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.
Friday, 30 August 2013
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
Wednesday, 21 August 2013
Second thoughts
With all the controversy surrounding the upper chamber of the Canadian Parliament lately, this headline in today's Toronto Star looked promising:
"SENATOR TO RENOUNCE CANADIAN CITIZENSHIP"
Wow! Must be Senator Pamela Wallin, the most famous citizen of Wadena, Saskatchewan. Pam had a lengthy career in the media, first as a TV journalist, then later as host for the Canadian version of "Who wants to be a millionaire?" Evidently she pondered that question for a moment and decided the answer was "Pamela Wallin", because about a decade ago she left the hard grind of network television and embarked on a remarkable series of public sector boondoggles.
For a few years she was Canada's consul-general (aka chief cocktail party hostess) in New York; then she became Chancellor of the University of Guelph. But the big score came in January 2009, when she was appointed by PM Stephen Harper to serve in the Canadian Senate. Enthusiastically travelling between Ottawa, Wadena, Guelph and Toronto, Pam ran up some hefty bills on the taxpayers' account. Sadly, her accounting standards were a bit slipshod, and she now faces repaying at least $120,000 to the Treasury. Worse, the file has been handed to the Mounties, which could result in a criminal prosecution for fraud.
Oh, it's not Pam? Then it must be Senator Mike Duffy, another vertically challenged ex-TV journalist appointed to the Senate by Harper in January 2009. Mike has also fallen foul of the expense watchdogs to the tune of six figures. In contrast to Pamela Wallin, he has already paid some of the money back -- or rather, it's been paid back for him, as a favor, by one of Harper's personal staff, who has since had to resign. We are, of course, assured that the PM himself knew nothing of this remarkable act of charity.
Not Mike either? Senator Patrick Brazeau must be the man, then -- another of Harper's slate of new appointees from January 2009. Like Pam and Mike, Patrick has problems keeping track of how he spends public money, but he's also facing a couple of charges of inappropriate sexual behavior.
Not Patrick, you say? Then it must be Senator Mac Harb, yet another Harper appointee with no math skills. ...
Oh wait, now I get it. Sadly, it's not a Canadian Senator at all. The headline refers to Texas Republican senator and Tea Party favorite, Ted Cruz. Ted has discovered, to his evident embarrassment, that he was actually born in Calgary. That's easily the most American city in Canada, but Ted needs more than that. He's reported to be considering a run for the White House, so he's in a big rush to renounce his Canadian citizenship before any Democrat "birther" movement gets going and starts to claim he's ineligible.
I wouldn't be too worried if I were Ted. Renouncing his Canadian citizenship will only take a few months, and he can be 100% certain that the US Senate will still be there when the process is complete. The Canadian Senate, maybe not so much. Having thoroughly poisoned the place by packing it with his innumerate cronies, PM Harper may well campaign to abolish it, on the grounds that it's irremediably corrupt!
"SENATOR TO RENOUNCE CANADIAN CITIZENSHIP"
Wow! Must be Senator Pamela Wallin, the most famous citizen of Wadena, Saskatchewan. Pam had a lengthy career in the media, first as a TV journalist, then later as host for the Canadian version of "Who wants to be a millionaire?" Evidently she pondered that question for a moment and decided the answer was "Pamela Wallin", because about a decade ago she left the hard grind of network television and embarked on a remarkable series of public sector boondoggles.
For a few years she was Canada's consul-general (aka chief cocktail party hostess) in New York; then she became Chancellor of the University of Guelph. But the big score came in January 2009, when she was appointed by PM Stephen Harper to serve in the Canadian Senate. Enthusiastically travelling between Ottawa, Wadena, Guelph and Toronto, Pam ran up some hefty bills on the taxpayers' account. Sadly, her accounting standards were a bit slipshod, and she now faces repaying at least $120,000 to the Treasury. Worse, the file has been handed to the Mounties, which could result in a criminal prosecution for fraud.
Oh, it's not Pam? Then it must be Senator Mike Duffy, another vertically challenged ex-TV journalist appointed to the Senate by Harper in January 2009. Mike has also fallen foul of the expense watchdogs to the tune of six figures. In contrast to Pamela Wallin, he has already paid some of the money back -- or rather, it's been paid back for him, as a favor, by one of Harper's personal staff, who has since had to resign. We are, of course, assured that the PM himself knew nothing of this remarkable act of charity.
