Saw a Bell Canada truck in a shopping mall parking lot today, with a sign on the side advertising the company's new "Fibe" TV service. The sign read: "Wireless TV. Yes, really".
Wow, you mean the pictures materialize on your screen right out of the air? No cables or anything?? What will they think of next?
***
PS -- Should have my "real" PC reconnected and be back to normal blogging by the end of this week.
Tuesday, 24 September 2013
Wednesday, 18 September 2013
The Bernanke put
If printing money were the key to economic success, Weimar Germany would have been the richest country in the world back in the 1920s, and Zimbabwe would be at the top of the rich list today. And of course, the US would now be booming merrily away, fueled by the Fed's $85 billion a month of "quantitative easing".
It hasn't quite happened like that. The US economy is moving ahead, but apparently the rate of progress, particularly in terms of employment, is still insufficient for the Federal Reserve's liking. In consequence, and defying most pundits' predictions, the Fed has decided to maintain the QE program at its existing level for the time being. Markets have breathed a big sigh of relief, propelling equity indices to fresh all-time highs.
The good times may not last long. With the Republican party almost entirely in thrall to the Tea Party, and President Obama vowing no compromise, it seems certain that the next few months will see a series of bruising fiscal battles. A government shutdown seems almost unavoidable, and some Republicans are perfectly willing to see the United States default on its debts for the first time since the Civil War. The Fed cited the possibility of fiscal mayhem as one of its reasons for standing pat on the monetary front for now.
Looking further ahead, it's at least possible that the tapering of QE is now many months away. The fiscal follies will last through the fall, and by year-end Ben Bernanke's term at the head of the Fed will have just a couple of months to run. He may well be disinclined to make a major shift in policy at that point, particularly if his successor is to be Janet Yellen, who is perceived to be more open to maintaining monetary ease.
We will not be able to judge whether QE has been a success until we see how the US economy (and that of the rest of the world) copes without it. After today's decision, it seems we may have to wait quite a while longer to find out.
It hasn't quite happened like that. The US economy is moving ahead, but apparently the rate of progress, particularly in terms of employment, is still insufficient for the Federal Reserve's liking. In consequence, and defying most pundits' predictions, the Fed has decided to maintain the QE program at its existing level for the time being. Markets have breathed a big sigh of relief, propelling equity indices to fresh all-time highs.
The good times may not last long. With the Republican party almost entirely in thrall to the Tea Party, and President Obama vowing no compromise, it seems certain that the next few months will see a series of bruising fiscal battles. A government shutdown seems almost unavoidable, and some Republicans are perfectly willing to see the United States default on its debts for the first time since the Civil War. The Fed cited the possibility of fiscal mayhem as one of its reasons for standing pat on the monetary front for now.
Looking further ahead, it's at least possible that the tapering of QE is now many months away. The fiscal follies will last through the fall, and by year-end Ben Bernanke's term at the head of the Fed will have just a couple of months to run. He may well be disinclined to make a major shift in policy at that point, particularly if his successor is to be Janet Yellen, who is perceived to be more open to maintaining monetary ease.
We will not be able to judge whether QE has been a success until we see how the US economy (and that of the rest of the world) copes without it. After today's decision, it seems we may have to wait quite a while longer to find out.
Saturday, 14 September 2013
Bad debts
It seems former Bank of Canada Governor Mark Carney may have spoken too soon when he asserted that Canadian household indebtedness was starting to decline from recent record levels. Statistics Canada reported this week that the ratio of household debt to disposable income rose to a new record high of 163.4 percent in the second quarter of this year, after falling very marginally in the two preceding quarters.
Mark Carney, his successor Stephen Poloz, Finance Minister Jim Flaherty and just about every economist in the country have been warning for months that debt levels will start to become a serious burden as soon as interest rates start to rise. You can maybe understand why the average Canadian might not entirely get the message: cheap money is cheap money, so why not take advantage? But you'd surely think the banks would know better than to keep shoveling out money to people who are all but certain to start defaulting in ever-increasing numbers as rates move back toward more historically normal levels.
Easy credit is artificially inflating house prices in Toronto and Vancouver, and setting up people all across the country for a nasty financial mess in the not-too-distant future. Do these guys never learn?
