Yesterday evening saw the first debate for the upcoming Toronto mayoral election. Incumbent Rob Ford squared off against four of his main rivals, and by all accounts did quite well. Ford's new BFF, Jimmy Kimmel, tweeted in amazement that the sweaty, oafish Ford "is JFK compared to some of these candidates".
Guess when the election is. October 27th! That's right -- seven months from now. Torontonians, and the rest of us covered by that city's TV stations, have so much to look forward to. There could be over a hundred candidates' debates before election day, though mercifully, only a few of them will make it onto the airwaves.
For senior levels of government in Canada, the setting of election dates follows the UK practice. A government has a maximum term in office -- generally five years -- but the actual timing of the elections is chosen by the government of the day. Federal and Provincial election campaigns tend to be relatively short. Municipal elections, in contrast, have fixed election dates, which encourages the kind of ludicrously long campaign season that's now underway in Toronto -- and in other municipalities, of course, but none of them has Rob Ford to contend with, so the interest level is much lower.
American commentators are routinely amazed that incumbent politicians in Canada and the UK get to choose when they face the electorate. However, the system of fixed election dates and relatively short terms in office, as seen in the United States, has downsides of its own. It's always campaign season, and when the major parties are particularly polarized, as they are at present, it becomes all but impossible to get any actual governing done. In Toronto, where Ford is a uniquely polarizing figure, the same is true. Effective governance became all but impossible by the middle of last year, as the scandals surrounding the mayor intensified, and it's impossible to imagine anything other than a ghastly political knife fight in the city until after election date.
It's way too late for change now, of course, but it would surely make sense to disallow candidates from campaigning until after Labour Day. Or would it? The candidates would find ways around any such rules, and a ban on early campaigning would surely give a clear advantage to the incumbent, given his higher public profile.
So, is the UK-derived system of flexible election dates preferable? It certainly means the official campaigns are shorter, but that doesn't prevent the parties from out-of-season mudslinging. Right now the federal Tories are running a vicious series of TV spots suggesting that Liberal leader Justin Trudeau is "in way over his head".
Even worse -- because the voters are paying for them -- are the ostensibly public service-oriented ads that are in truth nakedly political. The federal government is constantly touting its so-called "economic action plan", featuring a bar of the national anthem turned into an annoying jingle. The Ontario government's at it too, as the incumbent Liberals set themselves up for a possible spring election. There's an endlessly repeated spot bragging about all the infrastructure projects currently underway across the Province, which presumably includes the totally unnecessary roundabout being built at horrifying expense not far from here.
Even more ludicrously, there are ads promoting local produce, reviving the decades-old slogan, "good things grow in Ontario". Not right now they don't, with the ground only starting to reappear after one of the coldest and snowiest winters anyone can recall.
In the end, I'm agnostic about whether we're better off with fixed or flexible election dates. It wouldn't really matter anyway, if we had more honourable politicians, but who am I trying to kid?
Thursday, 27 March 2014
Wednesday, 26 March 2014
Leave your lights on
Saturday is being marked in these parts as Earth Day, and the World Wildlife Federation (WWF) wants us all to turn the lights out for an hour at 8:30 in the evening so as to ponder what we're doing to the planet. Somehow I don't think that the viewing figures for Hockey Night in Canada will take too much of a hit. After all, it's only a couple of weeks until the playoffs start.
In case you don't know what to think while you're sitting in the dark, the WWF* has been running daily ads in the major papers to get you started. The tag line: "People are still ignoring the science. That's what I'll be thinking about".
Oh, puh-leeeze! If we're talking about "ignoring the science", there's plenty of blame to go around. For example, who is it that's ignoring (or rather, deliberately obfuscating) the fact that nuclear energy is far safer than coal, cleaner than natural gas and infinitely more reliable than wind or solar power? Or the fact that the number of people killed in nuclear power-related accidents is close to zero, while millions might have frozen to death in the dark were it not for nuclear power? Or the overarching reality that the availability of affordable electricity, starting not much more than a century ago, vastly improved living standards for countless millions of people? That's why, in developing countries, electricity is the second thing that people demand access to, right after potable water.
The WWF's vision of the future may involve taking us back to an era when most people had no choice but to go to bed as soon as the sun went down. Forgive me if I don't choose to go along for the ride.