Not Mike either? Senator Patrick Brazeau must be the man, then -- another of Harper's slate of new appointees from January 2009. Like Pam and Mike, Patrick has problems keeping track of how he spends public money, but he's also facing a couple of charges of inappropriate sexual behavior.
Not Patrick, you say? Then it must be Senator Mac Harb, yet another Harper appointee with no math skills. ...
Oh wait, now I get it. Sadly, it's not a Canadian Senator at all. The headline refers to Texas Republican senator and Tea Party favorite, Ted Cruz. Ted has discovered, to his evident embarrassment, that he was actually born in Calgary. That's easily the most American city in Canada, but Ted needs more than that. He's reported to be considering a run for the White House, so he's in a big rush to renounce his Canadian citizenship before any Democrat "birther" movement gets going and starts to claim he's ineligible.
I wouldn't be too worried if I were Ted. Renouncing his Canadian citizenship will only take a few months, and he can be 100% certain that the US Senate will still be there when the process is complete. The Canadian Senate, maybe not so much. Having thoroughly poisoned the place by packing it with his innumerate cronies, PM Harper may well campaign to abolish it, on the grounds that it's irremediably corrupt!
Tuesday, 13 August 2013
Banking Bad
When I can tear myself away from binge-watching Breaking Bad, I've been using Netflix to catch up on some interesting documentaries. I started with Searching for Sugar Man, which tells the unlikely tale of Sixto Rodriguez, a long-forgotten American folkie who has always been massively popular in South Africa, but nowhere else. Rodriguez is from Detroit, so Netflix then directed me towards Detropia, a gloomy but compelling analysis of the decline of the Motor City.
And from there I was directed to Inside Job, an Oscar-winning diatribe about the financial crisis, narrated by Matt Damon. It's a few years old now -- Dominique Strauss-Kahn was still at the IMF when the film was made, rather than helping innumerable police forces with their inquiries, and Christine Lagarde was still in the French government, not at the IMF -- but it still packs a punch. The narrative of how the crisis unfolded is still all too familiar, but the movie tells it clearly and concisely. You won't get as deep an analysis as you would from, for example, Michael Lewis's The Big Short -- there are plenty of CDOs in Inside Job, but the film's makers seem to have decided that synthetic CDOs were maybe a step too far -- but there are no obvious blunders.
The film's director and writer, Charles Ferguson, uses a lot of talking heads to move the story along. These are mostly people who are very happy to take the opportunity to castigate Wall Streeters: Eliot Spitzer features prominently, for example. People who might have defended Wall Street or its regulators proved rather harder to nail down, and one of Ferguson's most effective techniques is to name and shame them: "Alan Greenspan declined to be interviewed for this film"; "Lloyd Blankfein declined to be interviewed for this film" and so on, many times over.
It has to be said, though, that those who "declined to be interviewed" are unlikely to have many regrets, because most of those who did venture in front of the camera to defend the financial sector were roughed up very badly. There's former Dallas Fed boss Frederic Mishkin, for example, who resigned from the Fed at the end of August 2008, just as the crisis was coming to a head, because "I had a textbook to revise"! Mishkin comes across as shifty and, to be frank, a total lightweight*. Or there's Glenn Hubbard of Columbia Business School (and the Council of Economic Advisers), who bristles at the tough questions and barks at Ferguson "You've got three minutes! Give it your best shot!"
Much of this ground has been covered extensively by other writers and film makers. The closest thing Ferguson has to an original contribution is his exposition of how academic economists have sold their souls to Wall Street in exchange for massive consulting fees. In addition to the aforementioned Messrs Mishkin and Hubbard, Ferguson managed to inveigle Martin Feldstein in front of the camera, where he did himself very few favours. Others named by Ferguson, including the biggest kahuna of all, Larry Summers, "declined to be interviewed".
