US in recession since December 2007: official panel Yep thats exactly what I said here.
SEE:
Black Gold
U.S. Economy Entering Twilight Zone
Tag
sasset-backed commercial paper ,, goldhomes, mortgages, housing, bubble, US, economy, oil prices, sub-prime mortgage, Wall Street, crash, recession,
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Thursday, December 04, 2008
Monday, December 01, 2008
Shades of Grenwal Tory Dirty Tricks
Hey remember the last time there was a minority government and the Harpocrites secretly recorded a meeting. At the time the minoritiy government was the Paul Martin Liberals, and the taping was done by Tory MP Gurmeet Grewal who claimed he was being bribed to cross the floor. Well the Harpocrites are at it again releasing secret illegal tape recordings in hopes to shore up their minority government during this crisis of confidence. A Law and Order government secretly and illegally taping the opposition the hypocrisy is only matched by their desperation.
The Tories also unveiled a surreptitiously recorded tape of a New Democratic Party caucus meeting, alleging it showed a long-existing cabal with the Bloc Québécois to defeat the government — and there were rumours that as a last resort, Mr. Harper might seek to prorogue Parliament, ending the session to avoid defeat in the Commons
The Prime Minister's Office released a secretly taped recording of a conference call of the NDP caucus in which Leader Jack Layton refers to having "locked in" the support of the Bloc early.
Mr. Harper's aides argued it showed a pre-existing NDP-Bloc agreement to look for an excuse to defeat the Tories that had nothing to do with last week's economic statement.
In the recording, Mr. Layton is heard telling his MPs they have plans to cope if the Bloc goes "offside" during the coalition.
"I actually believe they're the least of our problems, but in case I'm wrong, let's just say we have strategies. This whole thing would not have happened if the moves hadn't have been made with the Bloc to lock them in early, because you couldn't put three people together in one, in three hours. The first part was done a long time ago, I won't go into details …," Mr. Layton said.
Mr. Mulcair insisted that while the two parties have spoken about co-operation on issues like employment insurance, the first NDP-Bloc talks about a coalition took place only after elements of the government's economic update were revealed last week.
He said the party mistakenly sent the conference-call number to a Conservative MP, who dialled in and recorded the meeting. He said the NDP plans to raise the action as a violation of parliamentary ethics and will consider pressing charges.
Mr. Mulcair said the Tories "illegally" recorded a private meeting, and called it "scandalous."
"It shows the desperation of the Conservatives," he said.
Mulcair added that the NDP were also pursuing legal action against the Tories for listening in and broadcasting a private discussion.
"We're already in contact with senior lawyers in that regard," he said.
And the reason to release this tape despite the possibility of facing legal charges let alone jeopradizing their declining public support?
There were also rumours that Mr. Harper might prorogue Parliament, ending the current session so he cannot be defeated in the Commons — although some said that was a last-resort option that would look desperate.
They know full well that the majority of Canadians, heck the majority of Albertans, did not vote for them.Hence the desperation to stay in power at any cost. So of course the Harpocrites are feigning outrage about a pending coalition government made up of the opposition parties, not because it is an undemocratic power grab as they spent the weekend messaging to the media, but rather because they have used the tactic in the past and know that it can be done.
Only a day earlier, Mr. Harper's chief of staff Guy Giorno sent out an e-mail that included talking points, scripts for Tory partisans to use on radio phone-in shows and a template for letters to newspaper editors. Party faithful were encouraged to "use every single tool and medium at our disposal" to spread the word that opposition parties are trying to usurp the government in a crass bid to protect their political "entitlements."
Text of PMO e-mail to Tory MPs on key talking points
Note to all Conservative members of Parliament:
As you are aware, the Opposition parties are currently discussing a plan to topple our government and replace it with a Liberal-NDP-Bloc coalition.
While we believe such an arrangement would be an affront to the democratic will of Canadians when they afforded us a strengthened mandate on October 14th, we must nonetheless take this threat very seriously.
The Conservative party asked its members to make "emergency" donations to help prevent the NDP and Liberals from forming a coalition government, the latest step undertaken by Tory officials to rally supporters. Irving Gerstein, the Conservative Fund Canada's chairman, sent an e-mail appeal to supporters over the weekend, asking them to "protect Canada's future and protect Canada's democracy from being hijacked by politicians who care about nothing more than power and entitlements."The message asks recipients to make a donation of "$200 or $100 -- whatever you can afford" and states "time is of the essence."
"The Liberals are holding secret negotiations with the socialist NDP and separatist Bloc Quebecois to overturn the wishes of Canadian voters and take power," Mr. Gerstein wrote. "They want to take power and impose on Canadians a prime minister without a personal mandate, a Liberal-NDP coalition not one voter has ever endorsed and have it all backstopped by the separatist Bloc Quebecois who simply want to destroy the country."
Conservative MP Pierre Poilievre said the tape proves the NDP has been plotting to usurp results of the election. "The mask has been lifted off -- the separatists and the NDP have been having these backroom talks for months," he said. "Their goal is to reverse the election results and seize power. Now their scheme is exposed ... it's incumbent upon the Liberal Party to ... no longer participate in the secret discussions."
Poilievre said he doesn't know who made the tape and declined to comment on its ethical implications.
But roll back the tape to September 2004, just a little more than two months after Canadians elected a minority Liberal government. Then-opposition leader Harper appeared at a news conference with Bloc leader Gilles Duceppe -- you know, the guy who wants to destroy the country -- and NDP leader Jack Layton to announce that the three of them had conspired -- sorry, agreed -- on a list of demands that would give them a larger role in governing.
"The agreement that we are announcing today will profoundly alter the operation of the House of Commons in ways that opposition parties have been demanding for years," Harper told reporters.
The three opposition leaders also wrote to then governor-general Adrienne Clarkson urging her to "consider all of your options before exercising your constitutional authority" in the event the Martin government lost a confidence vote.
The opposition leaders said the letter was an attempt to head off any attempt by Martin to hold a snap election in the hope of coming back with a majority.
"I would not want the prime minister to think that he could simply fail in the House of Commons as a route to another general election. That's not the way our system works," Harper said.
SEE:
Flaherty's Fiscal Failure
NDP the New Reform Party
tags
Canada, Flaherty, politics, Conservatives,illegal taping, opposition coalition, Grewal, economy, government, Conservatives, Harper, recession, NDP, Liberals, BQ, politics, , federal election, minoirity government Jack Layton,
The Tories also unveiled a surreptitiously recorded tape of a New Democratic Party caucus meeting, alleging it showed a long-existing cabal with the Bloc Québécois to defeat the government — and there were rumours that as a last resort, Mr. Harper might seek to prorogue Parliament, ending the session to avoid defeat in the Commons
The Prime Minister's Office released a secretly taped recording of a conference call of the NDP caucus in which Leader Jack Layton refers to having "locked in" the support of the Bloc early.
Mr. Harper's aides argued it showed a pre-existing NDP-Bloc agreement to look for an excuse to defeat the Tories that had nothing to do with last week's economic statement.
