Prime Minister Stephen Harper's recent travels make Santa's Christmas journey look like a walk around the block. Earlier in November, Harper went to China for a trade mission, but he cut the visit short by a day so that he could attend the Remembrance Day ceremonies back in Ottawa. Then he immediately jumped back aboard the government's aging Airbus A300 to hop off to New Zealand for the G20 summit and a spot of light Putin-baiting. Today we find him in Dakar, Senegal, for the opening ceremonies of la Francophonie, a largely ceremonial grouping of French-speaking nations.
This sort of globe-trotting is standard behaviour for political leaders trying to big themselves up with their domestic electorates, and of course Harper is facing an election some time in 2015. While the PM's away, his colleagues back home are equally busy setting themselves up for the vote. Finance Minister Joe Oliver introduced a Fall Economic Update that was effectively a mini-budget and included a raft of tax cuts. In case anyone was in any doubt that the current Parliament is in its lame duck phase, the statement was introduced at a lunch in Toronto rather than in the House of Commons.
The key element of the tax cuts, a plan to allow couples to save tax by splitting their incomes, was widely seen as unfair (as indeed it is), so Oliver quickly followed up with the announcement of a $5 billion package of "new" spending. The Government's claim is that this can now be afforded because the budget is coming back into surplus, even though just weeks ago it appeared to be saying that the tax cuts would eat up all of its fiscal room.
In any case, the spending hikes are much less than they seem, since most of the "new" items had already been announced. And as a measure of the Government's flagrant insincerity, even in dealings with those it supposedly favours, you could hardly do better than look at a new plan to help veterans dealing with mental health issues. This scheme accounted for about $200 million of the supposed $5 billion in "spending", but it transpires that the full sum will be spread out over fifty years! OK, so it's the job of government to provide for future generations, but it's remarkably shameless, even by the standards of the Harperites, to claim credit now for spending that won't actually take place until people yet unborn have done their military service.
There will be a lot more of this kind of chicanery as election day approaches. The so-called fixed election date is in October 2015, but it will be a mercy for the whole country if Harper decides to go for it a few months earlier.
Saturday, 29 November 2014
Tuesday, 25 November 2014
House rules
By and large, Canadians are not quite as obsessive about house prices as the Brits are -- but they're still fixated on the issue, as these two articles, which took up an entire page in today's Toronto Star, illustrate. Much of the analysis in the articles is lifted from a new report from Canada Mortgage and Housing Corporation (CMHC), the government-owned mortgage insurer, that attempts to "detect the presence of problematic conditions" in Canada's housing markets. CMHC concludes, and the journalists are happy to concur, that the risks of a major correction in Canadian house prices, even in the small number of urban centres where prices have been advancing most strongly, is relatively limited. It expresses some concern about overbuilding in Montreal and Toronto, but deems other urban centres to be "low risk".
Helpfully, the CMHC report includes an overview of the agency's internal methodology for analysis of market conditions. This focuses on four inter-related indicators: overheating, price acceleration, overvaluation and overbuilding. Looking at how CMHC evaluates these indicators, one surprising fact quickly emerges: although the level of interest rates is taken into account, it does not appear to play an explicit role in the final assessment.
Considering the concern that central bankers and others have expressed about the potentially dangerous impact of the long period of ultra-low interest rates we are living through -- or rather, about what happens when rates finally start to rise -- and keeping in mind that Canadian household debt levels remain near all-time highs in relation to incomes, this is remarkable. It becomes even more so if you look at some of the current numbers that CMHC seems so relaxed about. For example:
"At the national level, Canada’s resale market has been balanced since 2010, thus indicating that (house) price growth should be generally in line with overall inflation. However, national annual (house) price growth has exceeded growth in the overall consumer price index (CPI) almost every year since 2010. Through the first nine months of 2014, the average (house) price for Canada was up 6.9 per cent compared to the 1.9 per cent increase in the CPI."
Can this really be considered sustainable? After all, at a 6.9 percent annual pace, house prices double in just over a decade. Moreover, given weak underlying inflationary pressures and sluggish growth in employment, can there really be any doubt that the degree to which house prices are outpacing the general price level is almost entirely due to the torrent of cheap money provided by the Bank of Canada?