Ferguson demonstrates very effectively that none of these folk, nor any of the bankers who paid (and continue to pay) big consulting fees for their services, feels any responsibility, let alone remorse, still less guilt, over the dire consequences of their actions. By and large they're still on the job, and back to business as usual. Ferguson notes that the only person closely involved in the crisis to have been run out of town is Eliot Spitzer, and that was in connection with his personal life, rather than with the crisis as such.
With the Obama administration failing almost totally to deliver on its promises of regulatory reform, the world is relying on the promises of the bankers that they've learned their lessons, and won't do it again. If you've watched as much Breaking Bad as I have, you'll have heard Walter White make the same kind of promise many times -- and you'll know how much you can believe it.
*I was tempted to say "Idiot", but I don't know how many readers I share with Dostoevsky.
And from there I was directed to Inside Job, an Oscar-winning diatribe about the financial crisis, narrated by Matt Damon. It's a few years old now -- Dominique Strauss-Kahn was still at the IMF when the film was made, rather than helping innumerable police forces with their inquiries, and Christine Lagarde was still in the French government, not at the IMF -- but it still packs a punch. The narrative of how the crisis unfolded is still all too familiar, but the movie tells it clearly and concisely. You won't get as deep an analysis as you would from, for example, Michael Lewis's The Big Short -- there are plenty of CDOs in Inside Job, but the film's makers seem to have decided that synthetic CDOs were maybe a step too far -- but there are no obvious blunders.
The film's director and writer, Charles Ferguson, uses a lot of talking heads to move the story along. These are mostly people who are very happy to take the opportunity to castigate Wall Streeters: Eliot Spitzer features prominently, for example. People who might have defended Wall Street or its regulators proved rather harder to nail down, and one of Ferguson's most effective techniques is to name and shame them: "Alan Greenspan declined to be interviewed for this film"; "Lloyd Blankfein declined to be interviewed for this film" and so on, many times over.
It has to be said, though, that those who "declined to be interviewed" are unlikely to have many regrets, because most of those who did venture in front of the camera to defend the financial sector were roughed up very badly. There's former Dallas Fed boss Frederic Mishkin, for example, who resigned from the Fed at the end of August 2008, just as the crisis was coming to a head, because "I had a textbook to revise"! Mishkin comes across as shifty and, to be frank, a total lightweight*. Or there's Glenn Hubbard of Columbia Business School (and the Council of Economic Advisers), who bristles at the tough questions and barks at Ferguson "You've got three minutes! Give it your best shot!"
Much of this ground has been covered extensively by other writers and film makers. The closest thing Ferguson has to an original contribution is his exposition of how academic economists have sold their souls to Wall Street in exchange for massive consulting fees. In addition to the aforementioned Messrs Mishkin and Hubbard, Ferguson managed to inveigle Martin Feldstein in front of the camera, where he did himself very few favours. Others named by Ferguson, including the biggest kahuna of all, Larry Summers, "declined to be interviewed".
Ferguson demonstrates very effectively that none of these folk, nor any of the bankers who paid (and continue to pay) big consulting fees for their services, feels any responsibility, let alone remorse, still less guilt, over the dire consequences of their actions. By and large they're still on the job, and back to business as usual. Ferguson notes that the only person closely involved in the crisis to have been run out of town is Eliot Spitzer, and that was in connection with his personal life, rather than with the crisis as such.
With the Obama administration failing almost totally to deliver on its promises of regulatory reform, the world is relying on the promises of the bankers that they've learned their lessons, and won't do it again. If you've watched as much Breaking Bad as I have, you'll have heard Walter White make the same kind of promise many times -- and you'll know how much you can believe it.
*I was tempted to say "Idiot", but I don't know how many readers I share with Dostoevsky.
Wednesday, 7 August 2013
Carney's straitjacket
Well, that was certainly unexpected! Bank of England Governor Mark Carney introduced his much-awaited "forward guidance" framework for interest rates today, and basically made the unemployment rate the primary determinant of policy. Carney effectively committed the Bank to keeping interest rates at rock bottom levels until unemployment falls below 7 percent.
The UK's current official unemployment rate is 7.8 percent. Given the continuing relatively sluggish recovery in the economy -- which is still smaller than it was before the financial crisis hit -- Carney's commitment has convinced most commentators that official rates will stay low until at least 2016. It could even be longer if productivity starts to rise as the recovery picks up steam.
