Sunday, November 30, 2008

No confidence in a power hungry Harper

Canada's Conservative Party, ignoring the economic crisis, have opted for a high stakes gamble to force a fresh election and Conservative majority. Canada’s Prime Minister is known as a man who gets up in the morning with a determination to destroy his political opponents.

Harper's ridiculous act of political brinksmanship has taken an economic crisis and made it into a political crisis. it has encouraged an unprecedented coalition of Liberals and New Democrats. A coalition prepared to take over the reigns of government.

Instead of reaching out, as leader of a minority government and as president-elect Barack Obama is doing by talking to moderate Republicans, he smacked his opponents in the chops.

Instead of heeding the advice of economists everywhere that the economy needs stimulus, he got his Minister of Finance to present a budget that offered cutbacks and tiny surpluses that absolutely no one believes will be realized.

Instead of supporting the fight against political corruption and vote buying they plan to eliminate a $1.95-per-vote annual tax subsidy for political parties. The plan would all but cripple the opposition, while saving the treasury a paltry $30-million.

Faced with Harper’s folly the opposition parties have cobbled several variations of a motion to go to parliament next week. These range from a call to turn the focus back to the economy through to a full on non-confidence motion which:

  • denounces the Conservatives' handling of the economy
  • expresses that the House has lost confidence in the Conservative government
  • expresses that in the opinion of the House, an alternative government can be formed from existing Members of the Parliament

So what would this Liberal led coalition offer in its economic package? According to the party’s finance spokesman Scott Brison measures to be considered would include:

  • an increase and an acceleration of infrastructure measures, with a particular focus on green infrastructure
  • an increase in support for Research and Development measures that can take place in the short-term
  • working with provinces to improve programs for Canadian workers to train and retrain as part of life-long learning to help them cope with current and future economic realities
  • working with manufacturing, forestry and auto sector leaders to develop measures that help strengthen their position during this crisis.

With regards to the auto sector, we would not continue to be a bystander in these important ongoing negotiations in the U.S., seeking to be a more active stakeholder given that Canada represent 14 per cent of the auto industry in North America.

We would also convene an immediate First Ministers conference to partner with provinces to ensure the stimulus comes into effect quickly and makes an impact now in the downturn, but also contributes to greater productivity and prosperity in the future as the global economy recovers.

Curiously, according to recent polling, the majority of Canadians believe the Conservatives are best suited to delivering on the economy. In the face clear evidence that Harper is more concerned about politics than he is about the country’s wellbeing that sentiment might be at risk.

But to give the country confidence in a potential coalition the Liberals must show some real spine and resolve their leadership issues. Even if it goes back to the wider membership in due course the federal caucus and party executive need to bite the bullet in the short term and install workable leadership.

One major display of a country first attitude would surely involve putting ego aside for the sake of wider interests. Any potential coalition must be predicated on the public interest over petty politics.

Thursday, November 27, 2008

Regulating the housing market

It should not take a sociology major to determine that adequate, affordable housing is a social imperative. Which makes the proposition of the home as an investment, wealth generation vehicle a dubious development. The resulting housing stress as the ‘free market’ approach to property trading implodes must surely flow on and reduce overall productivity.

Historically, while home owners might have aspired to upgrades, actually clinging to the family home was a clear priority. Even when the home became a commodity, and for much of the 20th century, there was no real change in house prices, measured against the broader economy – at least in western economies.

It was only around 1995 that house prices began to outpace inflation, the greed and speculation coming out of the 1980s finally infected the housing market. The security of the family home is now under threat, subject to increased outside forces and an increasing willingness to risk the house on the promise

At the same time pressure is increasing on rental markets, which had remained more competitive than the purchase sector until recent times. In Australia “vacancy rates in all capital cities have fallen well below the three per cent level which is widely used as a benchmark of fully-utilised supply.” With a consequent creep in rent levels.

The global credit squeeze will no doubt slow down housing speculation. In the long term slowing this trend is not good enough, housing is too important to simply leave to the mercies of market forces. If we want relatively stable economies homes cannot be used as gambling chips.

Perhaps more than any sector of the economy housing needs to be regulated. Certainly there must be an end to no-doc or sub-prime loans; home equity lending needs to be looked at and controlled carefully, as do many of the financial ploys in the market. There might be a sucker born every minute, but the housing market is not the place to test the concept.

Monday, November 24, 2008

Comparison worth celebrating

The Rudd government has just would up its first year in office remarkably blemish free. Contrasted with Howard’s scandal prone administration that seems an incredible achievement. In John Howard’s in shaky first term lost 7 Ministers in various scandals, four of them in the first year.

Arguably Howard set the bar too high from the outset, with his Ministerial Code of Conduct, but he was nothing less than a victim of his own hubris. By contrast the Rudd administration has been virtually invisible, with any attempts by the opposition of generating scandal quickly ignored as petty gestures.

