We surely live in interesting times, especially when it comes to money. Right now, central bankers, politicians, and business folk alike are nervously awaiting the final shake-out of a situation that began with the sub-prime loan crisis. The banks have been duly rolling out their bad loan information, declaring the requisite write-downs, and causing the vox populi to be turned up to a fever pitch on the anger-meter.
Not to sound blasé, but what’s done is done. As far as the bad debts are concerned, one can’t put the genie back in the toothpaste tube, or squeeze the toothpaste back into the genie lamp.
I have been trying to get my pea-sized brain around all the comings and goings on the economic front, attempting to extract some version of the truth that will keep me from being plunged into a catatonic state. As best as I can decipher, here it is:
Banks lost a crap load of money on bad loans, and will continue to do so, because people’s houses – their biggest asset – are now worth 25 cents on the dollar less than what they paid, and when they try to refinance, the banks will not be generous enough with either the amount, the interest rate, or the other terms;
Oil, food, and metals are high because the US dollar dropped in value, and to get the same ‘value’ you have to jack up the prices. Think about it – you sell crap in US dollars, but the US dollar is worth ten percent less. That means you take ten percent less, right? Wrong, you charge more because 2 billion people in China and India want to trade their bicycles and three-wheeled scooters in for cars, and are prepared to pay what the Yanks won’t;
When the dollar drops, so does the value of stocks bought and sold in US dollars. You might decide, hey, it’s bargain time, but if people are losing their houses, and have to pay double at the pumps, how well are those companies going to do? So, you buy gold, silver, copper, and oil futures, maybe also a bit of wheat and corn for good measure.
As for those who think a recession is not in the cards, think about this:
Every time the price of oil spikes high, we end up in a recession;
Every time the stock market tanks, we end up in a recession;
If ten percent of homeowners are getting relocated to shopping carts, and the rest owe more than their house is worth, nobody’s buying stuff, which means nobody’s selling stuff, which, again, means recession.
What makes this one strange is that in the past, a recession would force prices down due to the drop in demand. Those who still have money begin to cabbage up the old stock, and we gradually get going again – just like pulling over for a pee break. Now, the old stock never gets old – it gets cabbaged up outside the country, and voila, prices don’t come down. It’s called stagflation, and it’s the reason why, despite all of the predictions, Japan did not buy up every corporation on Earth, like every tacky movie and TV show in the late 1980’s and early 1990’s predicted.
The only thing I can think is that we do not fully understand globalization. Controlling money supply, inflation, and all that is based on individual governments being able to control all the variables. Between emerging economic powers and huge hedge funds, policies that worked every other time are as effective as the little Dutch boy sticking his finger in the dyke (or Wile E. Coyote holding the umbrella in order to stop the anvil heading for his head).
Welcome to the future, folks, whatever it ends up as.
Monday, May 26, 2008
Tuesday, May 20, 2008
No Carbon Tax is better than a bad Carbon tax
Before I begin, I have to confess the major reason why I identify with being a conservative. Most armchair pundits who react to people like us with incredulity and contempt charge that we are obstructionist by nature. Conservatives, they believe, harken back to a golden age before this and that, and in true Luddite fashion, try to stand in the way of progress. The more shrill amongst them accuse our ilk of hating everyone and everything that does not conform to our narrow view of the world.
They win debates by trying to cast the ground rules in their favour – in particular, how questions are framed. They attempt to cast questions in a similar style to the old example of “Do you still beat your wife?” Answer either yes, no or even maybe, and you are an inhuman beast. Worse still, if you reject the question, you are cast as someone who has something to hide.
Obviously, letting your opponents define who you are will not give you a flattering, or accurate portrait, so I must explain why I choose to adhere to such a maligned label.
I am a conservative not because I oppose interventions in the economy, or society. I am a conservative because I oppose interventions in the economy, or society that are ill devised, incompetently implemented, and completely unnecessary. I especially dislike them when they will clearly do the opposite of what they were designed to do. All conservative, despite their individual biases and interpretations, will agree on one thing – doing nothing is better than doing the wrong thing.