The Bank's new approach is not unique. The US Federal Reserve has always had a twin mandate of preserving the value of the currency and keeping the economy strong. In recent months, Chairman Ben Bernanke has repeatedly stressed that the Fed will only start to tighten its policy settings (initially by "tapering" quantitative easing) when US unemployment falls to a more acceptable level: the figure normally cited, as in the UK, is 7 percent.
Like the US, the UK has its own QE program in place, and as in the US, the first stage in withdrawing monetary stimulus was always likely to be a reduction in the scale of that program. Since that will have to be done with great caution in order to avoid spooking the markets, it has always been clear that actual increases in rates are some way ahead.
From that perspective, Carney's commitment today may not be as much of a sea-change as some are suggesting. However, it is surprising to find a banker as canny as Carney tying his own hands in this way, particularly when, as many of the readers commenting on the linked article have noted, the unemployment rate is such a flawed measure of the state of the labour market. Interestingly, Chancellor George Osborne has welcomed Carney's announcement, even though he and most of his predecessors have generally preferred to focus on the alternative "claimant count" measure of joblessness. Unsurprisingly, the claimant count numbers normally make the government of the day look better than the unemployment rate does.
It's possible that Carney has sown the seeds for future problems here. He has made it clear that the Bank reserves the right to start raising rates with unemployment above 7 percent, if it concludes that the pace of GDP growth is responsible for pushing inflation above 2.5%. This opens up a whole new field of speculation for bank watchers: "inflation is pushing higher, but does Carney think that's because of GDP growth or is it a result of one-off factors?" Conversely, what if unemployment falls to 7 percent but measured inflation remains below target? Will Carney feel obliged to raise rates in order to maintain credibility?
Canada's National Post has rather cruelly reported that Carney has "befuddled" Britain with today's announcement. That seems unduly harsh, but it will be some considerable time to discover whether today's choice of "the road less taken" is too clever by half.
UPDATE, 9 August: Looks as if Jeremy Warner at the Telegraph agrees with me.
The UK's current official unemployment rate is 7.8 percent. Given the continuing relatively sluggish recovery in the economy -- which is still smaller than it was before the financial crisis hit -- Carney's commitment has convinced most commentators that official rates will stay low until at least 2016. It could even be longer if productivity starts to rise as the recovery picks up steam.
The Bank's new approach is not unique. The US Federal Reserve has always had a twin mandate of preserving the value of the currency and keeping the economy strong. In recent months, Chairman Ben Bernanke has repeatedly stressed that the Fed will only start to tighten its policy settings (initially by "tapering" quantitative easing) when US unemployment falls to a more acceptable level: the figure normally cited, as in the UK, is 7 percent.
Like the US, the UK has its own QE program in place, and as in the US, the first stage in withdrawing monetary stimulus was always likely to be a reduction in the scale of that program. Since that will have to be done with great caution in order to avoid spooking the markets, it has always been clear that actual increases in rates are some way ahead.
From that perspective, Carney's commitment today may not be as much of a sea-change as some are suggesting. However, it is surprising to find a banker as canny as Carney tying his own hands in this way, particularly when, as many of the readers commenting on the linked article have noted, the unemployment rate is such a flawed measure of the state of the labour market. Interestingly, Chancellor George Osborne has welcomed Carney's announcement, even though he and most of his predecessors have generally preferred to focus on the alternative "claimant count" measure of joblessness. Unsurprisingly, the claimant count numbers normally make the government of the day look better than the unemployment rate does.
It's possible that Carney has sown the seeds for future problems here. He has made it clear that the Bank reserves the right to start raising rates with unemployment above 7 percent, if it concludes that the pace of GDP growth is responsible for pushing inflation above 2.5%. This opens up a whole new field of speculation for bank watchers: "inflation is pushing higher, but does Carney think that's because of GDP growth or is it a result of one-off factors?" Conversely, what if unemployment falls to 7 percent but measured inflation remains below target? Will Carney feel obliged to raise rates in order to maintain credibility?
Canada's National Post has rather cruelly reported that Carney has "befuddled" Britain with today's announcement. That seems unduly harsh, but it will be some considerable time to discover whether today's choice of "the road less taken" is too clever by half.