* The WWF is currently headed up by David Miller, who was mayor of Toronto in the first decade of this century. He did such a bang-up job at City Hall that the citizenry veered sharply to the right in 2010 and elected Rob Ford. You wouldn't want that on your CV!
In case you don't know what to think while you're sitting in the dark, the WWF* has been running daily ads in the major papers to get you started. The tag line: "People are still ignoring the science. That's what I'll be thinking about".
Oh, puh-leeeze! If we're talking about "ignoring the science", there's plenty of blame to go around. For example, who is it that's ignoring (or rather, deliberately obfuscating) the fact that nuclear energy is far safer than coal, cleaner than natural gas and infinitely more reliable than wind or solar power? Or the fact that the number of people killed in nuclear power-related accidents is close to zero, while millions might have frozen to death in the dark were it not for nuclear power? Or the overarching reality that the availability of affordable electricity, starting not much more than a century ago, vastly improved living standards for countless millions of people? That's why, in developing countries, electricity is the second thing that people demand access to, right after potable water.
The WWF's vision of the future may involve taking us back to an era when most people had no choice but to go to bed as soon as the sun went down. Forgive me if I don't choose to go along for the ride.
* The WWF is currently headed up by David Miller, who was mayor of Toronto in the first decade of this century. He did such a bang-up job at City Hall that the citizenry veered sharply to the right in 2010 and elected Rob Ford. You wouldn't want that on your CV!
Friday, 21 March 2014
Nice people need not apply
A few months ago I mentioned in a post on this blog that the first ministers of six of Canada's provinces and territories were female. That included the four most populous provinces -- Ontario, Quebec, BC and Alberta.
That number is now down to three. Late last year the female leader in Nunavut quit; early this year it was the turn of the Premier of Newfoundland and Labrador. And this past weekend, Alberta Premier Alison Redford stepped down, under intense pressure from her own Conservative Party caucus. Add in a near-miss for BC Premier Christy Clark in last year's provincial election, and there seems to be a bit of a trend emerging here, especially as the female leaders in both Ontario and Quebec are facing tricky elections too.
This has led to a torrent of angst in the ultra-liberal Toronto Star. There are two articles on the subject in today's edition alone. Here's a link to one of them, by columnist Carol Goar.
Not surprisingly, Ms Goar sees a pushback from the grey-haired, angry old men who have dominated politics for so long. There may indeed be some of this at work, but I think there's a whole lot more to it than that. Arguably, the benefits to society of having more women rising to the top positions in the political world were grossly misrepresented in the first place. We were told that women were more co-operative, less confrontational and so on, and that their ascension to political power would result in a kinder, gentler style of politics.
It may be true that women in the aggregate are "nicer" than men, but did anyone think that it would be the "nice" women who clawed their way to the top of the tree? After all, it was never the nice men that succeeded. Looking back on the Prime Ministers I've seen in action in Canada and the UK over the past half century, it's hard to pick out many that were kind and considerate and motivated by a strong sense of morality. The closest I can come up with to a "nice" man is Joe Clark, three decades ago in Canada -- and Joe lasted less than nine months as PM, before he was cynically turfed out by the definitely-not-nice Pierre Trudeau.
To succeed in politics, you need to be ruthless and conniving, and there's no good reason to think that's any different for women.* One of the intriguing comments when Ms Redford quit in Alberta came from a disgruntled member of her caucus, who said "She's just not a nice lady". This prompted one Star columnist to ask, huffily, whether he would have made a similar comment about a male leader. No, probably not: he'd more likely have said something much saltier that a family newspaper would have been unable to publish.
Look around the world and you see a similar pattern. Margaret Thatcher sandbagged (or handbagged) Edward Heath to get the top job, and was ruthlessly dispatched herself when she'd outlived her usefulness. Down under, Julia Gillard became Prime Minister through an intra-party coup, only to be turfed out in exactly the same way when electoral defeat loomed. Live by the sword, die by the sword.
Ms Goar seems close to despair at the recent turn of events, afraid that the momentum that brought so many women into positions of power has ebbed. I don't think that's the case, but it's clear that women who take up political office can't expect to be treated any better than men -- and isn't that how it should be?
* Might things be different if we had many more women in politics? I wonder. Even if every single MP were female, it's hard to imagine that the "nice" ones, as opposed to the ones with the sharp elbows, would get the top jobs.