Tell that to Stephane Dion, the erstwhile Leader of Her Majesty’s Loyal Opposition in Ottawa. Monsieur Dion wants a carbon tax on gasoline, which, in his view, will help the environment. Dion’s tax, however, if it ever saw the light of day, would not only fail in its objective, it will do irreparable harm to those who really are not part of the problem.
I live in a rural farming area in eastern Ontario. We, in essence, grow the food that all Canadians consume – and when I say ‘all’ Canadians, I am including those 83 percent who live in urban areas. These are the people who will be the first hit by such a scheme – the proverbial canaries in the coal mine. The Liberal carbon tax will mean higher costs for fuel for farm equipment, for fertilizers, and for transporting produce. Moreover, for those farmers who need to supplement their farm income with a job in a nearby city, it means higher commuting costs.
If such a tax does not push many farmers and rural residents to the financial breaking point, it will guarantee higher prices at the checkout counter on your next grocery run.
Sadly enough, it will not make a lick of difference in our carbon output, or greenhouse gas production, and the clue is located in the number I cited two paragraphs ago.
Urban dwellers make up over 80 percent of the population, and a higher percentage of earned wages and consumer spending. And while math was never my strong suit, that would mean that over 80 percent of the problem lies there.
Some defensive sorts will point out the environmental impact of agriculture, but as that food is being consumed by more than just the farmer and his immediate household, that is a spurious argument. If the pollution of a jet airliner should be divided by the number of its passengers, why not divide the farmer’s amount by the number of people who eat his produce?
But, back to the carbon tax. How many people in large cities, with municipal subways, buses, and other forms of mass transit, still insist on driving the Ford Explorer or Yukon Denali down the expressways?
We should ask the question of what should be more repugnant to those who value green – either in the form of the environment or in hard earned taxpayers’ dollars. Are we offended by government supports paid by all (including urban citizens) to support farmers who feed everyone (including city dwellers), and can only continue to do so by taking good care of the surrounding land and soil – their capital asset. Or should we be offended by those who, given the choice of taking relatively inexpensive and readily available transportation subsidized by all (including rural taxpayers) would rather burn expensive fuel, emit carbon dioxide and other noxious gases for the sake of status and convenience.
Recently, someone remarked to me that Earth Day was the time when people from the land of steel and concrete traveled past chemical factories and toxic brownlands to come out to a land of trees, pure water, and clean air to lecture the locals about environmental stewardship.
Clearly, if this is Mr. Dion’s policy, he will be doing the same, by punishing the converted and allowing the real culprits a free ride.
This conservative believes that no carbon tax is better than a bad one.
They win debates by trying to cast the ground rules in their favour – in particular, how questions are framed. They attempt to cast questions in a similar style to the old example of “Do you still beat your wife?” Answer either yes, no or even maybe, and you are an inhuman beast. Worse still, if you reject the question, you are cast as someone who has something to hide.
Obviously, letting your opponents define who you are will not give you a flattering, or accurate portrait, so I must explain why I choose to adhere to such a maligned label.
I am a conservative not because I oppose interventions in the economy, or society. I am a conservative because I oppose interventions in the economy, or society that are ill devised, incompetently implemented, and completely unnecessary. I especially dislike them when they will clearly do the opposite of what they were designed to do. All conservative, despite their individual biases and interpretations, will agree on one thing – doing nothing is better than doing the wrong thing.
Tell that to Stephane Dion, the erstwhile Leader of Her Majesty’s Loyal Opposition in Ottawa. Monsieur Dion wants a carbon tax on gasoline, which, in his view, will help the environment. Dion’s tax, however, if it ever saw the light of day, would not only fail in its objective, it will do irreparable harm to those who really are not part of the problem.
I live in a rural farming area in eastern Ontario. We, in essence, grow the food that all Canadians consume – and when I say ‘all’ Canadians, I am including those 83 percent who live in urban areas. These are the people who will be the first hit by such a scheme – the proverbial canaries in the coal mine. The Liberal carbon tax will mean higher costs for fuel for farm equipment, for fertilizers, and for transporting produce. Moreover, for those farmers who need to supplement their farm income with a job in a nearby city, it means higher commuting costs.