UPDATE, 9 August: Looks as if Jeremy Warner at the Telegraph agrees with me.
Tuesday, 6 August 2013
Let's all freeze in the dark!
These are tough times for anyone wanting to keep the lights on in Canada. Anti-nuclear activists are opposing plans to extend the life of some of Ontario's aging fleet of reactors. The (self-appointed, unelected) Council of Canadians vows to oppose a pipeline to bring Alberta oil to Quebec and Atlantic Canada (or any other pipeline, anywhere, for that matter). Moving oil by train just got a whole lot more difficult, as a result of the disastrous and tragic derailment in Lac-Megantic. NIMBYs and craven politicians ensure that gas-fired generating plants can no longer be sited in urban areas, where the power is actually needed.
Still, we can always count on renewables, right? I mean, the environmentalists love those, don't they? Well, maybe not. Check out this story about how a group of green NIMBYs is trying to scupper plans for wind and solar power generation in a semi-wilderness area north of Toronto, because they don't like the way that stuff looks.
Now, I'm no fan of wind power, which might just be the least practical form of renewable energy. As even the greens are starting to notice, the turbines are uglier than sin. The wind never blows at the right time and storing the power is problematic, so you have to build conventional power plants to provide backup capacity, which is mighty expensive. Still, Canada is a country of climate extremes. You need heat to live here in the winter, and in most places you need cooling to function in the summer. If every conceivable method of generating power is going to run into opposition from one quarter or another, then there are about 35 million of us who are going to start wishing ourselves away.
Maybe the most telling part of the linked story is the very last line: "Development is development whether it has been painted with a green brush or not". Ah, there you have it. Remember this old quip?
What's the difference between a developer and an environmentalist? A developer is someone who wants to build a cabin in the woods. An environmentalist is someone who already has one.
Still, we can always count on renewables, right? I mean, the environmentalists love those, don't they? Well, maybe not. Check out this story about how a group of green NIMBYs is trying to scupper plans for wind and solar power generation in a semi-wilderness area north of Toronto, because they don't like the way that stuff looks.
Now, I'm no fan of wind power, which might just be the least practical form of renewable energy. As even the greens are starting to notice, the turbines are uglier than sin. The wind never blows at the right time and storing the power is problematic, so you have to build conventional power plants to provide backup capacity, which is mighty expensive. Still, Canada is a country of climate extremes. You need heat to live here in the winter, and in most places you need cooling to function in the summer. If every conceivable method of generating power is going to run into opposition from one quarter or another, then there are about 35 million of us who are going to start wishing ourselves away.
Maybe the most telling part of the linked story is the very last line: "Development is development whether it has been painted with a green brush or not". Ah, there you have it. Remember this old quip?
What's the difference between a developer and an environmentalist? A developer is someone who wants to build a cabin in the woods. An environmentalist is someone who already has one.
Friday, 2 August 2013
All Maude cons
The wikipedia entry for Maude Barlow describes her as a "Canadian author and activist". Politicians across the country who have had to deal with her over the past three decades or so might have a less flattering description: busybody, perhaps. Maude has a left-leaning, nationalist and politically correct opinion to offer about any subject you'd care to name. She styles herself as "voluntary Chair" of something called the Council of Canadians, which was founded by, er, Maude Barlow, and is in fact little more than a vehicle for amplifying her voice in the public forum, as even a cursory glance at its all Maude, all the time website would confirm.
Last week, the Premiers of Canada's provinces and territories pitched up in our little town for their annual conference. Maude organised a demonstration in support of universal public health care. This is something most Canadians support, and Maude bused in a couple of thousand retired trade unionists to wave placards outside the conference site.
Fair enough, except for two things. First, Maude's beef in this particular case is actually with the Federal government, which wasn't represented at the conference. Second -- and this appears to have been a pure gaffe -- the main demonstration outside the conference centre took place at an hour when the Premiers were not actually there. They were having lunch at a winery just outside town. Talk about sound and fury signifying nothing! It was little more than a photo op for Maude and her cronies, and not a very successful one at that -- the demo merited nary a mention in the national press and scarcely any more in the local rag.