Wednesday, 19 March 2014
George and Jim (and Joe)
In both the UK and Canada, fiscal policy has been driven in recent years by the desire of the governing parties (Conservative in both countries, although in the UK the Tories are in a coalition with the Liberal Democrats) to win national elections that are due in 2015. How's that going?
Over in London, Chancellor George Osborne tabled his annual budget today. The UK economy seems to be performing well: the GDP growth forecast for this year has been raised to 2.7%, with an average rate of about 2.5% projected for the next half-decade. Even so, the budget deficit is falling only slowly. It's expected to reach 6.6% of GDP this year, and a surplus is not expected until 2018, even if the present course of austerity is maintained.
The fact that the deficit is set to take far longer to eliminate than the Government initially claimed did not stop Osborne from starting to lay out his party's wares for the next election. There were a couple of populist gestures -- a one penny cut in the duty on beer, a reduction in the tax on bingo (!) and yet another postponement of higher fuel taxes -- but the main measures, which seem to have caught the commentariat by surprise, showed very clearly whose votes the party hopes to attract, come polling day: seniors and savers.
Seniors looking to use their pension "pots" will receive more favourable tax treatment, and the much-loathed requirement to use the "pot" to purchase an annuity will be abolished. As for savers, the tax-free individual savings accounts (ISAs) will be simplified, and the annual contribution limits increased.
Osborne can be expected to table one more budget ahead of the election. It's unlikely to deviate far from today's themes, which Osborne characterised as a deal for "makers, savers and doers" -- as opposed, very evidently, to all the welfare recipients and assorted less fortunates whom the government has been enthusiastically caning in its last few budgets, and continued to squeeze this time, with the announcement of a ceiling on "structural welfare spending".
Here in Canada, Finance Minister Jim Flaherty introduced his remarkably event-free budget a month ago. Canada's budget deficit was not as entrenched or severe as the UK's to begin with, and Flaherty's enthusiastic approach to spending cuts has effectively eliminated it already, with a surplus projected for next year, paving the way for a pre-election extravaganza in next year's budget. Like Osborne, the Canadian Finance Minister can be expected to keep a tight rein on welfare spending, while doling out the goodies to the middle classes and seniors who are the party's natural base of support.
One small surprise is that it won't be Flaherty who doles out the pre-vote potlatch. Flaherty resigned yesterday, planning to return to the private sector. His health has been poor -- he has a rare and painful skin disease -- so it was always expected that he would leave politics at the next election. The new Finance Minister is Toronto MP Joe Oliver, who has extensive business experience but is new to politics and, most surprisingly of all, is 73 years old.
So the stage is set in both countries for a test of whether voters can be bought with their own money. And in both countries there's an extra wrinkle: Quebec holds a provincial election in about three weeks', and a PQ victory could start the ball rolling toward another sovereignty vote, while in the UK, Scotland holds its own referendum on sovereignty in September. Neither Quebec nor Scotland is natural Tory territory, so in principle their departures would only make it easier for conservatives to hold onto power in the rest of the UK or Canada. At the same time, it's a safe bet that neither David Cameron nor Stephen Harper wants to enter the history books as the guy who presided over the breakup of the country. Isn't politics fun?
Over in London, Chancellor George Osborne tabled his annual budget today. The UK economy seems to be performing well: the GDP growth forecast for this year has been raised to 2.7%, with an average rate of about 2.5% projected for the next half-decade. Even so, the budget deficit is falling only slowly. It's expected to reach 6.6% of GDP this year, and a surplus is not expected until 2018, even if the present course of austerity is maintained.
The fact that the deficit is set to take far longer to eliminate than the Government initially claimed did not stop Osborne from starting to lay out his party's wares for the next election. There were a couple of populist gestures -- a one penny cut in the duty on beer, a reduction in the tax on bingo (!) and yet another postponement of higher fuel taxes -- but the main measures, which seem to have caught the commentariat by surprise, showed very clearly whose votes the party hopes to attract, come polling day: seniors and savers.
Seniors looking to use their pension "pots" will receive more favourable tax treatment, and the much-loathed requirement to use the "pot" to purchase an annuity will be abolished. As for savers, the tax-free individual savings accounts (ISAs) will be simplified, and the annual contribution limits increased.