In the recording, Mr. Layton is heard telling his MPs they have plans to cope if the Bloc goes "offside" during the coalition.
"I actually believe they're the least of our problems, but in case I'm wrong, let's just say we have strategies. This whole thing would not have happened if the moves hadn't have been made with the Bloc to lock them in early, because you couldn't put three people together in one, in three hours. The first part was done a long time ago, I won't go into details …," Mr. Layton said.
Mr. Mulcair insisted that while the two parties have spoken about co-operation on issues like employment insurance, the first NDP-Bloc talks about a coalition took place only after elements of the government's economic update were revealed last week.
He said the party mistakenly sent the conference-call number to a Conservative MP, who dialled in and recorded the meeting. He said the NDP plans to raise the action as a violation of parliamentary ethics and will consider pressing charges.
Mr. Mulcair said the Tories "illegally" recorded a private meeting, and called it "scandalous."
"It shows the desperation of the Conservatives," he said.
Mulcair added that the NDP were also pursuing legal action against the Tories for listening in and broadcasting a private discussion.
"We're already in contact with senior lawyers in that regard," he said.
And the reason to release this tape despite the possibility of facing legal charges let alone jeopradizing their declining public support?
There were also rumours that Mr. Harper might prorogue Parliament, ending the current session so he cannot be defeated in the Commons — although some said that was a last-resort option that would look desperate.
They know full well that the majority of Canadians, heck the majority of Albertans, did not vote for them.Hence the desperation to stay in power at any cost. So of course the Harpocrites are feigning outrage about a pending coalition government made up of the opposition parties, not because it is an undemocratic power grab as they spent the weekend messaging to the media, but rather because they have used the tactic in the past and know that it can be done.
Only a day earlier, Mr. Harper's chief of staff Guy Giorno sent out an e-mail that included talking points, scripts for Tory partisans to use on radio phone-in shows and a template for letters to newspaper editors. Party faithful were encouraged to "use every single tool and medium at our disposal" to spread the word that opposition parties are trying to usurp the government in a crass bid to protect their political "entitlements."
Text of PMO e-mail to Tory MPs on key talking points
Note to all Conservative members of Parliament:
As you are aware, the Opposition parties are currently discussing a plan to topple our government and replace it with a Liberal-NDP-Bloc coalition.
While we believe such an arrangement would be an affront to the democratic will of Canadians when they afforded us a strengthened mandate on October 14th, we must nonetheless take this threat very seriously.
The Conservative party asked its members to make "emergency" donations to help prevent the NDP and Liberals from forming a coalition government, the latest step undertaken by Tory officials to rally supporters. Irving Gerstein, the Conservative Fund Canada's chairman, sent an e-mail appeal to supporters over the weekend, asking them to "protect Canada's future and protect Canada's democracy from being hijacked by politicians who care about nothing more than power and entitlements."The message asks recipients to make a donation of "$200 or $100 -- whatever you can afford" and states "time is of the essence."
"The Liberals are holding secret negotiations with the socialist NDP and separatist Bloc Quebecois to overturn the wishes of Canadian voters and take power," Mr. Gerstein wrote. "They want to take power and impose on Canadians a prime minister without a personal mandate, a Liberal-NDP coalition not one voter has ever endorsed and have it all backstopped by the separatist Bloc Quebecois who simply want to destroy the country."
Conservative MP Pierre Poilievre said the tape proves the NDP has been plotting to usurp results of the election. "The mask has been lifted off -- the separatists and the NDP have been having these backroom talks for months," he said. "Their goal is to reverse the election results and seize power. Now their scheme is exposed ... it's incumbent upon the Liberal Party to ... no longer participate in the secret discussions."
Poilievre said he doesn't know who made the tape and declined to comment on its ethical implications.
But roll back the tape to September 2004, just a little more than two months after Canadians elected a minority Liberal government. Then-opposition leader Harper appeared at a news conference with Bloc leader Gilles Duceppe -- you know, the guy who wants to destroy the country -- and NDP leader Jack Layton to announce that the three of them had conspired -- sorry, agreed -- on a list of demands that would give them a larger role in governing.
"The agreement that we are announcing today will profoundly alter the operation of the House of Commons in ways that opposition parties have been demanding for years," Harper told reporters.
The three opposition leaders also wrote to then governor-general Adrienne Clarkson urging her to "consider all of your options before exercising your constitutional authority" in the event the Martin government lost a confidence vote.
The opposition leaders said the letter was an attempt to head off any attempt by Martin to hold a snap election in the hope of coming back with a majority.
"I would not want the prime minister to think that he could simply fail in the House of Commons as a route to another general election. That's not the way our system works," Harper said.
SEE:
Flaherty's Fiscal Failure
NDP the New Reform Party
tags
Canada, Flaherty, politics, Conservatives,illegal taping, opposition coalition, Grewal, economy, government, Conservatives, Harper, recession, NDP, Liberals, BQ, politics, , federal election, minoirity government Jack Layton,
Alberta Loses Billions
Poor fiscal management is the heritage of the Tired Old Tories....as in Heritage Trust Fund lossing billions in investment interest and the Alberta Treasury Branches (the Socred Bank)losing billions in the toxic paper loans. Anywhere else heads would roll. Howerver in the province of the one party state those in charge just keep on keeping on, including rewarding themselves for bad management decisions.And the Alberta Treasury Branch brass - who showered themselves with hefty bonuses last year - are getting their ducks for an "additional provision" to cover the toxic asset-backed commercial paper they lost Albertans' money on.
ATB Financial has made an additional $55.5-million provision for potential losses on its holdings of asset-backed commercial paper, bringing its total provisions for possible ABCP losses to $308.6 million.ATB's net income for the quarter ended Sept. 30 fell to $5.7 million, the financial services company said Friday in its latest quarterly report. That's down from $8.5 million in the year earlier period when ATB took a $77.6-million provision for potential losses for its holdings of asset-backed commercial paper. ATB's $1.14-billion principal investment in ABCP will be converted to longer-term notes that reach maturity in six to nine years. ATB will revalue the restructured ABCP investment upon closing. "Times are getting tougher, even in resilient economies such as Alberta's, and interest rate conditions and uncertainty in the marketplace continue to impact our business. But our continued growth and positive results mean Albertans can be confident in ATB," said Dave Mowat, ATB's President and CEO.
Knowing full well that Alberta taxpayers will bail you out.
SEE:
Find blog posts, photos, events and more off-site about:$100 oil, Alberta, tarsands, oilsands, Canada, peak oil, royalties, oil, profits, Province, Bill Hunter, Alberta Royalty Review,Alberta Cabinet, CAPP, Ed Stelmach,Big Oil,oil royalties,
Sunday, November 30, 2008
Flaherty's Fiscal Failure
Finance Minister Jim Flaherty told reporters that the Harpocrite neo-con austerity plan aka the fiscal update was not 'written on a napkin, we have planned it for months'.