Unabashed, Maude is on to a new crusade this week, against a plan to build an oil pipeline from Alberta to New Brunswick. On a net basis, Canada is self sufficient in oil, but because of the country's vast scale, it has historically made sense to import oil for refineries in Quebec and the Atlantic provinces. The planned refinery would put an end to that. Since Alberta oil currently trades at a big discount to internationally-traded crude, because of the lack of pipelines to get the stuff to market, there would be a big tax windfall for the Alberta and federal governments if the pipeline were built, plus a lot of jobs created by the construction itself.
Sounds like a win-win proposition, provided the pipeline is built and operated to the correct standards, right? Not according to Maude, who has announced her intention to organise a national campaign against it. Maude doesn't believe that the company involved, TransCanada Corp, really wants to supply refineries in Eastern Canada. As the Council of Canadians website puts it: The 4,400 kilometre pipeline is expected to lead to massive tanker exports from Atlantic coast to send crude to the much larger and more profitable markets of India, China and Europe.
"Expected" by whom, exactly? No doubt oil companies can make some pretty dumb decisions. But it's a bit difficult to see why TransCanada would spend $12 billion to build a pipeline several thousand kilometres in the wrong direction if its goal was to ship the oil to China and India. There's also little doubt that if the pipeline were built, the discount currently applicable to Alberta crude would be arb'd away, with the result that sales outside Canada would no longer be more profitable than sales within the country.
Whether Maude and her Council like it or not, Canada's economy is more dependent than ever on natural resources. That in turn means that the universal "free" healthcare she and they were lobbying for just last week is similarly dependent on the tax take from those resources. Winding the clock back to the bucolic, poorer and much less populous Canada of a half century ago is no longer an option -- or certainly not one that most Canadians would support.
And that may be the most interesting thing about Maude Barlow. She has never sought election to public office, so the degree of public acceptance of her often wacky views has never been put to the test. Imagine that.
Last week, the Premiers of Canada's provinces and territories pitched up in our little town for their annual conference. Maude organised a demonstration in support of universal public health care. This is something most Canadians support, and Maude bused in a couple of thousand retired trade unionists to wave placards outside the conference site.
Fair enough, except for two things. First, Maude's beef in this particular case is actually with the Federal government, which wasn't represented at the conference. Second -- and this appears to have been a pure gaffe -- the main demonstration outside the conference centre took place at an hour when the Premiers were not actually there. They were having lunch at a winery just outside town. Talk about sound and fury signifying nothing! It was little more than a photo op for Maude and her cronies, and not a very successful one at that -- the demo merited nary a mention in the national press and scarcely any more in the local rag.
Unabashed, Maude is on to a new crusade this week, against a plan to build an oil pipeline from Alberta to New Brunswick. On a net basis, Canada is self sufficient in oil, but because of the country's vast scale, it has historically made sense to import oil for refineries in Quebec and the Atlantic provinces. The planned refinery would put an end to that. Since Alberta oil currently trades at a big discount to internationally-traded crude, because of the lack of pipelines to get the stuff to market, there would be a big tax windfall for the Alberta and federal governments if the pipeline were built, plus a lot of jobs created by the construction itself.
Sounds like a win-win proposition, provided the pipeline is built and operated to the correct standards, right? Not according to Maude, who has announced her intention to organise a national campaign against it. Maude doesn't believe that the company involved, TransCanada Corp, really wants to supply refineries in Eastern Canada. As the Council of Canadians website puts it: The 4,400 kilometre pipeline is expected to lead to massive tanker exports from Atlantic coast to send crude to the much larger and more profitable markets of India, China and Europe.
"Expected" by whom, exactly? No doubt oil companies can make some pretty dumb decisions. But it's a bit difficult to see why TransCanada would spend $12 billion to build a pipeline several thousand kilometres in the wrong direction if its goal was to ship the oil to China and India. There's also little doubt that if the pipeline were built, the discount currently applicable to Alberta crude would be arb'd away, with the result that sales outside Canada would no longer be more profitable than sales within the country.
Whether Maude and her Council like it or not, Canada's economy is more dependent than ever on natural resources. That in turn means that the universal "free" healthcare she and they were lobbying for just last week is similarly dependent on the tax take from those resources. Winding the clock back to the bucolic, poorer and much less populous Canada of a half century ago is no longer an option -- or certainly not one that most Canadians would support.