Osborne can be expected to table one more budget ahead of the election. It's unlikely to deviate far from today's themes, which Osborne characterised as a deal for "makers, savers and doers" -- as opposed, very evidently, to all the welfare recipients and assorted less fortunates whom the government has been enthusiastically caning in its last few budgets, and continued to squeeze this time, with the announcement of a ceiling on "structural welfare spending".
Here in Canada, Finance Minister Jim Flaherty introduced his remarkably event-free budget a month ago. Canada's budget deficit was not as entrenched or severe as the UK's to begin with, and Flaherty's enthusiastic approach to spending cuts has effectively eliminated it already, with a surplus projected for next year, paving the way for a pre-election extravaganza in next year's budget. Like Osborne, the Canadian Finance Minister can be expected to keep a tight rein on welfare spending, while doling out the goodies to the middle classes and seniors who are the party's natural base of support.
One small surprise is that it won't be Flaherty who doles out the pre-vote potlatch. Flaherty resigned yesterday, planning to return to the private sector. His health has been poor -- he has a rare and painful skin disease -- so it was always expected that he would leave politics at the next election. The new Finance Minister is Toronto MP Joe Oliver, who has extensive business experience but is new to politics and, most surprisingly of all, is 73 years old.
So the stage is set in both countries for a test of whether voters can be bought with their own money. And in both countries there's an extra wrinkle: Quebec holds a provincial election in about three weeks', and a PQ victory could start the ball rolling toward another sovereignty vote, while in the UK, Scotland holds its own referendum on sovereignty in September. Neither Quebec nor Scotland is natural Tory territory, so in principle their departures would only make it easier for conservatives to hold onto power in the rest of the UK or Canada. At the same time, it's a safe bet that neither David Cameron nor Stephen Harper wants to enter the history books as the guy who presided over the breakup of the country. Isn't politics fun?
Thursday, 13 March 2014
Marked down
It's a tough time to be Mark Carney. The superstar of global central banking, now at the Bank of England, is taking a shellacking on both sides of the Atlantic.
With Carney too far away to answer back, CIBC's veteran economist Avery Shenfeld is blaming him for an unhealthy rebalancing of the Canadian economy. As Shenfeld sees it, the Bank of Canada's low interest rate policy in response to the financial crisis worked almost too well. It triggered a boom in housing (read: condo) construction that resulted in the Canadian economy bouncing back faster than the rest of the G7. That outperformance in turn caused capital inflows into Canada, which drove the Canadian dollar above parity with the US dollar, way above its fundamental value. The resulting lack of competitiveness caused manufacturers to look for more competitive jurisdictions for their investment plans, exacerbating the demise of the domestic manufacturing sector.
I have to say I'm not altogether convinced by this. There are a lot of reasons why Canadian manufacturing is on the slide, and it's not clear that a weaker exchange rate would have been sufficient to offset them. Most notably, Canadian labour costs are significantly higher than in "right to work" US states, or in Mexico. In Ontario, the country's manufacturing heartland, energy costs are prohibitively high, thanks in large part to a preposterously ill-conceived push for green energy by the provincial government under Dalton McGuinty. Both of these factors, together with the free trade arrangement with the US and Mexico, were in place long before the Canadian dollar became overvalued.
It's also difficult to agree with what Shenfeld feels Carney should have done instead. Normally you'd think of cutting interest rates to hold back the currency, but as Shenfeld sees it, that's what caused the dollar to get too strong in the first place. He thinks the Bank of Canada should have intervened directly in the currency markets, selling Canadian dollars in the hope of driving down their value. However, history suggests that central bank intervention of this sort is rarely effective so long as the underlying factors leading to the "incorrect" exchange rate remain in place.
All in all, then, I think Carney would be entitled to dismiss Shenfeld's criticisms in this case. That's just as well, because he has some serious issues to deal with over in London. This week he has been grilled by politicians over the latest interbank rate fixing scandal. You'll recall the overblown crisis over the fixing of the LIBOR rate a few years ago; well, this time, it's exchange rate manipulation that's in focus, once again with the aim of rigging the rate settings used in settling contracts.