Oh dear that means all these cuts, the attack on democratic public funding of political parties, the plan to freeze public sector workers wages and take away their right to strike, and the plan to sell off crown assests and privatize infrastructure spending was all planned months ago. Then why didn't they make that known to the public during the election? Because of course it was couched as 'balancing the budget' and 'we won't run a deficit'.
When the fiscal update was released it was anything but....rather it was another example of Harpers political agenda being foisted on Canadians by a minority government intent on neo-con social engineering at any cost. Until that cost was deemed politically too expensive. Then Harper blinked. At least when it came to public financing of political parties.
Government reverses itself on political funding decision
As far as freezing wages, removing the right to strike and privatization that is still on the agenda.
The Harpocrites have no fiscal plan, they have their same old tired neo-con agenda; reduce government. In particular reduce programs that they and their right wing base are opposed to as we saw with their announcement of arts cuts and before that their attack in their first term on womens programs and legal aid programs.
The biggest wasrte of government funding has been Harpers war in Afghanistan, but reducing our involvement and reducing military spending is not on their agenda.Instead they are increasing spending on the military and refusing to withdraw our troops any earlier than 2011.
With unemployment increasing and predicted to get worse,due to the collapse of the manufacturing sector in Ontario, especially with the auto industry, again the Haprocrites failed to come up with a stimulus plan.
Instead the cynical might be forgiven for thinking the this Law and Order government has only one real infrastructure plan given their propensity to imitate the U.S. Increased incarceration means building more prisons, to house the unemployed forced into a life of crime.
Harper is following in the footeps of another Conservative PM from Calgary; R.B. Bennett. He failed to deal with the economic crisis of the Great Depression. Flaherty's fiscal update shows that the Harpocrite government is failing Canadians just as Bennett did.
SEE:
Neo-Con Industrial Strategy.
Too Little Too Late
WSJ Criticizes Contracting Out
Mayor Of Kabul Says Get Out
Economics 101
Common Sense
Neo-Cons Have No New Ideas
Here Come the Seventies
Auto Solution II
Wage Controls
Arts Vote Cost Jaffer His Job
C.D. Howe Canada's Grand Poobah
Calgary Herald Remembers R.B. Bennett
tags
Canada, Flaherty, politics, Conservatives,consumer spending, tax-credit, Stelmach, economy, government, Conservatives, Harper, recession, Conference Board of Canada, consumer confidence, Economy, Finance Minister, CPP, net debt, pension, debt, P3's, public-private-partnerships
Oh dear that means all these cuts, the attack on democratic public funding of political parties, the plan to freeze public sector workers wages and take away their right to strike, and the plan to sell off crown assests and privatize infrastructure spending was all planned months ago. Then why didn't they make that known to the public during the election? Because of course it was couched as 'balancing the budget' and 'we won't run a deficit'.
When the fiscal update was released it was anything but....rather it was another example of Harpers political agenda being foisted on Canadians by a minority government intent on neo-con social engineering at any cost. Until that cost was deemed politically too expensive. Then Harper blinked. At least when it came to public financing of political parties.
Government reverses itself on political funding decision
As far as freezing wages, removing the right to strike and privatization that is still on the agenda.
The Harpocrites have no fiscal plan, they have their same old tired neo-con agenda; reduce government. In particular reduce programs that they and their right wing base are opposed to as we saw with their announcement of arts cuts and before that their attack in their first term on womens programs and legal aid programs.
The biggest wasrte of government funding has been Harpers war in Afghanistan, but reducing our involvement and reducing military spending is not on their agenda.Instead they are increasing spending on the military and refusing to withdraw our troops any earlier than 2011.
With unemployment increasing and predicted to get worse,due to the collapse of the manufacturing sector in Ontario, especially with the auto industry, again the Haprocrites failed to come up with a stimulus plan.
Instead the cynical might be forgiven for thinking the this Law and Order government has only one real infrastructure plan given their propensity to imitate the U.S. Increased incarceration means building more prisons, to house the unemployed forced into a life of crime.
Harper is following in the footeps of another Conservative PM from Calgary; R.B. Bennett. He failed to deal with the economic crisis of the Great Depression. Flaherty's fiscal update shows that the Harpocrite government is failing Canadians just as Bennett did.
SEE:
Neo-Con Industrial Strategy.
Too Little Too Late
WSJ Criticizes Contracting Out
Mayor Of Kabul Says Get Out
Economics 101
Common Sense
Neo-Cons Have No New Ideas
Here Come the Seventies
Auto Solution II
Wage Controls
Arts Vote Cost Jaffer His Job
C.D. Howe Canada's Grand Poobah
Calgary Herald Remembers R.B. Bennett
tags
Canada, Flaherty, politics, Conservatives,consumer spending, tax-credit, Stelmach, economy, government, Conservatives, Harper, recession, Conference Board of Canada, consumer confidence, Economy, Finance Minister, CPP, net debt, pension, debt, P3's, public-private-partnerships
Friday, November 28, 2008
Capital Offers No Solution To It's Own Crisis
Capital's crisis is now fully public...Only twice in the past has the business confidence index been lower - in the third quarter of 2001 - during the bursting of the tech-bubble - and during the 1990-91 period, when a recession battered the real estate, financial and retail sectors.
"In both cases, the drops were followed by contracting business capital investment," the Conference Board said in a release.
Capital spending is a major engine of economic growth, combining with consumer and government spending and exports as the main pillars of the economy. Weak capital spending, at a time of falling consumer confidence and government cuts, will put a squeeze on growth.
The Conference Board said "the latest survey, conducted during the first three weeks of October, as mayhem gripped global financial markets, found businesses were "much more concerned" about the economy and their future financial situations than in the previous poll, taken during the summer.
Nearly 70 per cent of businesses responding to the survey believed that the economy would be in worse shape in six months - compared with 12 per cent who expected an improvement.
The net result of that negative view is that only 25.8 per cent of the business leaders surveyed believe now is a good time to make new investments in plants, technology and equipment, the board said.
And it is having a Flashback....
Hedge fund industry enters time-warp in January 1970, pops out virtually unchanged in 2008
Thought recent develops in the hedge fund industry such as poor performance, SEC registration, and taxation were unprecedented? Yeah, so did we - until Nicholas Motson of the Cass Business School (see related post), gave us a heads-up about a fascinating article from the January 1970 issue of FORTUNE magazine. The entire article can be downloaded here on the A.W. Jones & Co. website (yes, that A.W. Jones - the father of the hedge fund industry).As you will see, the similarities between the hedge fund world of 1970 and that of 2008 and truly amazing - almost eerie in fact. Even the 39 year old Warren Buffett makes a cameo in this piece. As Motson pointed out to us, “…if you re-scale the numbers it could have been printed yesterday.”
The bizarre parallels begin with the article’s very title: “Hard Times Come to Hedge Funds“. It goes on to chronicle the travails of the $1 billion industry (as a point of reference, the US mutual fund sector managed about $50 billion at the time). FORTUNE estimated there were 3,000 investors in about 150 hedge funds by 1970. Most funds were launched between 1966 and 1970 and “the great bulk” were registered in Manhattan (that’s just south of Greenwich, for those who may not remember the old days).