In effect, CMHC's conclusion seems to be only that current house prices are sustainable as long as nothing untoward happens on the interest rate front. That's not a very robust conclusion from the standpoint of policymakers. Nor, perhaps, from the standpoint of prospective homebuyers. In the first of the two linked articles, personal finance guru Adam Mayers opines that for people in the Toronto area, there's not much reason to delay getting into the market, what with five-year fixed rate money available at rates well below 3%. Recognizing the risk of higher rates down the road, however, Mayers counsels buyers to apply the money they save, thanks to ultra-low rates, to paying down the mortgage principal as quickly as possible.
That's great advice, but as the persistence of high household debt levels clearly shows, it's not advice that most people care to take. As and when interest rates start to rise, caveat emptor.
Helpfully, the CMHC report includes an overview of the agency's internal methodology for analysis of market conditions. This focuses on four inter-related indicators: overheating, price acceleration, overvaluation and overbuilding. Looking at how CMHC evaluates these indicators, one surprising fact quickly emerges: although the level of interest rates is taken into account, it does not appear to play an explicit role in the final assessment.
Considering the concern that central bankers and others have expressed about the potentially dangerous impact of the long period of ultra-low interest rates we are living through -- or rather, about what happens when rates finally start to rise -- and keeping in mind that Canadian household debt levels remain near all-time highs in relation to incomes, this is remarkable. It becomes even more so if you look at some of the current numbers that CMHC seems so relaxed about. For example:
"At the national level, Canada’s resale market has been balanced since 2010, thus indicating that (house) price growth should be generally in line with overall inflation. However, national annual (house) price growth has exceeded growth in the overall consumer price index (CPI) almost every year since 2010. Through the first nine months of 2014, the average (house) price for Canada was up 6.9 per cent compared to the 1.9 per cent increase in the CPI."
Can this really be considered sustainable? After all, at a 6.9 percent annual pace, house prices double in just over a decade. Moreover, given weak underlying inflationary pressures and sluggish growth in employment, can there really be any doubt that the degree to which house prices are outpacing the general price level is almost entirely due to the torrent of cheap money provided by the Bank of Canada?
In effect, CMHC's conclusion seems to be only that current house prices are sustainable as long as nothing untoward happens on the interest rate front. That's not a very robust conclusion from the standpoint of policymakers. Nor, perhaps, from the standpoint of prospective homebuyers. In the first of the two linked articles, personal finance guru Adam Mayers opines that for people in the Toronto area, there's not much reason to delay getting into the market, what with five-year fixed rate money available at rates well below 3%. Recognizing the risk of higher rates down the road, however, Mayers counsels buyers to apply the money they save, thanks to ultra-low rates, to paying down the mortgage principal as quickly as possible.
That's great advice, but as the persistence of high household debt levels clearly shows, it's not advice that most people care to take. As and when interest rates start to rise, caveat emptor.
Saturday, 22 November 2014
Undisprovable
Well, that didn't take long! Slate's in-house meteorologist, Eric Holthaus, is first out of the gate with the suggestion that the colossal snowfall in Buffalo this week can be attributed to.... global warming!
Pop quiz, folks: if last week had seen Buffalonians strolling down Genesee Street in shorts and sunbathing by Lake Erie in 90-degree weather, to what would Eric Holthaus have attributed that?
Pop quiz, folks: if last week had seen Buffalonians strolling down Genesee Street in shorts and sunbathing by Lake Erie in 90-degree weather, to what would Eric Holthaus have attributed that?
Friday, 21 November 2014
It's all about wealth
In my previous blog post I looked at a report from StatsCan that suggested that income distribution in Canada had become less unequal between 2006 and 2012. Today we have a report from UBS and something called Wealth-X that seems to confirm the contrary point I was trying to make: if you look at wealth rather than income, you get a quite different picture.
Let's skip over the jaw-dropping fact that 0.004% of the world's adult population accounts for 13% of global wealth and look at the Canadian numbers. And what do we find? Remarkably, it appears that both the number of "ultra-rich" in Canada, and the size of their stash, are increasing faster than the comparable numbers in the United States. ("Ultra-rich" is defined as holding more than $30 million in net assets).
If I can go a bit Piketty on you for a second, one intriguing finding of the survey is that 75 percent of Canada's ultra-rich are considered to be self-made, with only 13 percent inheriting it. You have to wonder how they calculated that: by asking people to self-define, maybe? Few people are likely to report themselves as being one of the "idle rich" if they have any choice in the matter. Those numbers are certainly out of line with many of Piketty's findings, which place considerable emphasis on inheritance.