Some of the biggest banks in FX trading are in the frame on this one, and this time the Bank of England itself has had to suspend one of its own traders. Carney was still at the Bank of Canada when all of this was going on, but it's become his mess to clean up, and the tone of the questioning from the assembled politicians was unforgiving,
This is a part of his new job that may be less familiar to Carney than the day-to-day routine of setting monetary policy. There are various official rate settings in Canada that work in a broadly similar way to indices like LIBOR, but they're of limited interest outside the country. In contrast, LIBOR and its cousins have an impact around the world, and London remains a key global hub in FX trading. As Carney correctly noted, it's essential that the Bank of England's reputation be cleared, if London is to retain its key role in global finance -- something on which the entire UK economy arguably depends. Well, nobody said this job was going to be easy.
With Carney too far away to answer back, CIBC's veteran economist Avery Shenfeld is blaming him for an unhealthy rebalancing of the Canadian economy. As Shenfeld sees it, the Bank of Canada's low interest rate policy in response to the financial crisis worked almost too well. It triggered a boom in housing (read: condo) construction that resulted in the Canadian economy bouncing back faster than the rest of the G7. That outperformance in turn caused capital inflows into Canada, which drove the Canadian dollar above parity with the US dollar, way above its fundamental value. The resulting lack of competitiveness caused manufacturers to look for more competitive jurisdictions for their investment plans, exacerbating the demise of the domestic manufacturing sector.
I have to say I'm not altogether convinced by this. There are a lot of reasons why Canadian manufacturing is on the slide, and it's not clear that a weaker exchange rate would have been sufficient to offset them. Most notably, Canadian labour costs are significantly higher than in "right to work" US states, or in Mexico. In Ontario, the country's manufacturing heartland, energy costs are prohibitively high, thanks in large part to a preposterously ill-conceived push for green energy by the provincial government under Dalton McGuinty. Both of these factors, together with the free trade arrangement with the US and Mexico, were in place long before the Canadian dollar became overvalued.
It's also difficult to agree with what Shenfeld feels Carney should have done instead. Normally you'd think of cutting interest rates to hold back the currency, but as Shenfeld sees it, that's what caused the dollar to get too strong in the first place. He thinks the Bank of Canada should have intervened directly in the currency markets, selling Canadian dollars in the hope of driving down their value. However, history suggests that central bank intervention of this sort is rarely effective so long as the underlying factors leading to the "incorrect" exchange rate remain in place.
All in all, then, I think Carney would be entitled to dismiss Shenfeld's criticisms in this case. That's just as well, because he has some serious issues to deal with over in London. This week he has been grilled by politicians over the latest interbank rate fixing scandal. You'll recall the overblown crisis over the fixing of the LIBOR rate a few years ago; well, this time, it's exchange rate manipulation that's in focus, once again with the aim of rigging the rate settings used in settling contracts.
Some of the biggest banks in FX trading are in the frame on this one, and this time the Bank of England itself has had to suspend one of its own traders. Carney was still at the Bank of Canada when all of this was going on, but it's become his mess to clean up, and the tone of the questioning from the assembled politicians was unforgiving,
This is a part of his new job that may be less familiar to Carney than the day-to-day routine of setting monetary policy. There are various official rate settings in Canada that work in a broadly similar way to indices like LIBOR, but they're of limited interest outside the country. In contrast, LIBOR and its cousins have an impact around the world, and London remains a key global hub in FX trading. As Carney correctly noted, it's essential that the Bank of England's reputation be cleared, if London is to retain its key role in global finance -- something on which the entire UK economy arguably depends. Well, nobody said this job was going to be easy.
Monday, 10 March 2014
You call that funny?
One of the harmless myths that Canadians live by is that we're funnier than our neighbours to the south. There's some historical evidence for this. A century ago, Stephen Leacock managed the remarkable double play of being both an economist and a wit. If you've never heard of him, think a slightly gentler, non-Jewish version of SJ Perelman, the guy who wrote most of the Marx Brothers' material.*
More recently, Canadians have played major roles in ensemble comedy shows like SNL and Second City -- people like John Candy, Mike Myers and the acerbic Norm Macdonald all hail from this side of the border. And we mustn't forget Lorne Michaels, who may not be funny himself, but has kept SNL loaded with fresh talent for going on three decades.