Speaking of flashbacks the solution to this crisis is a New Regina Manifesto for the 21st Century.....
Public reading marks 75th anniversary of Regina Manifesto
'No CCF Government will rest content until it has eradicated capitalism.'
Ottawa (19 Aug. 2008) - Seventy-five years ago this summer, the Regina Manifesto was adopted at the first national convention of the Co-operative Commonwealth Federation (CCF) in Regina. The 4,300-word declaration laid out a socialist vision for the country and has influenced the Canadian left ever since. To this day the document remains an emotional symbol for the New Democratic Party (NDP) – which replaced the CCF in 1961 – even though it includes a utopian declaration that no socialist today expects ever to be realized
The former based upon Fabian Social Democratic tradiditons looked to the State and in particular its economists to deal with the crisis of capital during the Great Depression. As such capital was lost, in the collapse of the stock market. Today the same Great Crisis is occuring but what is obvious is that all socialization of capital can be accomplished without the State and centralized planning; rather through public ownership through workers control, a phenomenon denied by the CCF as implausable, impossible, and associated with the 'Imposibilists" of the Socialist Party of Canada.
Today we have the opportunity to mobilise the mass of social capital, the wealth created by workers through the production of surplus value, as well as through workers investments; their pension plans, RRSP's and investments. Share Capital, that the Wall Street pundits proclaim was the new capitalism, was in fact the expansion of the recognition that all capital is the result of creation of the proletariat.
That is when the casino market of investments and movement of fictional captial; finance captial, collapses all that is left to retrieve capital is real prudction; factories and workers. In other words all capital is actually based on two contradictory sources; inheritence, the dead capital of previous generations of workers, and productive capital; living workers and the means of production.
The hedge funds and private capital investors who dominate the financial markets are based upon the former as George Soros ,himself a benfificary of the fictive capita of hedge funds,l takes pains to point out, the obvious, that without real capital; living workers and factories, all other capital is whiffenpoof.
And credit is the ultimate in dead capital, its only real is when it is spent by living workers through consumption and investment. Otherwise it is merely caluculations made by computers being used by international speculators. The use of 'creative' accounting practices by capitalists allows them to discount their losses over a period, to make them disappear, which has led us to this crisis. The real effect of these practices is to create actual unemployment of workers the very source of all capital.
While it may appear counterintuitive the practice worked for a decade as investors shored up companies that cutback workers, however in this crisis it is the reverse that is now required. Investment to be successful must create jobs such as in infrastructure. And the greatest source of capital remains living workers, both their labour to produce value and the capital they have created in pension funds, mortgages, RRSPs, savings accounts and government bonds. Its as clears as the nose on your face. The credit/capital crisis is the fact that Americans and Canadians have no savings, rather they are overextended on credit, they are in debt, so their nations are in debt. Laying off workers only worsens the crisis, since they now become permanent debtors.
Public ownership, the socialization of all capital under worker and community control, the creation of workers cooperatives as an alternative to corporations, and by extension the creation of peoples banks; credit unions under workers control, is the elephant in the room, that so terrifies the captialist class who keep telling us this meltdown is not the end of capitalism as we know it. Though it should be.SEE:
There Is An Alternative To Capitalism
Business Unionism Offers No Solution To Capitalist Crisis
Auto Solution II
Super Bubble Burst
Your Pension Plan At Work
Gambling On Your Future
The End Of The Leisure Society
It's the Labour Theory of Value, stupid
Workers Control vs Corporate Welfare
NDP And Workers Control
A Peoples Program for Alberta
Left, Right and Liberty
State-less Socialism
Cooperative Commonwealth=Free Market
Not Your Usual Left Wing Rant
Populism and Producerism
THE BRITISH DISTRIBUTIONISTS
Historical Memory on the Eve of the Election
Calgary Herald Remembers R.B. Bennett
Social Credit And Western Canadian Radicalism
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Wednesday, November 26, 2008
Economics 101
A rose is a rose, a recession is a recession, no need to get 'technical' about it.'Technical' recession possible: Flaherty
Prime Minister Harper says Canada is facing a "technical recession"
Canada to be hit by recession, 7.5% jobless rate, OECD warns
Oshawa's 96% jump in employment insurance recipients leads country
Number of Canadians on EI rises 3.9 per cent from last year: StatsCan
More working Canadians using food banks: study
A recession refers to economic contraction, a real decline in economic output as measured by the change in gross domestic product. Most recently, Canada experienced recessions in the mid-1970s and the early 1980s and 1990s. In each case, real GDP shrank and unemployment rates climbed into double digits.
SEE:
Common Sense
tags
Canada, Flaherty, politics, Conservatives,consumer spending, tax-credit, Stelmach, economy, government, Conservatives, Harper, recession, Conference Board of Canada, consumer confidence, Economy,
Tuesday, November 25, 2008
Common Sense
While Harper, Flaherty and Farmer Ed continue to wear rose coloured blinders denying the obvious; that we are in a recession, you and I know better.Confidence falls
Reuters; Canwest News
Falling home prices and the worst bear market since the Great Depression combined to drive consumer confidence down further in November, the Conference Board of Canada said. The independent research association said confidence fell 2.9 points to 71, a level last reached in 1982 and 1990, respectively. Both were periods of recession. Consumers were gloomier about their personal financial situation than in October, with more than one-quarter saying their families were worse off than they were six months ago.
Confidence plunges on Prairies
Markus Ermisch, Sun Media
Tue, November 25, 2008
The Prairie provinces led the nation's tumble in consumer confidence this month, says the latest Conference Board of Canada consumer confidence index.
The Ottawa-based think tank reported yesterday Alberta, Saskatchewan and Manitoba collectively posted a 7.4-point drop in consumer confidence.
During the November survey, conducted between Nov. 6 and Nov. 13, 15.1% of the respondents said they were better of financially today than six months ago, a drop of 1.4% from October.
Meanwhile, 25.4% said they were worse off now, up 2.5% from October.
The Conference Board treats the Prairie provinces as one region and doesn't calculate individual results for each of the three provinces.
Alberta, however, which generates much of its income from natural resources, has also been impacted by collapsing commodity prices, which saw oil prices plunge from heights above US$145 a barrel this summer to less than $50 last week.
As a result of this unprecedented price contraction, economists at BMO Capital Markets forecast provincial GDP to grow 0.3% next year, down from the 2% growth estimated for 2008.
This means Alberta would be near the bottom of national growth chart.
The Prairie provinces led the nation's tumble in consumer confidence this month, says the latest Conference Board of Canada consumer confidence index.
The Ottawa-based think tank reported yesterday Alberta, Saskatchewan and Manitoba collectively posted a 7.4-point drop in consumer confidence.
During the November survey, conducted between Nov. 6 and Nov. 13, 15.1% of the respondents said they were better of financially today than six months ago, a drop of 1.4% from October.
Meanwhile, 25.4% said they were worse off now, up 2.5% from October.
The Conference Board treats the Prairie provinces as one region and doesn't calculate individual results for each of the three provinces.