In any case, since the average ultra-rich Canadian is 63 years old, it seems inevitable that inherited wealth will form a growing proportion of the total in the years ahead. That will further entrench the rising level of inequality to which Piketty and others have drawn attention, ensuring that his comparisons with the gilded age of Fitzwilliam Darcy and Pere Goriot lose none of their relevance.
Let's skip over the jaw-dropping fact that 0.004% of the world's adult population accounts for 13% of global wealth and look at the Canadian numbers. And what do we find? Remarkably, it appears that both the number of "ultra-rich" in Canada, and the size of their stash, are increasing faster than the comparable numbers in the United States. ("Ultra-rich" is defined as holding more than $30 million in net assets).
If I can go a bit Piketty on you for a second, one intriguing finding of the survey is that 75 percent of Canada's ultra-rich are considered to be self-made, with only 13 percent inheriting it. You have to wonder how they calculated that: by asking people to self-define, maybe? Few people are likely to report themselves as being one of the "idle rich" if they have any choice in the matter. Those numbers are certainly out of line with many of Piketty's findings, which place considerable emphasis on inheritance.
In any case, since the average ultra-rich Canadian is 63 years old, it seems inevitable that inherited wealth will form a growing proportion of the total in the years ahead. That will further entrench the rising level of inequality to which Piketty and others have drawn attention, ensuring that his comparisons with the gilded age of Fitzwilliam Darcy and Pere Goriot lose none of their relevance.
Tuesday, 18 November 2014
Falling inequality in Canada? Maybe
Amid all the justified handwringing about rising economic inequality around the world, Statistics Canada came out today with an unexpected finding. Apparently the share of national income going to the top one percent of the population fell to a six-year low in 2012. The richest slice of Canadian society (about 260,000 taxpayers) now corrals 10.3% of national income, down from a peak of 12% in 2006. The share of income going to the top 5 percent and top 10 percent also fell.
The earnings of Canada's top one percent certainly pale against the comparable number for the US, which is north of 18% and is continuing to rise. But hold the (Niagara) champagne, because these data don't tell the full story, and Canada is not quite an egalitarian utopia. Recall that the key focus of much of the literature on inequality, including Thomas Piketty's doorstopper, Capital in the 21st century, is on inequality of wealth distribution rather than annual income.
No doubt the prolonged declines in equity prices in the wake of the financial crisis hit the wealthiest hardest, but stock prices have bounced back sharply in the last year or two. That not only means that wealth inequality is on the rise again in Canada: it also means that income inequality may have ticked up again in the two years since StatsCan compiled its data, as dividends, which are self-evidently a larger component of incomes at the top end than at the bottom, have continued to grow.
And then there's housing costs, which the OECD and others have pointed to as a significant contributor to inequality in Canada. House prices in Toronto, Vancouver and Calgary, the three most economically dynamic cities in Canada, continue to rise sharply, while less fortunate areas fall further behind. This too suggests that if one were to look at wealth rather than income, one would see a much different picture from the one StatsCan is painting.
Oddly enough, it's unlikely that any political party will have much to say about today's data. The Tories are quite comfortable with the rich getting richer anyway, while the Liberals and NDP, both of whom have expressed concern over rising inequality, may actually be a little aggrieved at StatsCan for undermining some of their arguments!
The earnings of Canada's top one percent certainly pale against the comparable number for the US, which is north of 18% and is continuing to rise. But hold the (Niagara) champagne, because these data don't tell the full story, and Canada is not quite an egalitarian utopia. Recall that the key focus of much of the literature on inequality, including Thomas Piketty's doorstopper, Capital in the 21st century, is on inequality of wealth distribution rather than annual income.
No doubt the prolonged declines in equity prices in the wake of the financial crisis hit the wealthiest hardest, but stock prices have bounced back sharply in the last year or two. That not only means that wealth inequality is on the rise again in Canada: it also means that income inequality may have ticked up again in the two years since StatsCan compiled its data, as dividends, which are self-evidently a larger component of incomes at the top end than at the bottom, have continued to grow.
And then there's housing costs, which the OECD and others have pointed to as a significant contributor to inequality in Canada. House prices in Toronto, Vancouver and Calgary, the three most economically dynamic cities in Canada, continue to rise sharply, while less fortunate areas fall further behind. This too suggests that if one were to look at wealth rather than income, one would see a much different picture from the one StatsCan is painting.