But there are strong counter-arguments: Jim Carrey, for instance, who was briefly the highest paid star in movies until someone realized that watching someone gurning wasn't worth a whole lot. Nowadays he can't get himself arrested, more's the pity.
And then there's Martin Short, a Second City alumnus who unaccountably went on to a lengthy post-SNL career. He pitched up in Toronto this past weekend to host the Canadian Screen Awards show, a bizarre concoction that honours everything from movies to sportscasting.
To no-one's surprise, Short reeled off a litany of Rob Ford jokes, but then he let loose with this gem. Looking at the audience of stars big and (mostly) small, he said "this reminds me of the luge at the Winter Olympics. Most of you have got to where you are by lying flat on your backs".
That's not unfunny, but it's wildly sexist. It sounds like something Rob Ford might have said. And if Ford had said it, his critics in the media would have piled in on him unmercifully.
Aside from some gasps from the audience, Short got away with it. Because of course, he's "Canadian Showbiz Royalty". That may seem to you to be an oxymoron, and maybe it is. But it's also a synonym, for "lives in Los Angeles".
* Interestingly, Leacock himself seems to have thought that the funniest person in the world at the time was Dorothy Parker.
More recently, Canadians have played major roles in ensemble comedy shows like SNL and Second City -- people like John Candy, Mike Myers and the acerbic Norm Macdonald all hail from this side of the border. And we mustn't forget Lorne Michaels, who may not be funny himself, but has kept SNL loaded with fresh talent for going on three decades.
But there are strong counter-arguments: Jim Carrey, for instance, who was briefly the highest paid star in movies until someone realized that watching someone gurning wasn't worth a whole lot. Nowadays he can't get himself arrested, more's the pity.
And then there's Martin Short, a Second City alumnus who unaccountably went on to a lengthy post-SNL career. He pitched up in Toronto this past weekend to host the Canadian Screen Awards show, a bizarre concoction that honours everything from movies to sportscasting.
To no-one's surprise, Short reeled off a litany of Rob Ford jokes, but then he let loose with this gem. Looking at the audience of stars big and (mostly) small, he said "this reminds me of the luge at the Winter Olympics. Most of you have got to where you are by lying flat on your backs".
That's not unfunny, but it's wildly sexist. It sounds like something Rob Ford might have said. And if Ford had said it, his critics in the media would have piled in on him unmercifully.
Aside from some gasps from the audience, Short got away with it. Because of course, he's "Canadian Showbiz Royalty". That may seem to you to be an oxymoron, and maybe it is. But it's also a synonym, for "lives in Los Angeles".
* Interestingly, Leacock himself seems to have thought that the funniest person in the world at the time was Dorothy Parker.
Wednesday, 5 March 2014
House of cards
The biggest boast of the Harper government up in Ottawa -- and these are people that like to boast a lot -- is that thanks to their stewardship, Canada avoided the worst effects of the global economic meltdown. None of the country's major financial institutions needed a bailout, and the banking sector is widely regarded as the soundest in the world. These themes are likely to be a major part of the Conservative Party's election platform next year.
A lot of this is, in fact, true, and some of the credit does indeed belong to the Tories. Finance Minister Jim Flaherty took a very hands-on approach to the banks, particularly in the area of mortgage lending, which helped to avoid some of the wilder excesses seen south of the border. Credit must also go to the previous Liberal government, which in the late 1990s prevented two pairs of banks from merging. Those mega-mergers would have created precisely the kind of too-big-to-fail and too-unwieldy-to-manage banks that ran into so much trouble around the world.
But there's more to the economy than just a financial system, and in other respects Canada hasn't done so well. The manufacturing sector has been gutted, thanks to a high exchange rate, uncompetitive energy prices and the growing presence of Mexico in the key automotive sector. The big bet on energy seems to be starting to unravel as the US becomes increasingly self-sufficient and environmentalists stymie all attempts to get the product to market.
All in all, the strength of the banks notwithstanding, it's no surprise that sentiment surveys regularly show that Canadians are gloomy, or at best cautious, about the economy. So it was something of a surprise to learn from Statistics Canada last week that Canadian household wealth is now higher than it was before the financial crisis. Why the long faces, guys?
