of any real thinking on the subject on the part of the Republicans. And he muses about whether Obamacare might have been set up to fail, so that voters would be ready to embrace "single payer health care" (i.e, a government system) by the time the 2016 election rolls around. That's far-fetched, but as an aging population puts ever more pressure on already bloated US health care costs, something almost as drastic is going to have to be done, sooner rather than later
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