In fact, just prior to the advent of Rudd’s first year in government Howard and his infamous crew were still discussing, justifying or admitting their miserable decade in office. They are still, it seems, willing subjects for a media which thrives on a level of scandal; even if it is old scandal.

There were suggestions that Rudd would reshuffle his ministry during our long Christmas break, making way some overdue rewards. Change is now off the books; why interfere with a team that is working for the government? The anonymity of the current ministry suits Rudd, and it seems suits the Australian people.

Saturday, November 22, 2008

Limitations of diversity

I’m inclined to the idea of federal systems of government; they more easily reflect regional diversity. Federal systems can also mitigate against bad policies; innovations tried first in one jurisdiction before spreading nationally. For all that there are a wide diversity in federal models.

I tend to defend the Australian model against perennial attack from the Canberra centralists. Aussie federalism was hammered out in fiery forges of constitutional conventions, ensuring all former colonies retained a fair go regardless of size or economic strength. A favourite point is that the Aussie model prohibits any trade barriers between states.

There are other systems I wonder at, like Canada’s. Interprovincial trade barriers leave the provinces to endlessly negotiate bilateral, trilateral or quadrilateral deals. Canada's constitution prohibits internal tariffs, but it says nothing about non-tariff barriers.

For 130 years, the provinces have erected a spider's web of licensing requirements, product standards and other regulations that protect their own workers and local markets -- at increased costs to consumers and businesses, as well plumbers who simply want to move from one province to the next.

Before a landmark free-trade deal was struck between Alberta and British Columbia last year, an Alberta farmer had to restack the hay on his pickup truck when crossing the provincial border to meet B C hay-stacking regulations. At one time BC’s Campbell government had tried to force Costco and others in Alberta to provide purchase records of BC residents who slipped across the border to shop.

At the same time Alberta’s major windfall from the oil-sands chimera was held jealously for the sole benefit of that province. But now that dream has burst with falling oil prices and general economic gloom that prairie province will soon be dusting off their begging bowl and heading to Ottawa.

Obviously each of the various federal models have shortcomings. National governments consciously use their budgets as a device to "manage" the state of their economies, increasing their spending or cutting their taxes when private sector activity is weak and unemployment is rising, and cutting their spending or increasing taxes when private sector activity is too strong and inflation pressure in rising.

State/provincial governments aren't national governments and what they should do with their budgets during downturns in the economy is different from what national governments should do. That is because, unless duplication can be justified, state/provincial government should be purely in the business of delivering service, they are business managers in effect.

Of course that model works well, though not seamlessly, when there are no trade barriers between these subordinate jurisdictions. Canada, and to a degree the US, have never established that sort of clarity between state and national responsibilities. I expect it makes managing the economy just a touch problematic.

Wednesday, November 19, 2008

Crown colonies and bloody Bostons

On Nov. 19, 1858, the Crown Colony of British Columbia was created. Happy 150th birthday BC! I fell in love with BC, the place felt like home, albeit the other side of the coin; so many similarities mixed in with the obvious differences.

Having lived for many years around Australia’s Bass Strait the presence of Boston sailors was one of the curious similarities. On the edges of the Great Southern Ocean it was wailing and sealing drawing these intrepid adventurers.

"Vessels of the American fleet, the first representative of which had already been on our coast as far back as 1797, were a common site in colonial Van Diemen's Land."

In fact some would credit the surviving remnant of the ancient Tasmanian aboriginals to the lusty attentions of the Boston sealers. These people, mainly females and children surviving, were located on various Bass Strait islands, handy for the attentions of the itinerant seamen.

By 1858 BC was still an isolated British holding, with most white activity revolving around the fur trade. Obviously, at that time, communication with the rest of the ‘Empire’ was a slow and tedious business. The governor of Vancouver Island, Sir James Douglas, was stranded at the ends of the Earth with few resources for the ensuing gold rush.

Within months an estimated 30,000 ‘Bostons’, mainly from the US, were making their way along Fraser River system, to the bloody consternation of the Stó:lô and nations further up the Fraser Canyon. On the way they created settlements such as Boston Bar.

Of course the 30,000 didn’t hail from Boston as such, but from ships bearing the name as their home port. I’m not sure how the native populace so quickly managed to adopt this label for the voracious species of invaders to their ancestral lands.

"The Bostons [Americans] and Indians have been fighting for the last ten days and has been a great many killed on both sides. The Indians have stopped the miners from going up through the Canyon," George Wesley Beam reported in a letter dated Aug. 20.

Douglas, as mentioned, had few resources to contend with the flood of prospectors and the savagery and bloodshed. A number of armed groups went north to avenge the butchered Bostons and clear a path with force.