If such a tax does not push many farmers and rural residents to the financial breaking point, it will guarantee higher prices at the checkout counter on your next grocery run.
Sadly enough, it will not make a lick of difference in our carbon output, or greenhouse gas production, and the clue is located in the number I cited two paragraphs ago.
Urban dwellers make up over 80 percent of the population, and a higher percentage of earned wages and consumer spending. And while math was never my strong suit, that would mean that over 80 percent of the problem lies there.
Some defensive sorts will point out the environmental impact of agriculture, but as that food is being consumed by more than just the farmer and his immediate household, that is a spurious argument. If the pollution of a jet airliner should be divided by the number of its passengers, why not divide the farmer’s amount by the number of people who eat his produce?
But, back to the carbon tax. How many people in large cities, with municipal subways, buses, and other forms of mass transit, still insist on driving the Ford Explorer or Yukon Denali down the expressways?
We should ask the question of what should be more repugnant to those who value green – either in the form of the environment or in hard earned taxpayers’ dollars. Are we offended by government supports paid by all (including urban citizens) to support farmers who feed everyone (including city dwellers), and can only continue to do so by taking good care of the surrounding land and soil – their capital asset. Or should we be offended by those who, given the choice of taking relatively inexpensive and readily available transportation subsidized by all (including rural taxpayers) would rather burn expensive fuel, emit carbon dioxide and other noxious gases for the sake of status and convenience.
Recently, someone remarked to me that Earth Day was the time when people from the land of steel and concrete traveled past chemical factories and toxic brownlands to come out to a land of trees, pure water, and clean air to lecture the locals about environmental stewardship.
Clearly, if this is Mr. Dion’s policy, he will be doing the same, by punishing the converted and allowing the real culprits a free ride.
This conservative believes that no carbon tax is better than a bad one.
Friday, May 16, 2008
Thoughts on Victoria Day
This weekend, thousands of Canadians will be kicking back for the unofficial start to the summer – the Victoria Day weekend. Usually, though, the manner in which we celebrate a monarch who gave name to an era of modern history consists of cleaning out garages, opening up cottages, painting, primping, gardening, and shoveling doggie-doo, but je digress…
It’s only natural, though. It is the first time since the fall that many of us have had three days to string together to get any outdoor work done. I do feel bad, however, that the significance of the day gets lost.
Normally, I would not be so maudlin about it, except that part of the long weekend will be spent putting the finishing touches on a speech I am giving to a Canada-Commonwealth Trade Forum in Edmonton on the 29th of this month. Although my serious writing focuses on the idea of a Commonwealth free trade agreement, I am taking a more pragmatic approach by speaking on A “Commonwealth Trade Strategy for Canada.”
The Commonwealth, aside from being the successor to the old British Empire, is a voluntary association of approximately 53 nations. Between us, we have one-third of the world’s population, forty percent of the membership of the World Trade Organization, and almost one-quarter of global trade.
There are over 83 organizations within the Commonwealth family, whose activities range from education, to healthcare, to sport, to development. One such group – the Royal Commonwealth Society of Canada – will be my hosts at the event.
Rather than shamelessly promote my book, or the event, I just want to encourage you to go to the Commonwealth Secretariat’s website and see how much they do. I also want you to bear in mind that Canada is the second-largest contributor to its budget, and yet what they give amounts to five cents a year per Canadian.
In a world where globalization has so many panicked about our economic future, it seems odd that for our best insurance policy, we wouldn’t pay more than a nickel a year. Heck, the Timbit that got that woman temporarily sacked from Tim Horton’s cost 16 cents.
Priorities, people, priorities…
It’s only natural, though. It is the first time since the fall that many of us have had three days to string together to get any outdoor work done. I do feel bad, however, that the significance of the day gets lost.
Normally, I would not be so maudlin about it, except that part of the long weekend will be spent putting the finishing touches on a speech I am giving to a Canada-Commonwealth Trade Forum in Edmonton on the 29th of this month. Although my serious writing focuses on the idea of a Commonwealth free trade agreement, I am taking a more pragmatic approach by speaking on A “Commonwealth Trade Strategy for Canada.”