Mark Carney, his successor Stephen Poloz, Finance Minister Jim Flaherty and just about every economist in the country have been warning for months that debt levels will start to become a serious burden as soon as interest rates start to rise. You can maybe understand why the average Canadian might not entirely get the message: cheap money is cheap money, so why not take advantage? But you'd surely think the banks would know better than to keep shoveling out money to people who are all but certain to start defaulting in ever-increasing numbers as rates move back toward more historically normal levels.
Easy credit is artificially inflating house prices in Toronto and Vancouver, and setting up people all across the country for a nasty financial mess in the not-too-distant future. Do these guys never learn?
Friday, 13 September 2013
Apologies for the hiatus!
I have been unable to post here for the last ten days or so because our heating and a/c system has failed and is being replaced. A lot of the very messy work is taking place in my home office, so my main computer is temporarily out of commission. This situation is likely to last for another week or two.
In the meantime, if you want something to read, can I recommend an excellent piece on the Guardian website, marking the fifth anniversary of the Lehman Bros. collapse. Here's a link:
www.theguardian.com/business/2013/sep/13/lehman-brothers-collapse
In the meantime, if you want something to read, can I recommend an excellent piece on the Guardian website, marking the fifth anniversary of the Lehman Bros. collapse. Here's a link:
www.theguardian.com/business/2013/sep/13/lehman-brothers-collapse
Saturday, 7 September 2013
Looks like a lump of labour
I've written here once or twice before about the "lump of labour fallacy". Supposedly, most economists think it is wrong to assume that there is demand for a fixed amount of labour in an economy. After all, employed people spend their earnings, and that demand creates more jobs for other people. This reasoning leads the majority of economists to favour immigration and increased female participation in the workforce, and to reject measures like shortening the workweek (as France did a few years ago) as being unlikely to lower the unemployment rate.
The lump of labour fallacy keeps coming to mind when I hear about older workers hanging on to their jobs because they can't afford to retire. If "lump of labour" really is a fallacy, this shouldn't make it harder for young people to get a job. After all, the oldies are earning and spending, right? At the very least, however, it seems to me that the greying of the workforce must change the type of jobs the young can get. If the CFO is planning to hang around until he's 70, there's a knock-on effect right through the finance department; down at the bottom there's no immediate need to take on a new graduate trainee. Instead, that guy or gal winds up at Starbucks, making the CFO's skinny latte each morning*.
That's serious enough in itself. This week, however, Avery Shenfeld at CIBC has put out a short piece arguing that the problem is worse than that. As he puts it, "Why can't your precious Tyler and Chloe find an after school job? Because you're in it." Avery didn't get to be head of CIBC's economics department by parroting fallacies. So maybe, like me, he's wondering whether the "lump of labour" really isn't a fallacy at all.
* The CFO knows you must never drink latte or cappuccino later in the day.
The lump of labour fallacy keeps coming to mind when I hear about older workers hanging on to their jobs because they can't afford to retire. If "lump of labour" really is a fallacy, this shouldn't make it harder for young people to get a job. After all, the oldies are earning and spending, right? At the very least, however, it seems to me that the greying of the workforce must change the type of jobs the young can get. If the CFO is planning to hang around until he's 70, there's a knock-on effect right through the finance department; down at the bottom there's no immediate need to take on a new graduate trainee. Instead, that guy or gal winds up at Starbucks, making the CFO's skinny latte each morning*.
That's serious enough in itself. This week, however, Avery Shenfeld at CIBC has put out a short piece arguing that the problem is worse than that. As he puts it, "Why can't your precious Tyler and Chloe find an after school job? Because you're in it." Avery didn't get to be head of CIBC's economics department by parroting fallacies. So maybe, like me, he's wondering whether the "lump of labour" really isn't a fallacy at all.
* The CFO knows you must never drink latte or cappuccino later in the day.
Wednesday, 4 September 2013
Name and shame
Courtesy of our local talk radio station, CKTB, we learn of a new initiative from a climate change lobby group called 350.org. They are raising a petition to demand that hurricanes and major storms, currently given alternating male and female names according to a pre-set list. should instead be named after politicians who deny climate change. This whole movement really is turning into an intolerant cult, isn't it? What's next, tarring and feathering?
Anyway, great timing, guys. At the time of writing, we have now gone longer into any Atlantic hurricane season since records were kept, without a single tropical storm reaching hurricane strength. It's also been an unusually long time since any hurricane hit the US mainland*.
So it certainly seems as if the climate is changing. Just not in the way that 350.org seems to believe.