Well, as an excellent op-ed piece by Carol Goar of the Toronto Star points out, the StatsCan data are a lot less reassuring than they seem. Most of the increase in wealth reflects the continuing (some would say gravity defying) strength in the housing market, which has of course been driven by the Bank of Canada's persistent cheap money policy. (There's no end to this in sight: the Bank today kept its key overnight rate at 1 percent). This has a lot of ramifications, some of which Goar points out: baby boomers, who own their own homes, are doing much better than the younger generation; and the poorest quintile in the population, who by and large can't afford homes of their own, are being left behind.
I'd add some further thoughts:
* since only the Toronto and Vancouver housing markets are really strong, there's a sort of redistribution of paper wealth toward those cities. Just this past weekend, a realtor told me that in our neighbouring city of St Catharines, which has been badly hurt by the shrinking automotive sector, house prices have not budged for two decades. The same tale can be told in all kinds of communities across the country, which suggests that the Tories would be unwise to run only on their economic prowess when election time rolls around.
* household debt levels are near historic highs. As and when interest rates start to rise, some people will get into trouble and try to unload their houses (or have them repossessed). When that happens, the "wealth" tied up in the housing stock will tend to erode very fast.
* many baby boomers are counting on the equity in their house to see them through retirement (that's not counting the 14% who told a recent survey that they were relying on winning the lottery. Sadly, I'm not making that up). But who's going to buy all the houses the boomers want to sell? Younger people, at least in the larger cities, want to live downtown, not on some kind of faux ranch out in the sticks. An increasing proportion of them don't even bother getting a driver's license, which effectively rules out any move to the suburbs. Combine that with the inevitable rise in mortgage interest rates, and it's awfully difficult to see how the boomers as a group will cash out nearly as much as they expect when they decide to downsize.
These problems are by no means unique to Canada. As the populations of the major developed countries age, there are similar issues to be dealt with everywhere. However, for all the empty bragging of politicians up in Ottawa, there will be delicate policy decisions to be made for many more years yet.
A lot of this is, in fact, true, and some of the credit does indeed belong to the Tories. Finance Minister Jim Flaherty took a very hands-on approach to the banks, particularly in the area of mortgage lending, which helped to avoid some of the wilder excesses seen south of the border. Credit must also go to the previous Liberal government, which in the late 1990s prevented two pairs of banks from merging. Those mega-mergers would have created precisely the kind of too-big-to-fail and too-unwieldy-to-manage banks that ran into so much trouble around the world.
But there's more to the economy than just a financial system, and in other respects Canada hasn't done so well. The manufacturing sector has been gutted, thanks to a high exchange rate, uncompetitive energy prices and the growing presence of Mexico in the key automotive sector. The big bet on energy seems to be starting to unravel as the US becomes increasingly self-sufficient and environmentalists stymie all attempts to get the product to market.
All in all, the strength of the banks notwithstanding, it's no surprise that sentiment surveys regularly show that Canadians are gloomy, or at best cautious, about the economy. So it was something of a surprise to learn from Statistics Canada last week that Canadian household wealth is now higher than it was before the financial crisis. Why the long faces, guys?
Well, as an excellent op-ed piece by Carol Goar of the Toronto Star points out, the StatsCan data are a lot less reassuring than they seem. Most of the increase in wealth reflects the continuing (some would say gravity defying) strength in the housing market, which has of course been driven by the Bank of Canada's persistent cheap money policy. (There's no end to this in sight: the Bank today kept its key overnight rate at 1 percent). This has a lot of ramifications, some of which Goar points out: baby boomers, who own their own homes, are doing much better than the younger generation; and the poorest quintile in the population, who by and large can't afford homes of their own, are being left behind.
I'd add some further thoughts:
* since only the Toronto and Vancouver housing markets are really strong, there's a sort of redistribution of paper wealth toward those cities. Just this past weekend, a realtor told me that in our neighbouring city of St Catharines, which has been badly hurt by the shrinking automotive sector, house prices have not budged for two decades. The same tale can be told in all kinds of communities across the country, which suggests that the Tories would be unwise to run only on their economic prowess when election time rolls around.
* household debt levels are near historic highs. As and when interest rates start to rise, some people will get into trouble and try to unload their houses (or have them repossessed). When that happens, the "wealth" tied up in the housing stock will tend to erode very fast.