The Commonwealth, aside from being the successor to the old British Empire, is a voluntary association of approximately 53 nations. Between us, we have one-third of the world’s population, forty percent of the membership of the World Trade Organization, and almost one-quarter of global trade.
There are over 83 organizations within the Commonwealth family, whose activities range from education, to healthcare, to sport, to development. One such group – the Royal Commonwealth Society of Canada – will be my hosts at the event.
Rather than shamelessly promote my book, or the event, I just want to encourage you to go to the Commonwealth Secretariat’s website and see how much they do. I also want you to bear in mind that Canada is the second-largest contributor to its budget, and yet what they give amounts to five cents a year per Canadian.
In a world where globalization has so many panicked about our economic future, it seems odd that for our best insurance policy, we wouldn’t pay more than a nickel a year. Heck, the Timbit that got that woman temporarily sacked from Tim Horton’s cost 16 cents.
Priorities, people, priorities…
Wednesday, May 14, 2008
Thoughts on the Global Credit Crisis
Recently, I put on my DVD of Monty Python and the Holy Grail. This was primarily at the urging of my son who likes (in no particular order) the wacky opening credits, the monks whacking themselves in the forehead with the boards, and the extra features that include the “Knights of the Round Table” scene performed entirely in Lego.
I thought about the scene in the movie where King Arthur does battle with the Black Knight. In succession, he cuts off an arm, then the other, then a leg, and then the other…You get it. Remarkably enough, each time the Black Knight loses a limb, he continues to goad the King for more battle. “It’s only a scratch,” he proclaims. In the end, the King walks away, with the Black Knight, only left with his head and torso intact, yelling “I’ll bite ya!”
Before you get the idea that I don’t have a point, here goes. I see the equivalent of the Black Knight every time I visit a financial website, or tune into CNBC, BNN (in Canada), or any other financial news network.
The pattern is the same. Some ‘expert’ proclaims that the worst is over with the credit crisis, and that the banks are on a solid footing, then, within a couple of days, some large institution declares a multi-billion dollar writedown. A while back, I had made a friendly bet with someone that within three days of the next “the coast is clear” declaration, somebody would declare a loss. I was wrong. It took four days for the BBC to report that UBS left a steaming pile of bad debt on the front step of investors, and that the bank’s boss, Marcel Ospel, was taking a long vacation. Ospel, of course, had said back in the early part of this year that nothing was wrong. That Black Knight didn’t lose a limb, just his job, but the severance package, I’m certain, would have aided in the healing process.
The other clarion call of the Black Knights is that there is no recession. Okay, the price of food and gas in virtually every jurisdiction on earth has doubled in the past 18 months, house prices in Europe and the US have dropped by about a quarter, foreclosures and repossessions are reaching levels unseen since the dirty ‘30’s, over 70 hedge funds have been rolled up in this time, and banks are holding back credit…but, hey, there’s not going to be a recession.
Look, I studied some economics in university, but I am not an economist. All I know is that if you sustain repeated blows to the head, at some point, you will lose consciousness. If the US and other economies continue to get the crap kicked out of them, at some point, something’s gotta give.
It’s great to be optimistic. Unfortunately, optimism can get detached from reality. Heck, they remind me of ‘Comical Ali’, that guy who did Saddam Hussein’s press conferences, declaring in sight of dropping bombs and advancing US forces that they had the ‘Great Satan’ on the run.
Hey, I’m not a hard man to please. All I need are two things to believe the worst is over. First, I want to go six weeks without some bank announcing a writedown of bad debt. Then I want the LIBOR (London Interbank…never mind, it’s the interest rate that banks charge each other) be roughly the same as the prime rate, and not double it. And that’s another thing…get to know LIBOR. Right now, the amount you pay for a mortgage is closer to LIBOR than prime. Prime is around 3%, LIBOR is closer to 6%, and your mortgage is around 5.75%...See?