Alberta, however, which generates much of its income from natural resources, has also been impacted by collapsing commodity prices, which saw oil prices plunge from heights above US$145 a barrel this summer to less than $50 last week.
As a result of this unprecedented price contraction, economists at BMO Capital Markets forecast provincial GDP to grow 0.3% next year, down from the 2% growth estimated for 2008.
This means Alberta would be near the bottom of national growth chart.
Gloom deepens among consumers as recession fears grow
OTTAWA — One of the last pillars of Canada's economic foundations may be crumbling as the latest survey shows consumer confidence eroding to a new quarter-century low.
The Conference Board's monthly poll of consumers found spreading gloom with the index drooping 2.9 points this month to 71, a depth not seen since the intense recession of the early 1980s.
"There's no doubt the level of the consumer confidence index is at recessionary levels and that's worrisome," said Paul Darby, an economist at the Ottawa think-tank.
"It's also now the case that that low sentiment has spread across the country - we've seen a major drop in consumer confidence in the Prairies as well."
The board's latest poll, conducted between Nov. 6 and Nov. 13, found the largest one-month decline on record for consumer sentiment in the Prairie region. Confidence also sagged in British Columbia, Ontario and Quebec, but edged up slightly in Atlantic Canada.
Nationally, only 9.7 per cent of those polled predicted there would be more jobs available in their communities in the next six months, the weakest employment expectation ever recorded by the Conference Board survey.
In the past few months, Canadians have seen the pillars of prosperity eroding or collapsing - exports, commodity prices, stock markets, housing, and most recently labour markets - but consumer spending, particularly for automobiles, has held up relatively well.
Darby believes the survey indicates Canadians may be getting ready to hold off on big purchases.
There is disagreement among economists about whether consumer confidence surveys accurately predict behaviour, but there may be more reality than usual in the latest survey, said TD Bank economist Don Drummond.
That's because the index dropped at a time when gasoline prices came sharply down, which he said was unusual.
"To have it fall when gasoline prices are falling may be more telling, because we've found there is a tight inverse relation between gas prices and consumer confidence," Drummond explained.
A major reason for the loss of confidence is the tumble in the stock market, which fell to barely half its summer peak, and growing fears that Canada is following the U.S. into bleak economic times.
In recent days, Prime Minister Stephen Harper, Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have said Canada may be in or headed into a recession.
"The most recent private-sector forecasts suggest the strong possibility of a technical recession ... yes, I am surprised by this," Harper said from Peru on Sunday. Only two months ago, he had said the worst was over for the Canadian economy.
What has surprised many is the speed of the changes that have turned expectations on their head.
Oil, a mainstay of the Canadian economy, has gone from US$147 a barrel to $50 in a matter of months, forcing many oilsands producers to scale back projects in northern Alberta and taking billions of dollars out of the oil economy.
The North American automakers have gone from troubled to teetering on the brink of bankruptcy, with layoffs expected to intensify.
In his report, Darby found one hint of hope - 25.9 per cent of those polled said now is a good time to make a major purchase, slightly more than in October.
But he noted it was a minuscule change, and likely means only that people are anticipating bargains on purchases they make now.
The Conference Board poll claims a 95 per cent probability of its index reading - set at 100 in 2002 - being accurate within 2.2 points.
OTTAWA — One of the last pillars of Canada's economic foundations may be crumbling as the latest survey shows consumer confidence eroding to a new quarter-century low.
The Conference Board's monthly poll of consumers found spreading gloom with the index drooping 2.9 points this month to 71, a depth not seen since the intense recession of the early 1980s.
"There's no doubt the level of the consumer confidence index is at recessionary levels and that's worrisome," said Paul Darby, an economist at the Ottawa think-tank.
"It's also now the case that that low sentiment has spread across the country - we've seen a major drop in consumer confidence in the Prairies as well."
The board's latest poll, conducted between Nov. 6 and Nov. 13, found the largest one-month decline on record for consumer sentiment in the Prairie region. Confidence also sagged in British Columbia, Ontario and Quebec, but edged up slightly in Atlantic Canada.
Nationally, only 9.7 per cent of those polled predicted there would be more jobs available in their communities in the next six months, the weakest employment expectation ever recorded by the Conference Board survey.
In the past few months, Canadians have seen the pillars of prosperity eroding or collapsing - exports, commodity prices, stock markets, housing, and most recently labour markets - but consumer spending, particularly for automobiles, has held up relatively well.
Darby believes the survey indicates Canadians may be getting ready to hold off on big purchases.
There is disagreement among economists about whether consumer confidence surveys accurately predict behaviour, but there may be more reality than usual in the latest survey, said TD Bank economist Don Drummond.
That's because the index dropped at a time when gasoline prices came sharply down, which he said was unusual.
"To have it fall when gasoline prices are falling may be more telling, because we've found there is a tight inverse relation between gas prices and consumer confidence," Drummond explained.
A major reason for the loss of confidence is the tumble in the stock market, which fell to barely half its summer peak, and growing fears that Canada is following the U.S. into bleak economic times.
In recent days, Prime Minister Stephen Harper, Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have said Canada may be in or headed into a recession.
"The most recent private-sector forecasts suggest the strong possibility of a technical recession ... yes, I am surprised by this," Harper said from Peru on Sunday. Only two months ago, he had said the worst was over for the Canadian economy.
What has surprised many is the speed of the changes that have turned expectations on their head.
Oil, a mainstay of the Canadian economy, has gone from US$147 a barrel to $50 in a matter of months, forcing many oilsands producers to scale back projects in northern Alberta and taking billions of dollars out of the oil economy.
The North American automakers have gone from troubled to teetering on the brink of bankruptcy, with layoffs expected to intensify.
In his report, Darby found one hint of hope - 25.9 per cent of those polled said now is a good time to make a major purchase, slightly more than in October.
But he noted it was a minuscule change, and likely means only that people are anticipating bargains on purchases they make now.
The Conference Board poll claims a 95 per cent probability of its index reading - set at 100 in 2002 - being accurate within 2.2 points.
SEE
tags
Monday, November 24, 2008
Neo-Cons Have No New Ideas
The neo-con federal government of Harper and Flaherty have no new ideas, just the same old ideology. After lambasing Harper for his flip flop on the deficit, and his denial that Canada is in a recession, Don Martin in his column today says;"Be it campaign deception or denial, having tens of thousands suddenly face the loss of jobs, savings and perhaps their homes has twisted Harper's old beliefs into policy pretzels. For this Conservative government, the age of ideology is over -- technically and realistically."
Unfortunately Don the Conservative Government has not given up on its neo-con ideology as we witness in this announcement by Jim Flaherty.
Flaherty aims to boost economy with P3 projects
Ottawa wants to build billions of dollars of bridges, hospitals and other infrastructure as a way to lessen the blow from the financial crisis, finance minister Jim Flaherty said Monday.
Speaking at a conference in Toronto, Mr. Flaherty said investments in infrastructure will be "a key part" of the government's strategy to stimulate the economy.