* Sandy, last November, was only a tropical storm when it made landfall. That's why the media hastily renamed it "Superstorm Sandy".
Anyway, great timing, guys. At the time of writing, we have now gone longer into any Atlantic hurricane season since records were kept, without a single tropical storm reaching hurricane strength. It's also been an unusually long time since any hurricane hit the US mainland*.
So it certainly seems as if the climate is changing. Just not in the way that 350.org seems to believe.
* Sandy, last November, was only a tropical storm when it made landfall. That's why the media hastily renamed it "Superstorm Sandy".
Tuesday, 3 September 2013
Old money
Before taking his leave of the Bank of Canada to take up his new post in the UK, Mark Carney noted a welcome deceleration in the growth of consumer credit. A fascinating new report by the consumer credit rating agency, Equifax, largely confirms this: growth in consumer indebtedness in Canada is indeed slowing (though not to the degree seen in the United States) and both delinquencies and bankruptcies have been heading steadily lower in the past few years.
There is one exception to this trend, however, and it's a worrying one. Canadians over the age of 65 are continuing to accumulate debt. Seniors' average borrowings rose by 6.5% in the year to mid-2013, and have been growing faster than the debts of other age cohorts for the past several years, although for now they remain lower than the average for all other groups apart from the credit-starved under 25s. It looks as if baby boomers, having failed to put aside enough savings during their high earning years, are now borrowing to maintain the lifestyle to which they consider themselves entitled.
You can maybe see why seniors would want to do this, but it's a bit harder to see why lenders are so willing to accommodate them. It's true that more and more people are working beyond traditional retirement age, but it remains the case that this is a group of people on incomes that are largely fixed. It may be some time before interest rates start to rise in Canada, but once that happens, indebted seniors will be among the first to feel the pinch. Of course, a lot of seniors have assets to pledge against their debts, mainly the family homestead, but that shouldn't give bankers too much comfort. You wouldn't want to be the first banker that starts to turn delinquent seniors out onto the streets in order to sell the home and recover the debt. The squawking would be heard from coast to coast, and since seniors vote in much larger numbers than the young. politicians would be quick to tell the banks to back off.
Then there are the societal implications. For a good many generations now, Canadians have been passing on to their heirs much greater wealth than they inherited from their own forebears. It's unlikely the baby boomers will be doing the same: the next generation, those now approaching middle age, are likely to find that the house and everything else that their parents leave behind is encumbered six ways to Sunday, with little net value left once all the creditors have been satisfied.
Did you ever drive down the highway behind a huge Winnebago with a bumper sticker bragging that 'We're spending our kids' inheritance"? Indeed they are, and at least here in Canada, there's no sign they're about to stop.
There is one exception to this trend, however, and it's a worrying one. Canadians over the age of 65 are continuing to accumulate debt. Seniors' average borrowings rose by 6.5% in the year to mid-2013, and have been growing faster than the debts of other age cohorts for the past several years, although for now they remain lower than the average for all other groups apart from the credit-starved under 25s. It looks as if baby boomers, having failed to put aside enough savings during their high earning years, are now borrowing to maintain the lifestyle to which they consider themselves entitled.
You can maybe see why seniors would want to do this, but it's a bit harder to see why lenders are so willing to accommodate them. It's true that more and more people are working beyond traditional retirement age, but it remains the case that this is a group of people on incomes that are largely fixed. It may be some time before interest rates start to rise in Canada, but once that happens, indebted seniors will be among the first to feel the pinch. Of course, a lot of seniors have assets to pledge against their debts, mainly the family homestead, but that shouldn't give bankers too much comfort. You wouldn't want to be the first banker that starts to turn delinquent seniors out onto the streets in order to sell the home and recover the debt. The squawking would be heard from coast to coast, and since seniors vote in much larger numbers than the young. politicians would be quick to tell the banks to back off.
Then there are the societal implications. For a good many generations now, Canadians have been passing on to their heirs much greater wealth than they inherited from their own forebears. It's unlikely the baby boomers will be doing the same: the next generation, those now approaching middle age, are likely to find that the house and everything else that their parents leave behind is encumbered six ways to Sunday, with little net value left once all the creditors have been satisfied.
Did you ever drive down the highway behind a huge Winnebago with a bumper sticker bragging that 'We're spending our kids' inheritance"? Indeed they are, and at least here in Canada, there's no sign they're about to stop.
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