I’m not asking for the moon. Just give me these two things and I’ll stop thinking you’re talking points were not scripted by a troupe of British comedians…
I thought about the scene in the movie where King Arthur does battle with the Black Knight. In succession, he cuts off an arm, then the other, then a leg, and then the other…You get it. Remarkably enough, each time the Black Knight loses a limb, he continues to goad the King for more battle. “It’s only a scratch,” he proclaims. In the end, the King walks away, with the Black Knight, only left with his head and torso intact, yelling “I’ll bite ya!”
Before you get the idea that I don’t have a point, here goes. I see the equivalent of the Black Knight every time I visit a financial website, or tune into CNBC, BNN (in Canada), or any other financial news network.
The pattern is the same. Some ‘expert’ proclaims that the worst is over with the credit crisis, and that the banks are on a solid footing, then, within a couple of days, some large institution declares a multi-billion dollar writedown. A while back, I had made a friendly bet with someone that within three days of the next “the coast is clear” declaration, somebody would declare a loss. I was wrong. It took four days for the BBC to report that UBS left a steaming pile of bad debt on the front step of investors, and that the bank’s boss, Marcel Ospel, was taking a long vacation. Ospel, of course, had said back in the early part of this year that nothing was wrong. That Black Knight didn’t lose a limb, just his job, but the severance package, I’m certain, would have aided in the healing process.
The other clarion call of the Black Knights is that there is no recession. Okay, the price of food and gas in virtually every jurisdiction on earth has doubled in the past 18 months, house prices in Europe and the US have dropped by about a quarter, foreclosures and repossessions are reaching levels unseen since the dirty ‘30’s, over 70 hedge funds have been rolled up in this time, and banks are holding back credit…but, hey, there’s not going to be a recession.
Look, I studied some economics in university, but I am not an economist. All I know is that if you sustain repeated blows to the head, at some point, you will lose consciousness. If the US and other economies continue to get the crap kicked out of them, at some point, something’s gotta give.
It’s great to be optimistic. Unfortunately, optimism can get detached from reality. Heck, they remind me of ‘Comical Ali’, that guy who did Saddam Hussein’s press conferences, declaring in sight of dropping bombs and advancing US forces that they had the ‘Great Satan’ on the run.
Hey, I’m not a hard man to please. All I need are two things to believe the worst is over. First, I want to go six weeks without some bank announcing a writedown of bad debt. Then I want the LIBOR (London Interbank…never mind, it’s the interest rate that banks charge each other) be roughly the same as the prime rate, and not double it. And that’s another thing…get to know LIBOR. Right now, the amount you pay for a mortgage is closer to LIBOR than prime. Prime is around 3%, LIBOR is closer to 6%, and your mortgage is around 5.75%...See?
I’m not asking for the moon. Just give me these two things and I’ll stop thinking you’re talking points were not scripted by a troupe of British comedians…
Tuesday, May 13, 2008
A (Re-) Inaugural Rant
It has been a while since I last wrote in this blog, which just goes to show you that for a diarist, persistence trumps prose. That, of course, is an unfortunate truth of today’s world – the world where quantity overwhelms quality.
Maybe it is a function of a mass consumer society where we feel the need to buy in bulk and ‘super size’ everything. That, of course, lays the blame on capitalism, instead of the stupidity and avarice of individuals, where it really belongs.
I remember my own situation on 9/11. When the news of the first plane crashing came through, there was the obvious background chatter and armchair theorizing. A former co-worker declared that it was the beginning of the biblical ‘end of days’, while I thought it might have been some wonky pilot error, similar to what happened over 50 years ago when that US bomber flew into the Empire State Building. Once the second plane hit, I knew I had to revisit my view, but this person carried on with theirs, and still does, for all I know. The fact that this person made liberal use of contempt and arrogance in their dealings with co-workers (including yours truly) made it all the more laughable. Oh, well, they are probably displaying the same winning personality in their new locale.
My point is that many people shovel pseudo-intellectual garbage into them like Augustus Gloop binging at the Wonka factory, and don’t seem to mind the brain rot that comes from a steady intake of high-carb conspiracy theories.