But some observers say there's a problem with the plan. The government wants to deliver the projects through so-called public private partnerships (P3) where projects are built and financed by the private sector but according the government's requirements. But while the P3 model has gained acceptance in much of the world, there is rising concern that the credit crunch has made it almost impossible to finance new P3s.
Because of the financial crisis, finding willing lenders has become a lot more difficult and when they can be found the cost of capital for even triple-A borrowers is much higher than even a few months ago, said Alban de La Selle, a senior executive at Dexia Credit Local SA, a leading European bank.
"Lenders [on infrastructure projects] have become significantly more cautious," according to a recent report by PricewaterhouseCoopers. "... infrastructure finance raising is likely to be challenging for some time to come and the business risk of these transactions is certainly higher."
But the financial turmoil may have thrown a monkey wrench into the mechanics of P3s by making the financing so much more difficult.
Mr. de La Selle said one way to overcome the problem would be for the government to provide the financing itself. Since governments are among the few players that can get the benefit of lower borrowing costs, that advantage could be brought into play in doing P3s, he said. For their part, the private sector partners would guarantee to repay the debt.
So instead of the government funding infrastructure projects, the Harpocrites want to fund the private sector to do it for them. Ironically currently P3's in Canada are funded by public pension money, there are very few private P3's.
The Harpocrites had an opportunity to build a P3 project; the National Porttrait Gallery but they canceled it last week.
Earth to Flaherty,hello we are in a recession if not a depression and companies are hoarding capital not spending it. So instead of expanding the public sector the government will be choosing winners and losers in the private sector to build infrastructure. And these companies will promise to repay the debt, which will only happen if they survive this depression. Throwing good money after bad.
And he made his announcement at a conference on P3's sponsored by the right wing business lobby the Fraser Institiute.
So much for the Harpocrites abandoning their neo-con ideology, even in this recession they scramble to keep faith with the right wing ideology that got us in this mess in the first place.
Speaking to a Fraser Institute dinner, the finance minister committed to increased spending by Ottawa, if it is needed. Flaherty stressed at the luncheon the importance of infrastructure spending by the federal government, notably in partnership with the private sector. He announced $1.25 billion in startup funding for P3 Canada Inc., an entity that will work on public-private projects.
Thank goodness for this opportune recession, even if it is still "technical," as Finance Minister Jim Flaherty insisted at a downtown conference yesterday. If it weren't for whatever it is, nothing would get done.
The legacy of good times lasting more than a decade is a mountain of unfunded priorities for public spending. It took recession, or perhaps only the vivid perception of it, to focus government attention on what it should have undertaken years ago.
Focus is too soft a word to describe the sudden conversion of our former fiscal conservatives to counter-cyclical spending. Yesterday, a previously dismissive Mr. Flaherty let the world know he was jumping into the pothole business with both feet.
Infrastructure spending "will be a key component of our future success," he told a conference on public-private partnerships, and a "key component" of his government's planned economic stimulus. Although ideological conservatives may worry about burdening future generations with unsustainable debt, real Conservatives are now committed to spending their way out of recession.
And nobody is cheering louder than the crowd that brought us collateralized debt obligations and credit default swaps. With the market for such innovative products seized up worse than a rusty Ford, government has become the only source of cheap credit for anything. Ergo, everybody loves infrastructure. Well-dressed converts flocked to Mr. Flaherty's speech yesterday like contrite sinners to a revival meeting.
Instead, governments should activate construction projects that are already on the drawing-boards, and have been waiting for funding. Canada's infrastructure suffered much depreciation during the fiscal restraint of the 1990s, and did not catch up in the balanced-budget period. The wear and tear are showing.
SEE:
Your Pension Plan At Work
A Critique of P3's From The Right
Find blog posts, photos, events and more off-site about:
Bank, of, Canada, Pensions, P3, public-private-partnerships, OMERS, CPP, Ontario-Teachers-Fund, OTF, Canada, investment, infrastructure, Ontario, shareholders, economics, budget, Flaherty, Government, parliament, Conservatives, Finance Minister, CPP, net debt, pension, debt, P3's, public-private-partnerships
Saturday, November 22, 2008
Back To The Fifties
Deflation in Canada in the late 1950's led the Bank of Canada to create the floating Dollar. Now it's sinking.
Biggest inflation rate fall since 1959 raises deflation concerns
Economists fear deflation because consumers and businesses are more likely to delay purchases hoping that prices will fall further, slowing economic activity and business investments.
But more importantly, CIBC World Markets economist Avery Shenfeld said deflation often appears as the final nail in the coffin of a dying economy.
"Typically the only way you get deflation is if you've had a massive recession that has high unemployment rates and a lot of economic slack, so the conditions in which you get deflation are certainly not welcome," he explained.
One factor that may offset the potential for deflation is a recent drop in the value of the Canadian dollar. After starting the year near to parity with its American counterpart, the loonie, as the Canadian currency is popularly known, fell below 80 United States cents this week.
SEE:
Here Come the Seventies
Find blog posts, photos, events and more off-site about:
Bank of Canada, dollar, Canada, deflation, loonie, exchange-rates, 1961, Diefenbuck
Biggest inflation rate fall since 1959 raises deflation concerns
Economists fear deflation because consumers and businesses are more likely to delay purchases hoping that prices will fall further, slowing economic activity and business investments.
But more importantly, CIBC World Markets economist Avery Shenfeld said deflation often appears as the final nail in the coffin of a dying economy.
"Typically the only way you get deflation is if you've had a massive recession that has high unemployment rates and a lot of economic slack, so the conditions in which you get deflation are certainly not welcome," he explained.
One factor that may offset the potential for deflation is a recent drop in the value of the Canadian dollar. After starting the year near to parity with its American counterpart, the loonie, as the Canadian currency is popularly known, fell below 80 United States cents this week.
SEE:
Here Come the Seventies
Find blog posts, photos, events and more off-site about:
Bank of Canada, dollar, Canada, deflation, loonie, exchange-rates, 1961, Diefenbuck
Recession Hits Alberta
I love it when folks who are in charge of the eonomy claim that they didn't see the recession coming, or they didn't expect it or they are shocked by it.
There is little doubt this week's developments signalled a change in the economic conditions affecting the province -- and in the messages coming from the Stelmach government, said political scientist Peter McCormick of the University of Lethbridge.
"I do think Alberta thought it was flying pretty high -- 'Recessions might hit lesser economies but they can't hurt us because we're oil, and oil never hurts,' " he said Friday."This is completely new territory for the government."
Oh please Peter gimme a break. There was the recession and oil crash of the seventies when the Tired Old Tories first took power. Then there was the oil boom and crash of the late seventies and early eighties which occured while the rest of Canada went into recession, by 1982 the oil market collapsed and Alberta followed the rest of the country into a downward spiral. Then there was the recession and debt/deficit crisis of the ninties. And through out it all the Tired Old Tories were in charge. So this ain't new territory.