Oddly enough, it's unlikely that any political party will have much to say about today's data. The Tories are quite comfortable with the rich getting richer anyway, while the Liberals and NDP, both of whom have expressed concern over rising inequality, may actually be a little aggrieved at StatsCan for undermining some of their arguments!
Sunday, 16 November 2014
Bullies and hypocrites
Right-wing leaders of middling powers are falling over themselves to take credit for Vladimir Putin's early exit from the G20 summit in Brisbane. According to the Canadian media, it was tough talk from Stephen Harper ("you need to get out of Ukraine") that did it; the British press is equally clear that it was a dressing-down by David Cameron. The conference host, Tony Abbott, had tried to get his shots in first by promising to "shirtfront" Putin. This is a term I'm not familiar with, but apparently it's used in rugby, so I imagine it involves plenty of mud and swearing.
Here's something to think about. If Putin were to order his forces to retake every now-independent state that was once part of the USSR, he'd be invading fewer sovereign countries than the US and/or its allies have seen fit to wage war in over the last three decades. (Don't believe me? Start counting back from Syria and Iraq currently, travel via Grenada, Serbia, Panama and many others, and don't stop until you get to Vietnam, Laos and Cambodia).
I don't know what Putin's up to in Ukraine; probably no good. But if he left Brisbane early, I don't imagine it was because Abbott, Cameron and Harper had made him feel ashamed. That's not an emotion he seems capable of feeling. It's more likely that he was finding the stench of hypocrisy a bit overwhelming.
Here's something to think about. If Putin were to order his forces to retake every now-independent state that was once part of the USSR, he'd be invading fewer sovereign countries than the US and/or its allies have seen fit to wage war in over the last three decades. (Don't believe me? Start counting back from Syria and Iraq currently, travel via Grenada, Serbia, Panama and many others, and don't stop until you get to Vietnam, Laos and Cambodia).
I don't know what Putin's up to in Ukraine; probably no good. But if he left Brisbane early, I don't imagine it was because Abbott, Cameron and Harper had made him feel ashamed. That's not an emotion he seems capable of feeling. It's more likely that he was finding the stench of hypocrisy a bit overwhelming.
Wednesday, 12 November 2014
So much for the budget surplus!
The Canadian Federal Government led by Stephen Harper has been open for years about its fiscal agenda: slash spending in order to bring the budget into surplus by 2015, then dole out all kinds of tax cuts to middle-class voters ahead of the expected October 2015 election date. However, Harper couldn't keep it in his pants that long. Just a couple of weeks ago he announced that the tax cuts, including a wildly inequitable income splitting scheme for married couples, would be effective for the 2014 tax year.
The result? Today, Finance Minister Joe Oliver announced that instead of recording a tiny surplus this year, Ottawa will instead record a deficit of about $3 billion. (All figures in Canadian dollars). The same tax cuts also mean that the projected surplus of more than $6 billion previously forecast for 2015 will now be just $1.9 billion. Surpluses are expected to continue over the following five years, but as Oliver admitted today, the fall in resource prices, notably for oil, has heightened the risks surrounding that projection.
As with everything the Harper government does, this is all about partisan political advantage, rather than the national interest. A couple of weeks ago, a Tory spokesman on a TV news show used the term "Trudeau tax" about every ten seconds over an entire five-minute interview. It's clear that the Tories intend to paint themselves as the only friends of the "middle class", whatever that is, while portraying Justin Trudeau's Liberals and Tom Mulcair's NDP as old fashioned tax-and-spend lefties.
The economy is still doing well enough, albeit not as well as the Tories like to claim, so it will be, along with Harper's nauseating macho posturing on the international scene, the key theme in the election, whenever that comes. And when will that be?? Early in his near-decade in office, Harper introduced a law providing for fixed election dates. Under the terms of that law, the election is supposed to be held on October 15 of next year, but there are growing reasons to think it will be held sooner than that.
Harper ignored his own law to call an early election four years ago, and there are plenty of signs, including the tax cuts, that he's setting the stage to do the same again in 2015. Trials relating to some of the political scandals resulting from Harper's stunt of stuffing the Senate with his cronies will get underway in the spring, and it will be hard to stop some of the muck from sticking to Harper. The Tories also have to be concerned that Justin Trudeau may continue to grow into his job as Liberal leader, and that there may not be as many opportunities next year for Harper to big himself up on the world stage. A late winter/early spring election seems more likely than the supposed "fixed date" in October.