On Aug. 17, a San Francisco reporter, H.M. Snyder, leads a company of 52 men up the Fraser River to make peace with the Indians "by peaceable means if we could, and by force if we must."

Poking around the issue I found another link with my own past, Douglas’ successor Frederick Seymour, who came to the colony with twenty years of colonial experience in Van Diemen's Land. Then of course there are Matthew Flinders, James Cook, Joseph Banks – I think Vancouver himself, and many more.

There is an excellent article in the Globe and Mail.

Sunday, November 16, 2008

A Few Brain Cells Short Of Conservative

“Conservatism's current intellectual chaos reverberated in the Republican ticket's end-of-campaign crescendo” 'Socialism'? It's Already Here

Little wonder we are in a global economic mess when US commentators have little real understanding of the terms and dynamics of economic/political theory. The United States of America is just coming out of one of the greatest national socialist periods in history, leaving potentially as much destruction as the Nazi era.

The Bush administration was hell-bent on corporate welfare, for their chosen beneficiaries, while the masses were left to fend for themselves. The approach would have been a global pandemic had other countries populations, like those in Britain, Canada and Australia, not been so inclined to a reasonable level of social equity.

As it stands, the Bush economic allies did attempt to dilute that social equity, indeed, Canada’s Harper still enjoys vivid dreams of playing out the Bush fantasy. But as I suggest in my Sunday blog on; republican (or conservative) intellectual increasingly comes across as an oxymoron.

I have shouted loud and long on this blog over the fallacious claims of those conservatives who would champion the concept of free trade. They know bloody well that it has never been tried, instead we had a period where the market was opened up to those who were willing to plunder the rest.

In fact free trade was, and will continue to be a very expensive exercise, one where the beneficiaries could indulge in corruption freely, with the rest of us left to pay the cost. We’ll be paying for a long time yet! Conservative dogma is riddled with falsehood, greed and obfuscation, but very little of anything identifiable as intelligence.

I am increasingly convinced there are standard international definitions for terms, then American definitions followed by American conservative daffynitions. The article quoted above trots out many US (Democratic) instances of ‘socialism, most of them not going anywhere beyond sound economics.

These conservative attack dogs never even consider the fascist end of the socialism scale common to the American right. Nor do they mention the destructive McCarthyisms which so easily led a nation astray, and still echoes in the conservative voice. American conservatives might be in chaos, but I wouldn’t dignify it with the word intellectual. On an international measure I would suggest the US version is a few brain cells short of conservative.

Thursday, November 13, 2008

Call Me Keynesian If You Must

For years now I have been chided for the use of economic expletives, like deficit and Keynesianism. Now those sort of words are coming back into semi-respectable usage I’m left confused rather than overjoyed. My two preferred economics tutors, economics editor Ross Gittins and fellow blogger Lindsay have no real concept of how thick I really am, but they keep trying.

Gittins is now revealing himself as a born again Keynesian, more or less using the argument that it was just as well to save his breath to cool his porridge. I can accept that from a professional commentator, but a recent article he penned (Listen carefully…) Take this statement for example:

“It's appropriate (and desirable) for budgets to fall into deficit when the economy is entering or leaving recession (or a serious downturn), whereas it's appropriate and desirable for the budget to move into surplus when the economy recovers from recession in the expansion phase of the business cycle.”

It has been common across western economies over the past couple of decades to shrink spending on key areas like health and education. That has never made any sense to me, just taking those two areas. Surely it is economically healthier to provide easily accessible frontline health services to reduce later pressure on more expensive specialist and hospital treatments.

Though conservatives tend to fear education it really has the effect of maintaining stock on the shelves for the future. The stop start in valuing education and training has severe consequences on the economy, particularly when we hit times of skills shortage, as is currently the case.

I’m inclined to believe that regardless of the economic cycle, if deficits are needed to ensure these things are maintained at appropriate levels it is worth the cost. I will stand corrected, but it seems that as the corporate sector must compete with government for available borrowings, the recent regime all too happily shed community responsibility for corporate gain.

For some insane reason the New South Wales state Labor government is sticking with the nasty ways of the past, increasing taxes and reducing spending to avoid deficit. In fact they are putting the national economy at risk to maintain a dubious AAA credit rating.

This at a time when the health, education and broader infrastructure across the state is in serious need of attention. The benefits of creating much needed jobs from construction and other projects feed back to the state in a number of ways, including maintaining currently dwindling GST revenues and other taxes.

I seriously fail to comprehend why government should not be entitled to a portion of loan funds, regardless of stages in the economic cycle. If investment is the base is not consistent they need to be caught up sooner or later, and it is generally later – after the horse has bolted. Call me Keynesian if you must, at least it is no longer a swear word among most economists.