Indeed the rose coloured blinders of the oil boom that the Tired Old Tories wear are the same ones they wore in the seventies and eighties. And now the recession has hit Alberta, we still have a budget surplus, just as we did in the ninties. But like the ninties, watch for the Tired Old Tories to start belt tightening and attacking the public sector while giving royalty holidays to their pals in Big Oil.
Indeed, the economic woes have hit on a number of fronts: the stock market slide has hammered Calgary-based petroleum producers; Alberta's housing market is slowing; retail sales are down; a handful of jobs have been cut.
While Ontario's manufacturing sector has been feeling the pain for months, the downturn in commodity markets -- particularly for crude oil -- is squeezing Alberta.
"We have been living in a bit of a dream world for the last little while. Things have not been well in other parts of the country," noted University of Calgary economist Ken McKenzie. "Until recently, we've been relatively removed from that because of high oil prices."
Much of the concern stems from just how quickly economic conditions, including commodity markets, have changed.
Resource revenue is still on pace this year for a record $14.6 billion, but it's about $4.3 billion less than what was predicted only three months ago.
Banks predict the Alberta economy will grow 1.9 per cent this year, gearing down to 0.3 per cent in 2009 -- the slowest since 1986.
"A $2-billion surplus is not a catastrophe compared to other provinces," Bernard said Friday. "There are a lot of positives, I think, for the Alberta economy, but for sure the drop in commodity prices is going to hurt."
McCormick agrees the province is faring better than other parts of the country where deficits are now being calculated. However, the government is trying to manage expectations by talking about tough times ahead.
"It's directed at universities, hospitals, school boards and government employees who are thinking about salary negotiations coming up -- that's who they are talking to," he said. "They are trying to get rid of boom-talk and boom-mentality now."
Alberta veers on royalties
Financial crisis forces energy-rich province to back down on its demands for a "fair share" from the development of its resources; New transitional rate for oil and gas wells will cost government $1.8-billion over the next five years.
It's the second time this year Alberta backtracks on the new policy, launched when energy prices were thought to rise forever. Last April, it backed off royalty increases affecting gas wells deeper than 2,500 metres and oil wells deeper than 2,000 metres.
The changes won't be the last.
SEE:
Black Gold
Steady Eddie Runs Away
Lougheed Spanks Klein
Don Getty's Legacy
You Won't Have Me To Kick Around
Lack of Planning Created Skills Shortage in Alberta
Laundry Workers Fight Privatization
Find blog posts, photos, events and more off-site about:$100 oil, Alberta, tarsands, oilsands, Canada, peak oil, royalties, oil, profits, Province, Bill Hunter, Alberta Royalty Review,Alberta Cabinet, CAPP, Ed Stelmach,Big Oil,oil royalties,
There is little doubt this week's developments signalled a change in the economic conditions affecting the province -- and in the messages coming from the Stelmach government, said political scientist Peter McCormick of the University of Lethbridge.
"I do think Alberta thought it was flying pretty high -- 'Recessions might hit lesser economies but they can't hurt us because we're oil, and oil never hurts,' " he said Friday."This is completely new territory for the government."
Oh please Peter gimme a break. There was the recession and oil crash of the seventies when the Tired Old Tories first took power. Then there was the oil boom and crash of the late seventies and early eighties which occured while the rest of Canada went into recession, by 1982 the oil market collapsed and Alberta followed the rest of the country into a downward spiral. Then there was the recession and debt/deficit crisis of the ninties. And through out it all the Tired Old Tories were in charge. So this ain't new territory.
Indeed the rose coloured blinders of the oil boom that the Tired Old Tories wear are the same ones they wore in the seventies and eighties. And now the recession has hit Alberta, we still have a budget surplus, just as we did in the ninties. But like the ninties, watch for the Tired Old Tories to start belt tightening and attacking the public sector while giving royalty holidays to their pals in Big Oil.
Indeed, the economic woes have hit on a number of fronts: the stock market slide has hammered Calgary-based petroleum producers; Alberta's housing market is slowing; retail sales are down; a handful of jobs have been cut.
While Ontario's manufacturing sector has been feeling the pain for months, the downturn in commodity markets -- particularly for crude oil -- is squeezing Alberta.
"We have been living in a bit of a dream world for the last little while. Things have not been well in other parts of the country," noted University of Calgary economist Ken McKenzie. "Until recently, we've been relatively removed from that because of high oil prices."
Much of the concern stems from just how quickly economic conditions, including commodity markets, have changed.
Resource revenue is still on pace this year for a record $14.6 billion, but it's about $4.3 billion less than what was predicted only three months ago.
Banks predict the Alberta economy will grow 1.9 per cent this year, gearing down to 0.3 per cent in 2009 -- the slowest since 1986.
"A $2-billion surplus is not a catastrophe compared to other provinces," Bernard said Friday. "There are a lot of positives, I think, for the Alberta economy, but for sure the drop in commodity prices is going to hurt."
McCormick agrees the province is faring better than other parts of the country where deficits are now being calculated. However, the government is trying to manage expectations by talking about tough times ahead.
"It's directed at universities, hospitals, school boards and government employees who are thinking about salary negotiations coming up -- that's who they are talking to," he said. "They are trying to get rid of boom-talk and boom-mentality now."
Alberta veers on royalties
Financial crisis forces energy-rich province to back down on its demands for a "fair share" from the development of its resources; New transitional rate for oil and gas wells will cost government $1.8-billion over the next five years.
It's the second time this year Alberta backtracks on the new policy, launched when energy prices were thought to rise forever. Last April, it backed off royalty increases affecting gas wells deeper than 2,500 metres and oil wells deeper than 2,000 metres.
The changes won't be the last.
SEE:
Black Gold
Steady Eddie Runs Away
Lougheed Spanks Klein
Don Getty's Legacy
You Won't Have Me To Kick Around
Lack of Planning Created Skills Shortage in Alberta
Laundry Workers Fight Privatization
Find blog posts, photos, events and more off-site about:$100 oil, Alberta, tarsands, oilsands, Canada, peak oil, royalties, oil, profits, Province, Bill Hunter, Alberta Royalty Review,Alberta Cabinet, CAPP, Ed Stelmach,Big Oil,oil royalties,
Thursday, November 20, 2008
Here Come the Seventies
The U.S. cannot cut its interest rates much more or it will end up at zero.
US interest rate falls to 1 per cent
Which means that the U.S. is no longer facing infaltion but the very real recessionary spiral of deflation. The very thing that created the crisis of the Seventies.
Deflation now tops policy-makers' hit list
Globe and Mail, Canada - These are some of the disquieting signs that the once-distant spectre of deflation is looming larger on the horizon, now that economies around the world .
..Deflation: A Primer New York Times
Deflation is the new bogey word as crunch sends prices tumbling Times Online
Deflation worries send Dow below 8000 Washington Times
When your house is burning, there is no sense fretting over painting the fence. With the U.S. economy mired in what will likely be a recession of historic proportions—and an outright depression in some industries—it would be foolish to get too worked up over future inflation concerns. Oracle-of-the-moment Nouriel Roubini, in his Forbes.com column, forecast the following for next year:
“The advanced economies will face stag-deflation (stagnation/recession and deflation) rather than stagflation, as the slack in goods, labor and commodity markets will lead advanced economies’ inflation rates to become below 1% by 2009.”