By introducing the tax cuts ahead of schedule -- and before there's actually a surplus to give away -- Harper is trying to preempt the opposition parties, daring them even to suggest that they would roll back the cuts and do something different with the surplus. It might work, but it's actually riskier than it looks. As long as the tax cuts were just a political pledge, it was possible for a lot of voters to think they might benefit, which would encourage some, at least, to vote Tory.
However, now that the details are known, it's very clear that the number of people who will benefit is quite small, and many of them are probably Tory supporters anyway. People will start filing their 2014 income taxes early in the new year, and large numbers will then realize that they've been sold a bill of goods. Harper might try to get around that by holding an election as early as February, before most people have done their taxes, but given Canada's climate, calling an election in the winter is never popular, especially with the candidates. Harper's breathtaking cynicism has kept him in office up to now, but his luck may be set to run out.
The result? Today, Finance Minister Joe Oliver announced that instead of recording a tiny surplus this year, Ottawa will instead record a deficit of about $3 billion. (All figures in Canadian dollars). The same tax cuts also mean that the projected surplus of more than $6 billion previously forecast for 2015 will now be just $1.9 billion. Surpluses are expected to continue over the following five years, but as Oliver admitted today, the fall in resource prices, notably for oil, has heightened the risks surrounding that projection.
As with everything the Harper government does, this is all about partisan political advantage, rather than the national interest. A couple of weeks ago, a Tory spokesman on a TV news show used the term "Trudeau tax" about every ten seconds over an entire five-minute interview. It's clear that the Tories intend to paint themselves as the only friends of the "middle class", whatever that is, while portraying Justin Trudeau's Liberals and Tom Mulcair's NDP as old fashioned tax-and-spend lefties.
The economy is still doing well enough, albeit not as well as the Tories like to claim, so it will be, along with Harper's nauseating macho posturing on the international scene, the key theme in the election, whenever that comes. And when will that be?? Early in his near-decade in office, Harper introduced a law providing for fixed election dates. Under the terms of that law, the election is supposed to be held on October 15 of next year, but there are growing reasons to think it will be held sooner than that.
Harper ignored his own law to call an early election four years ago, and there are plenty of signs, including the tax cuts, that he's setting the stage to do the same again in 2015. Trials relating to some of the political scandals resulting from Harper's stunt of stuffing the Senate with his cronies will get underway in the spring, and it will be hard to stop some of the muck from sticking to Harper. The Tories also have to be concerned that Justin Trudeau may continue to grow into his job as Liberal leader, and that there may not be as many opportunities next year for Harper to big himself up on the world stage. A late winter/early spring election seems more likely than the supposed "fixed date" in October.
By introducing the tax cuts ahead of schedule -- and before there's actually a surplus to give away -- Harper is trying to preempt the opposition parties, daring them even to suggest that they would roll back the cuts and do something different with the surplus. It might work, but it's actually riskier than it looks. As long as the tax cuts were just a political pledge, it was possible for a lot of voters to think they might benefit, which would encourage some, at least, to vote Tory.
However, now that the details are known, it's very clear that the number of people who will benefit is quite small, and many of them are probably Tory supporters anyway. People will start filing their 2014 income taxes early in the new year, and large numbers will then realize that they've been sold a bill of goods. Harper might try to get around that by holding an election as early as February, before most people have done their taxes, but given Canada's climate, calling an election in the winter is never popular, especially with the candidates. Harper's breathtaking cynicism has kept him in office up to now, but his luck may be set to run out.
Tuesday, 11 November 2014
Remembrance Day: perspective, please!
Wall-to-wall Remembrance Day coverage in the media today, which is as it should be in the centennial year of the start of the Great War, falsely labelled at the time as "the war to end all wars". If only.
Amid all the public ceremonies, large and small, it's hard not to notice that private honouring of the fallen is being rapidly supplanted by orchestrated displays of mass emotion, the sort of thing we've become depressingly accustomed to since the death of Princess Diana. It's no longer enough to emote and remember in quiet dignity: you have to emote and remember in ways that meet public approval.
Over in the UK, there's a bit of a fuss about a "poppy hijab" that some Muslim women have been wearing to show their respect. Some non-Muslims wonder why it's necessary for anyone to do anything beyond the traditional pin-on poppy, while some Muslim women feel that it's a distortion of the purpose of the hijab. As Muslim activist Sonia Ahmad puts it,
“My hijab is a visual sign of my religiosity and devotion to Allah and not a walking talking billboard on which to showcase my patriotism and undying loyalty to Britain. No other religious group is pressured to prove their allegiance in the same way.”