* many baby boomers are counting on the equity in their house to see them through retirement (that's not counting the 14% who told a recent survey that they were relying on winning the lottery. Sadly, I'm not making that up). But who's going to buy all the houses the boomers want to sell? Younger people, at least in the larger cities, want to live downtown, not on some kind of faux ranch out in the sticks. An increasing proportion of them don't even bother getting a driver's license, which effectively rules out any move to the suburbs. Combine that with the inevitable rise in mortgage interest rates, and it's awfully difficult to see how the boomers as a group will cash out nearly as much as they expect when they decide to downsize.
These problems are by no means unique to Canada. As the populations of the major developed countries age, there are similar issues to be dealt with everywhere. However, for all the empty bragging of politicians up in Ottawa, there will be delicate policy decisions to be made for many more years yet.
Sunday, 2 March 2014
As you sow....
Surprisingly, one of the most insightful comments I've seen so far on the Ukraine situation came from a sportswriter at the Toronto Star, Cathal Kelly. While calling for Canada to withdraw its team from the Paralympic Winter Games, set to start this week, he recognized that there was no case for even a threat of a military response, adding: "This would be a good time to think about Iraq".
Someone who might have thought about that before speaking is US Secretary of State John Kerry, who has described the Russian moves in Crimea as "an incredible act of aggression". That description of a limited number of troop movements, with next to no actual fighting, sounds passing strange coming from a country whose own acts of aggression customarily begin with volleys of hundreds of cruise missiles, usually under cover of darkness.
There are all sorts of reasons, of course, why Vladimir Putin has chosen his present course of action. He has, after all, referred to the collapse of the USSR as "the greatest geopolitical disaster of the twentieth century", and as recently as 2008 apparently told George W. Bush that he regarded Ukraine as Russian territory. (As, in the case of Crimea until 1954, it undoubtedly was).
However, one other factor that must be somewhere in Putin's mind is the sense that Russia has been consistently misled by the US and its allies in recent decades. There can be little dispute that the 2003 Iraq invasion went far beyond the UN authorization that Russia reluctantly went along with -- and we now know that it was based on entirely false pretenses (Saddam's WMDs). Likewise the NATO action in Libya, which very quickly abandoned its origins in "defending the civilian population" and became a naked push for regime change. Putin has probably been ruthless and untrustworthy all his life, but even if he wasn't, he could certainly have picked up the basics by watching the Western powers in action.
It's impossible to know how all of this is going to end, but one thing that's certain is that Ukraine is close to bankruptcy. It apparently needs $35 billion, yesterday. Who's going to come up with that? The EU? Not with its own problems still unresolved. The US? Even with the GOP trying to look tougher than President Obama, probably not. Which leaves only the Russians as potential saviours, and the Ukrainians with very few palatable choices.
Someone who might have thought about that before speaking is US Secretary of State John Kerry, who has described the Russian moves in Crimea as "an incredible act of aggression". That description of a limited number of troop movements, with next to no actual fighting, sounds passing strange coming from a country whose own acts of aggression customarily begin with volleys of hundreds of cruise missiles, usually under cover of darkness.
There are all sorts of reasons, of course, why Vladimir Putin has chosen his present course of action. He has, after all, referred to the collapse of the USSR as "the greatest geopolitical disaster of the twentieth century", and as recently as 2008 apparently told George W. Bush that he regarded Ukraine as Russian territory. (As, in the case of Crimea until 1954, it undoubtedly was).
However, one other factor that must be somewhere in Putin's mind is the sense that Russia has been consistently misled by the US and its allies in recent decades. There can be little dispute that the 2003 Iraq invasion went far beyond the UN authorization that Russia reluctantly went along with -- and we now know that it was based on entirely false pretenses (Saddam's WMDs). Likewise the NATO action in Libya, which very quickly abandoned its origins in "defending the civilian population" and became a naked push for regime change. Putin has probably been ruthless and untrustworthy all his life, but even if he wasn't, he could certainly have picked up the basics by watching the Western powers in action.
It's impossible to know how all of this is going to end, but one thing that's certain is that Ukraine is close to bankruptcy. It apparently needs $35 billion, yesterday. Who's going to come up with that? The EU? Not with its own problems still unresolved. The US? Even with the GOP trying to look tougher than President Obama, probably not. Which leaves only the Russians as potential saviours, and the Ukrainians with very few palatable choices.
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