Remember those wheelbarrows of cash Germans had to use to buy things after WWI watch for Americans to roll out the barrow.
Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically.
And true to form the Austrians celebrate deflation as one of the great things about the Great Depression.
Now we get to the crux of the matter: the Great Depression. The assumption is that falling prices somehow caused the economy to crumble. In fact, it was the after-effects of the boom combined with massive government intervention that caused the depression. The only silver lining in the entire period of the 1930s was precisely the falling prices that made the dollar count for more. Falling prices (a falling cost of living) are what Murray Rothbard has described as the "great advantage" of recessions. If you can imagine the Great Depression without falling prices, you have conjured up an image that is far worse than the reality.
As Rothbard has said, "rather than a problem to be dreaded and combatted, falling prices through increased production is a wonderful long-run tendency of untrammelled capitalism. The trend of the Industrial Revolution in the West was falling prices, which spread an increased standard of living to every person; falling costs, which maintained general profitability of business; and stable monetary wage rates—which reflected steadily increasing real wages in terms of purchasing power. This is a process to be hailed and welcomed rather than to be stamped out."
Now with deflation rising on the horizon as Bush bails out the financial market this prediction from the CATO Institute holds a warning for the future.
The Bush Legacy: Deflation or Inflation?
by Steve H. Hanke
Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute.
Added to cato.org on September 24, 2008
Economists of the Austrian school of economics term this type of debt deflation a "secondary deflation". If the forces of a secondary deflation are strong enough, a central bank's liquidity injections are rendered ineffective by what amounts to private sector sterilization. When people expect prices to fall, their demand for cash increases and soaks up central bank liquidity injections. This phenomenon characterized Japan's economy during most of the 1990s.
But what if the Federal reserve--fearing a secondary deflation, as they feared (incorrectly) a mild deflation in late 2002--pushed the Fed funds rate lower (now it's 2%) and turned on the inflation switch by monetizing more debt? Given the growing mountain of government debt, there is virtually an unlimited potential. It's a scenario worth thinking about.
And that future is here and now.
And since we are being nostalgic here is the theme song to the CTV series Here Comes the Seventies....
Tag
sasset-backed commercial paper ,, seventies,deflation, mortgages, housing, bubble, US, economy, oil prices, sub-prime mortgage, Wall Street, crash, recession,Bernanke, Inflation, Staglation, Stock-Market, US, Federal-Reserve-Chairman, Oil, gold, commoditiesSmoot-Hawley, protectionism, tariffs, Herbert Hoover, U.S., U.S. economy, Canada, Great Depression, John McCain, market crash, free trade, Republicans, recession,
US interest rate falls to 1 per cent
Which means that the U.S. is no longer facing infaltion but the very real recessionary spiral of deflation. The very thing that created the crisis of the Seventies.
Deflation now tops policy-makers' hit list
Globe and Mail, Canada - These are some of the disquieting signs that the once-distant spectre of deflation is looming larger on the horizon, now that economies around the world .
..Deflation: A Primer New York Times
Deflation is the new bogey word as crunch sends prices tumbling Times Online
Deflation worries send Dow below 8000 Washington Times
When your house is burning, there is no sense fretting over painting the fence. With the U.S. economy mired in what will likely be a recession of historic proportions—and an outright depression in some industries—it would be foolish to get too worked up over future inflation concerns. Oracle-of-the-moment Nouriel Roubini, in his Forbes.com column, forecast the following for next year:
“The advanced economies will face stag-deflation (stagnation/recession and deflation) rather than stagflation, as the slack in goods, labor and commodity markets will lead advanced economies’ inflation rates to become below 1% by 2009.”
Remember those wheelbarrows of cash Germans had to use to buy things after WWI watch for Americans to roll out the barrow.
Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically.
And true to form the Austrians celebrate deflation as one of the great things about the Great Depression.
Now we get to the crux of the matter: the Great Depression. The assumption is that falling prices somehow caused the economy to crumble. In fact, it was the after-effects of the boom combined with massive government intervention that caused the depression. The only silver lining in the entire period of the 1930s was precisely the falling prices that made the dollar count for more. Falling prices (a falling cost of living) are what Murray Rothbard has described as the "great advantage" of recessions. If you can imagine the Great Depression without falling prices, you have conjured up an image that is far worse than the reality.
As Rothbard has said, "rather than a problem to be dreaded and combatted, falling prices through increased production is a wonderful long-run tendency of untrammelled capitalism. The trend of the Industrial Revolution in the West was falling prices, which spread an increased standard of living to every person; falling costs, which maintained general profitability of business; and stable monetary wage rates—which reflected steadily increasing real wages in terms of purchasing power. This is a process to be hailed and welcomed rather than to be stamped out."
Now with deflation rising on the horizon as Bush bails out the financial market this prediction from the CATO Institute holds a warning for the future.
The Bush Legacy: Deflation or Inflation?
by Steve H. Hanke
Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute.
Added to cato.org on September 24, 2008
Economists of the Austrian school of economics term this type of debt deflation a "secondary deflation". If the forces of a secondary deflation are strong enough, a central bank's liquidity injections are rendered ineffective by what amounts to private sector sterilization. When people expect prices to fall, their demand for cash increases and soaks up central bank liquidity injections. This phenomenon characterized Japan's economy during most of the 1990s.
But what if the Federal reserve--fearing a secondary deflation, as they feared (incorrectly) a mild deflation in late 2002--pushed the Fed funds rate lower (now it's 2%) and turned on the inflation switch by monetizing more debt? Given the growing mountain of government debt, there is virtually an unlimited potential. It's a scenario worth thinking about.
And that future is here and now.
This week's cover story in The Economist makes it more or less official. Deflation, not inflation, is now the greatest concern for the world economy. Over the past year, producer prices have fallen throughout the advanced world; consumer prices have been falling for the last 6 months in France and Germany; in Japan wages have actually fallen 4 percent over the past year. Until the recent crisis prices were falling in Brazil; they continue to fall in China and Hong Kong; they will probably soon be falling in a number of other developing countries.
So far, none of these price declines looks anything like the massive deflation that accompanied the Great Depression. But the appearance of deflation as a widespread problem is disturbing, not only because of its immediate economic implications, but because until recently most economists - myself included - regarded sustained deflation as a fundamentally implausible prospect, something that should not be a concern.
And since we are being nostalgic here is the theme song to the CTV series Here Comes the Seventies....
Tag
sasset-backed commercial paper ,, seventies,deflation, mortgages, housing, bubble, US, economy, oil prices, sub-prime mortgage, Wall Street, crash, recession,Bernanke, Inflation, Staglation, Stock-Market, US, Federal-Reserve-Chairman, Oil, gold, commoditiesSmoot-Hawley, protectionism, tariffs, Herbert Hoover, U.S., U.S. economy, Canada, Great Depression, John McCain, market crash, free trade, Republicans, recession,
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