Sunday, November 09, 2008

Paling around with the language

Sarah Palin of Alaska, accused Mr. Obama of “palling around with terrorists.”

Politics throws up ugly words from time to time; but palling? With so much else going on I let it slide for awhile, but it worried me. It looks wrong ad sounds wrong – it’s plain ugly. Thanks Sarah, we need more ugly.

I no longer have a hard copy Oxford English dictionary, but the online version simply reverts the word to pal. lists the word as ‘informal’, which means something Americans accept as normal apparently.

If the word endures it will only be thanks to US media – palling is a stinker…

Kiwis out of step - again

When told a country has just 4.3 million people there is a temptation to ask their names; but New Zealand are used to being the butt of jokes. Try the fact they still have nearly 2.9 million registered voters, and they are not exactly a geriatric society.

In recent times an estimated 100 Kiwis a week have relocated to Australia. I guess it’s a matter of the grass is greener… both the migration and the election result. The sad part is that the country’s population is always economically marginal, and reducing population doesn’t help.

Now, despite eight years of good social and economic polices the Labour government of Helen Clark has been dumped. Kiwis are known for initiative and inventiveness; they are also known for others reaping the rewards. Instead of the best little economy in the world they continually sell themselves down the drain.

While other countries are swinging away from hard monetarism New Zealand has just embraced it. The new Prime Minister, John Key, has promised a more ambitious future for the country. A self made multi-millionaire and currency trader, that class largely responsible for the global mess, Key is intent on continuing the now dubious financial cowboy line.

At least, while most of the worlds endured monetarist policies New Zealand was doggedly progressive. I expect when the dust settles Australia will be hosting even more Kiwi voters in the future. Don’t get me wrong, I like them, but their country desperately needs them.

Thursday, November 06, 2008

Economics and elections

Eighty-nine percent of people view the economy negatively, and 85 percent think the country is on the wrong track. NYT

Given the assumed complexities of economics its easy to understand why my much repeated economic election prediction method is generally greeted by a shrug of the shoulders. Not one to give in easily I’ve continued to refine this prediction process, for myself as much as anyone.

Obviously few people can speak authoritatively about economics, I sure can’t. But it turns out that we aren’t talking about hard data here, at least the average voter isn’t, but about emotion responses to the effects of prevailing economic conditions. That is not as flaky as it sounds, with the main measure being consumer sentiment.

Consumer sentiment is a well excepted economic tool, though one obviously less recognised by the political establishment. It is the word sentiment here that finally dawned on me – like market professionals household consumers work on an emotional level more than hard numbers. But apparently consumer sentiment figures are far from flaky.

I used something similar, certainly less than formal, to predict the 2006 swing to Democrats in the US. But the method assumed an uneven sentiment across the country. My focus was on the rust belt states while the Bush Republicans were selling a ‘booming market’ as though the market was the sum total of the economy.

The Republican focus on the markets was so blinding even their local Reps through the rust belt states were taken by surprise less than two weeks out from the election. When the heavyweights deigned to make a visit to these depressed areas it was far too late to modify their campaign.

That raises the second modifier to this election prediction model – economic dynamics are not uniform across a country, state or even city. There will always be areas doing well while others could be enduring trends as diverse as inflation , deflation, stagflation or even recession.

Of course this presidential/congressional election did not require any really in depth analysis. Once action was required to ensure there was no run on banks across the country the seal was set. Could there be any greater indication of consumer sentiment than the fragility of the whole banking system?

Sunday, November 02, 2008

Pity The Poor Boomers

Pity the poor boomers being bought down by McCain
And pity for the boomers being threatened once again
Bought low by generation X and a gen that has no name
The boomers have the numbers but they still can’t play the game
(To a confusion of half remembered melodies from the John Wesley Harding album – Bob Dylan 1967)

It was another asinine headline - Next week the Boomers go bust – in a generally vacuous media coverage. The thrust being that whoever wins boomers lose, as McCain is pre-boomer and Obama post-boomer.

First up, let me take issue with the modern definition of a baby-boomer - born between 1946 and 1964. This construct only arose to fill the vacuum between the real extremities, 1945 – 1950 and the later gen X. Real boomers, of which I am one, are barely half a decade of procreation.

We are nothing more than the product of the pent up deprivations of wartime. It was the greatest ‘love in’ in history and the only thing that really distinguishes we true boomers is numbers.

Next let me say that many of us have utmost respect for certain of previous generations and are generally proud of our progeny, aforementioned gen X. But I still confess not to understand why we boomers are constantly vilified and envied. Numerical superiority does not imply any special attributes.

Sadly most of the traders responsible for the current global meltdown, not to mention a growing number of commentators and journalists, don’t even need a razor in their bathroom cabinet. At least boomers would bring a sense of history and experience to moderate youthful exuberance.