And that may be the most interesting thing about Maude Barlow. She has never sought election to public office, so the degree of public acceptance of her often wacky views has never been put to the test. Imagine that.
Thursday, 1 August 2013
Taper caper
The biggest question in the minds of financial market participants now is, "when will the Fed (and the ECB and Bank of England) start to "taper" the extraordinary monetary policy accommodation that we've grown used to over the past half decade? The Fed statement after this week's meeting gave no explicit clues, but it's clear they're thinking hard about it, and probably won't wait much longer.
The recent data flow in the US has been generally positive, though hardly robust. Estimates of GDP growth in Q2 were higher than expected, despite the effects of the spending sequester. Moreover, extensive revisions show that the recession a few years back was less severe than originally thought, and the subsequent recovery just slightly faster. One implication of this is that there may be a bit less slack in the economy than policymakers had assumed, which has implications for inflation risks. House prices are rising at the fastest rate since before the bubble burst in 2007.
Against this background, the Fed's key commitment is this: When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Most market participants continue to assume that the "taper" process will begin in September. The Fed's statement leaves no room for doubt that it will act cautiously, at least at the outset. This seems to have calmed equity markets, which reacted very badly when the Fed first began to muse about removing stimulus, back in May. The resilience of equity markets will make it easier for the Fed to "sell" the switch to a less stimulative stance, once it decides to make its move.
One element of the Fed's rhetoric still gives rise to a slight queasiness. Its concerns over inflation continue to be more focused on the risks posed by it being too low, rather than the threat of it suddenly moving higher. For many years the Greenspan Fed was complacent about inflation, and willing to persist with accommodative monetary policy, while ignoring the disastrous build-up in mispriced risk in the financial system that its cheap money creation had spawned. Given the lack of any real progress in improving financial market regulation and the lack of any apparent contrition on the part of bankers, the risk of another bout of financial instability needs to be taken seriously by the Fed.
Meanwhile, across the Atlantic, both the Bank of England and the ECB have kept rates unchanged yet again. However, there are growing signs that the UK economy is rapidly gaining momentum -- see this almost breathless story for the latest evidence. And there's even hope for the beleaguered Eurozone, with improvements reported in employment, manufacturing output and business sentiment. If the Fed does indeed start to change course in September, others may not be too far behind.
The recent data flow in the US has been generally positive, though hardly robust. Estimates of GDP growth in Q2 were higher than expected, despite the effects of the spending sequester. Moreover, extensive revisions show that the recession a few years back was less severe than originally thought, and the subsequent recovery just slightly faster. One implication of this is that there may be a bit less slack in the economy than policymakers had assumed, which has implications for inflation risks. House prices are rising at the fastest rate since before the bubble burst in 2007.
Against this background, the Fed's key commitment is this: When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Most market participants continue to assume that the "taper" process will begin in September. The Fed's statement leaves no room for doubt that it will act cautiously, at least at the outset. This seems to have calmed equity markets, which reacted very badly when the Fed first began to muse about removing stimulus, back in May. The resilience of equity markets will make it easier for the Fed to "sell" the switch to a less stimulative stance, once it decides to make its move.
One element of the Fed's rhetoric still gives rise to a slight queasiness. Its concerns over inflation continue to be more focused on the risks posed by it being too low, rather than the threat of it suddenly moving higher. For many years the Greenspan Fed was complacent about inflation, and willing to persist with accommodative monetary policy, while ignoring the disastrous build-up in mispriced risk in the financial system that its cheap money creation had spawned. Given the lack of any real progress in improving financial market regulation and the lack of any apparent contrition on the part of bankers, the risk of another bout of financial instability needs to be taken seriously by the Fed.
Meanwhile, across the Atlantic, both the Bank of England and the ECB have kept rates unchanged yet again. However, there are growing signs that the UK economy is rapidly gaining momentum -- see this almost breathless story for the latest evidence. And there's even hope for the beleaguered Eurozone, with improvements reported in employment, manufacturing output and business sentiment. If the Fed does indeed start to change course in September, others may not be too far behind.
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