No other religious group, maybe, but the pressure on everyone to conform is growing by the year. Just ask soccer player James McClean, of Wigan Athletic, who declined to wear a poppy on his shirt for a recent game. McClean grew up in Derry, and his personal memory of the armed forces concerns the Bloody Sunday massacre of unarmed civilians, rather than brave Tommies going over the top at Passchendaele. For his pains, he's been subjected to a torrent of abuse and threats via social media.
I find myself on McClean's side here, though for different reasons. My father was a genuine war hero, decorated by two countries for his bravery. He took part in the Dieppe raid, the invasion of Italy, and the assault on Walcheren Island toward the end of the war, when he was badly wounded and left for dead when his ship had to be abandoned. He carried shrapnel around in his body for the rest of his days. And he never wore a poppy. He grew up between the wars knowing that the whole poppy tradition had been established by General Lord Haig, a man who sent hundreds of thousands of men to certain death on the battlefields of Flanders and was looking for a way to expiate his guilt. My father wanted nothing to do with it, and I see no reason to disagree with him.
On the op-ed page o the Toronto Star today, there's a rambling piece by one Heather Menzies that includes what must surely be the most crass comment ever made about war and remembrance. Says she,
"War is a violation of the human body and spirit, and of the earth, in a way that is as devastating as climate change".
If you were looking for a way to trivialize war and insult the memory of the fallen, you couldn't come up with anything better (worse?) than that.
As I've written here before, the only proper way to remember the fallen is to work to find ways to stop adding to their numbers. Prime Minister Stephen Harper led the Remembrance Day ceremonies in Ottawa today just weeks after committing Canadian soldiers and materiel to the war against ISIS/ISIL. He's clearly calculating that there are votes to be had in portraying himself as a tough war leader when elections roll around next year. I'm not sure if that's hypocrisy, exactly, but it's damned close to it.
Amid all the public ceremonies, large and small, it's hard not to notice that private honouring of the fallen is being rapidly supplanted by orchestrated displays of mass emotion, the sort of thing we've become depressingly accustomed to since the death of Princess Diana. It's no longer enough to emote and remember in quiet dignity: you have to emote and remember in ways that meet public approval.
Over in the UK, there's a bit of a fuss about a "poppy hijab" that some Muslim women have been wearing to show their respect. Some non-Muslims wonder why it's necessary for anyone to do anything beyond the traditional pin-on poppy, while some Muslim women feel that it's a distortion of the purpose of the hijab. As Muslim activist Sonia Ahmad puts it,
“My hijab is a visual sign of my religiosity and devotion to Allah and not a walking talking billboard on which to showcase my patriotism and undying loyalty to Britain. No other religious group is pressured to prove their allegiance in the same way.”
No other religious group, maybe, but the pressure on everyone to conform is growing by the year. Just ask soccer player James McClean, of Wigan Athletic, who declined to wear a poppy on his shirt for a recent game. McClean grew up in Derry, and his personal memory of the armed forces concerns the Bloody Sunday massacre of unarmed civilians, rather than brave Tommies going over the top at Passchendaele. For his pains, he's been subjected to a torrent of abuse and threats via social media.
I find myself on McClean's side here, though for different reasons. My father was a genuine war hero, decorated by two countries for his bravery. He took part in the Dieppe raid, the invasion of Italy, and the assault on Walcheren Island toward the end of the war, when he was badly wounded and left for dead when his ship had to be abandoned. He carried shrapnel around in his body for the rest of his days. And he never wore a poppy. He grew up between the wars knowing that the whole poppy tradition had been established by General Lord Haig, a man who sent hundreds of thousands of men to certain death on the battlefields of Flanders and was looking for a way to expiate his guilt. My father wanted nothing to do with it, and I see no reason to disagree with him.
On the op-ed page o the Toronto Star today, there's a rambling piece by one Heather Menzies that includes what must surely be the most crass comment ever made about war and remembrance. Says she,
"War is a violation of the human body and spirit, and of the earth, in a way that is as devastating as climate change".
If you were looking for a way to trivialize war and insult the memory of the fallen, you couldn't come up with anything better (worse?) than that.