Right now, there is a lot of talk of a severe economic downturn, with people clearly exorcised about their future. Hey, so am I. Unfortunately, there will be a number of people who will read whatever motivations or biases they hold into the unfolding situation, than give a self-satisfied “aha!” Mind you, if some entertainment program or website should throw up the latest exploits of Paris, Britney, or Brangelina, a good number of sheeple should be thrown off track.
Look, I don’t see some hellfire and brimstone end time emergency replete with Hollywood special effects. I do, however, see smug people doing stupid things – obvious things.
Before I go any further, I should offer my own qualifier, and state that I am just as prone to bouts of stupidity as the next person. We all are. But like the alcoholic who has to take things ‘one day at a time,’ we can choose to remain intellectually sober, or fall of the wagon (or turnip truck), and celebrate idiocy. I struggle with my own stupid tendencies every day (and it can be a struggle, believe me…). The point is that some of us actually struggle, rather than immerse ourselves in stupidity.
If I have any wish for the world, it would be to pick up a frigging book once in a while – and not a romance novel, or skin magazine. If you Google a topic, don’t pick the first link, but look for one from a place that gives fancy degrees, or from someone who earned said pieces of paper written in Latin. And remember – the definition of a smart person is someone who realizes just how little of the world he or she actually understands.
So, before the spectre of sub-prime mortgages, food riots, gas prices, and erectile dysfunction cause you to flee to the hinterland and start living ‘la vida post-apocalypto’, relax, brew a pot of tea, sit down in a comfy chair, and read something without pictures or comedic punchlines.
It’s a little like a bran muffin. Might not taste so good, but it’ll leave you clean and regular.
Maybe it is a function of a mass consumer society where we feel the need to buy in bulk and ‘super size’ everything. That, of course, lays the blame on capitalism, instead of the stupidity and avarice of individuals, where it really belongs.
I remember my own situation on 9/11. When the news of the first plane crashing came through, there was the obvious background chatter and armchair theorizing. A former co-worker declared that it was the beginning of the biblical ‘end of days’, while I thought it might have been some wonky pilot error, similar to what happened over 50 years ago when that US bomber flew into the Empire State Building. Once the second plane hit, I knew I had to revisit my view, but this person carried on with theirs, and still does, for all I know. The fact that this person made liberal use of contempt and arrogance in their dealings with co-workers (including yours truly) made it all the more laughable. Oh, well, they are probably displaying the same winning personality in their new locale.
My point is that many people shovel pseudo-intellectual garbage into them like Augustus Gloop binging at the Wonka factory, and don’t seem to mind the brain rot that comes from a steady intake of high-carb conspiracy theories.
Right now, there is a lot of talk of a severe economic downturn, with people clearly exorcised about their future. Hey, so am I. Unfortunately, there will be a number of people who will read whatever motivations or biases they hold into the unfolding situation, than give a self-satisfied “aha!” Mind you, if some entertainment program or website should throw up the latest exploits of Paris, Britney, or Brangelina, a good number of sheeple should be thrown off track.
Look, I don’t see some hellfire and brimstone end time emergency replete with Hollywood special effects. I do, however, see smug people doing stupid things – obvious things.
Before I go any further, I should offer my own qualifier, and state that I am just as prone to bouts of stupidity as the next person. We all are. But like the alcoholic who has to take things ‘one day at a time,’ we can choose to remain intellectually sober, or fall of the wagon (or turnip truck), and celebrate idiocy. I struggle with my own stupid tendencies every day (and it can be a struggle, believe me…). The point is that some of us actually struggle, rather than immerse ourselves in stupidity.
If I have any wish for the world, it would be to pick up a frigging book once in a while – and not a romance novel, or skin magazine. If you Google a topic, don’t pick the first link, but look for one from a place that gives fancy degrees, or from someone who earned said pieces of paper written in Latin. And remember – the definition of a smart person is someone who realizes just how little of the world he or she actually understands.
So, before the spectre of sub-prime mortgages, food riots, gas prices, and erectile dysfunction cause you to flee to the hinterland and start living ‘la vida post-apocalypto’, relax, brew a pot of tea, sit down in a comfy chair, and read something without pictures or comedic punchlines.
It’s a little like a bran muffin. Might not taste so good, but it’ll leave you clean and regular.
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