As I've written here before, the only proper way to remember the fallen is to work to find ways to stop adding to their numbers. Prime Minister Stephen Harper led the Remembrance Day ceremonies in Ottawa today just weeks after committing Canadian soldiers and materiel to the war against ISIS/ISIL. He's clearly calculating that there are votes to be had in portraying himself as a tough war leader when elections roll around next year. I'm not sure if that's hypocrisy, exactly, but it's damned close to it.
Friday, 7 November 2014
Looking up, but not for the young
To the surprise of most analysts, Canada's employment picture continued to improve in October. Given the whipsaw pattern that employment has traced out over the past couple of years, the consensus expectation was for a small decline in employment for the month after a strong gain in September. Instead, the economy added 43,000 jobs in October, marking the first time that employment has risen in two consecutive months since late 2012. The national unemployment rate fell to 6.5%, its lowest level since the November 2008, when the financial crisis was just starting to bite.
Job gains were seen in the private sector and among the self-employed, with public sector employment falling slightly. The beleaguered manufacturing sector continued to report remarkably volatile employment levels, with the number of jobs rising by 33,000, while resource sector employment fell by more than 20,000. This latter number is unsurprising, given the collapse in global commodity prices in recent months. It remains to be seen whether the fall in the exchange rate will allow the manufacturing sector to continue picking up the slack in the months ahead.
There are worrying elements within the generally improving picture. The labour force participation rate is falling, particularly among younger workers, who still face an unemployment rate in excess of 12 percent. Bank of Canada Governor Stephen Poloz has been severely criticized this week for suggesting that unemployed young people should do volunteer work if they are unable to find paid employment. He noted that this would avoid something that's apparently known as "scarring" on one's resume, which means an unexplained gap between two spells of employment. What two spells of employment would those be, Governor? With the young finding it so hard to find jobs at all, "scarring" might be considered the least of their problems.
Job gains were seen in the private sector and among the self-employed, with public sector employment falling slightly. The beleaguered manufacturing sector continued to report remarkably volatile employment levels, with the number of jobs rising by 33,000, while resource sector employment fell by more than 20,000. This latter number is unsurprising, given the collapse in global commodity prices in recent months. It remains to be seen whether the fall in the exchange rate will allow the manufacturing sector to continue picking up the slack in the months ahead.
There are worrying elements within the generally improving picture. The labour force participation rate is falling, particularly among younger workers, who still face an unemployment rate in excess of 12 percent. Bank of Canada Governor Stephen Poloz has been severely criticized this week for suggesting that unemployed young people should do volunteer work if they are unable to find paid employment. He noted that this would avoid something that's apparently known as "scarring" on one's resume, which means an unexplained gap between two spells of employment. What two spells of employment would those be, Governor? With the young finding it so hard to find jobs at all, "scarring" might be considered the least of their problems.
Wednesday, 5 November 2014
Inflation: still "a monetary phenomenon"?
Milton Friedman's famous dictum that "inflation is always and everywhere a monetary phenomenon" is looking badly shopworn these days. When central banks announced their intention of combatting the financial crisis through record-low interest rates and quantitative easing, monetarists were quick to warn that hyperinflation was surely just around the corner. Even those economists who applauded the unconventional stimulus were concerned about what might happen if "normal" monetary conditions were not restored fairly quickly. Yet here we are, more than half a decade on, with interest rates still locked at record lows and massive amounts of monetary stimulus still sloshing around in the financial system -- and deflation is still a more pressing fear than inflation. Were the Friedmanites wrong?
It's a simple question, but not one that has a black-and-white answer. When most people think about inflation, they have in mind retail or consumer prices for goods and services. Truth to tell, that's also what Friedman was mainly talking about too. But there's also such a thing as asset price inflation, when the prices of such things as equities and real estate move sharply higher. There was plenty of that around during the Greenspan era, and there's no doubt that QE and ultra-low borrowing costs have given us more of the same in the last five years.
Many central bankers are nervous about this asset price bubble, and almost seem to wish that consumer prices would start to perk up, so that they can start to tap on the monetary brakes -- but consumer prices are refusing to cooperate. Why is that?
If we look back to the Greenspan era at the Federal Reserve, we find a central bank, or at least a central bank Chairman, convinced that expertly-applied monetary policy was the major factor behind the era of consumer price stability. In truth, there was always much more to it than that. Greenspan always acknowledged that rising productivity, largely related to the information revolution, played a major role, but he never paid much attention to another key factor: the flood of low-cost, high quality manufactured goods from China and other parts of the developing world. It's arguable that the Chairman of Walmart played a greater role than the Chairman of the Fed in ensuring US price stability in the early years of this century.
The relative importance of the factors keeping inflation low has changed subtly in the last few years. Cheap Asian imports are still helping, but not as much as they did a decade or so ago. Strongly rising labour productivity, especially in the US, is now more important, not least because the fruits of that productivity growth are generally not being passed on to workers in the form of higher wages, as routinely happened in the past. Labour incomes have been largely stagnant for many years, a fact that reflects a number of key changes in labour markets. These include the rapid spread of "right to work" laws among US states and, increasingly, in other parts of the world; continued outsourcing, both internationally and to lower labour cost jurisdictions; the replacement of full-time jobs by part-time and contract positions, which generally carry fewer benefits; and new union contracts that allow employers to pay new hires much lower wages than the existing workforce.
These developments are all inter-related, and labour unions have found themselves all but powerless to stop them. The "race to the bottom" for wages and benefits has kept costs of production low, which has directly contributed to the inflation stability that most developed countries continue to experience. However, it's becoming ever clearer that there's a downside: the absence of wage growth means that domestic demand is growing at a glacial pace in most countries, despite the efforts of central banks to goose it through expansionary policies.
Here, in fact, is the unhappy paradox: for a variety of reasons that have almost nothing to do with central banks, wildly expansionary monetary policy, both in the Greenspan era and post-financial crisis, has triggered neither inflation nor particularly robust real growth. It has, however, permitted the formation of one asset price bubble after another -- and as we saw back in 2007/8, when those bubbles start to burst, it's deflation and not inflation that policymakers have to worry most about.
It's a simple question, but not one that has a black-and-white answer. When most people think about inflation, they have in mind retail or consumer prices for goods and services. Truth to tell, that's also what Friedman was mainly talking about too. But there's also such a thing as asset price inflation, when the prices of such things as equities and real estate move sharply higher. There was plenty of that around during the Greenspan era, and there's no doubt that QE and ultra-low borrowing costs have given us more of the same in the last five years.
Many central bankers are nervous about this asset price bubble, and almost seem to wish that consumer prices would start to perk up, so that they can start to tap on the monetary brakes -- but consumer prices are refusing to cooperate. Why is that?
If we look back to the Greenspan era at the Federal Reserve, we find a central bank, or at least a central bank Chairman, convinced that expertly-applied monetary policy was the major factor behind the era of consumer price stability. In truth, there was always much more to it than that. Greenspan always acknowledged that rising productivity, largely related to the information revolution, played a major role, but he never paid much attention to another key factor: the flood of low-cost, high quality manufactured goods from China and other parts of the developing world. It's arguable that the Chairman of Walmart played a greater role than the Chairman of the Fed in ensuring US price stability in the early years of this century.
The relative importance of the factors keeping inflation low has changed subtly in the last few years. Cheap Asian imports are still helping, but not as much as they did a decade or so ago. Strongly rising labour productivity, especially in the US, is now more important, not least because the fruits of that productivity growth are generally not being passed on to workers in the form of higher wages, as routinely happened in the past. Labour incomes have been largely stagnant for many years, a fact that reflects a number of key changes in labour markets. These include the rapid spread of "right to work" laws among US states and, increasingly, in other parts of the world; continued outsourcing, both internationally and to lower labour cost jurisdictions; the replacement of full-time jobs by part-time and contract positions, which generally carry fewer benefits; and new union contracts that allow employers to pay new hires much lower wages than the existing workforce.
These developments are all inter-related, and labour unions have found themselves all but powerless to stop them. The "race to the bottom" for wages and benefits has kept costs of production low, which has directly contributed to the inflation stability that most developed countries continue to experience. However, it's becoming ever clearer that there's a downside: the absence of wage growth means that domestic demand is growing at a glacial pace in most countries, despite the efforts of central banks to goose it through expansionary policies.
Here, in fact, is the unhappy paradox: for a variety of reasons that have almost nothing to do with central banks, wildly expansionary monetary policy, both in the Greenspan era and post-financial crisis, has triggered neither inflation nor particularly robust real growth. It has, however, permitted the formation of one asset price bubble after another -- and as we saw back in 2007/8, when those bubbles start to burst, it's deflation and not inflation that policymakers have to worry most about.
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