From all, to all


The precedent’s hardly been set, and already…

Tories set to add forestry, mining to bailout list

After pledging more than $3-billion to rescue the auto sector, the Harper government is now poised to offer similar aid to the struggling mining and forestry industries in next month’s budget.

Industry Minister Tony Clement said Sunday on CTV’s Question Period that a number of industries are “under distress” and “other industrial sectors, other extraction sectors are on the table for our budget coming out on January 27th…”

In the Throne Speech, the Conservative government had pledged relief for automotive and aerospace sectors but nothing was proposed for the fisheries, mining and forestry industries.

NDP Leader Jack Layton credited the creation of the coalition between his party and the Liberals that is supported by the Bloc Québécois with forcing the government to act swiftly.

“It looks like the government’s finally changing direction,” Mr. Layton said on Question Period. “We’ve been saying for quite a number of months and during the election that we’ve needed strategies for these key sectors that were in trouble, and I think the Prime Minister was either in denial or just ideologically felt governments shouldn’t be helping out.”

Well thank goodness that’s over with — out with ideology, in with practicality! And what could be more practical, more pragmatic, more … Canadian, than to have everyone pitch in to bail each other out? The forestry sector bails out the auto industry. Mining bails out forestry. Aerospace bails out mining, fisheries bail out aerospace — and the auto industry bails out the fisheries! What each pays in taxes it gets back in subsidies. And vice versa.

But why not? There is no budget constraint. Deficits are no longer to be avoided. They’re “essential.” Spending is no longer to be controlled. It’s “stimulus.” The NDP are no longer socialists. They’re the Conservatives.

IN OTHER PRAGMATIC NEWS: Ottawa eyes shipbuilding as economic stimulus  

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From all, to all

  1. this site is not posting comments today

  2. you wrapped it up neatly. exposing the damage done by the liberals bumbling and kowtowing to the rich and powerful for contributions to their bulging wallets and campaign funds. aided by their oft conspirators the ndp who supported them for who knows what rewards. and letting union wages rise to lofty heights on the backs of workers who make only minimum wages yet have to pay the same high prices for rents and food which rises with every union contract to what the high paid union guys can pay with no hardship

  3. Shipbuilding? How about some FAST FERRIES? Why don’t these people learn?

  4. @Steve Wart

    Fast Ferries?

    How about Fast Trains? How about some vision? A high speed rail between Québec city and Windsor, and another one from Vancouver through Alberta (before eventually connecting the two) might be the biggest investment – for the environment, national cohesion, tourism dollars, jobs – this government could make.

  5. I lived in Switzerland for 5 years. It’s a place where they know how to build train tunnels through mountains.

    The longest overland tunnel in the world is the Gotthard tunnel, at 57km. Switzerland has many cool parallels with Canada: a beautiful natural landscape, a francophone minority that doesn’t get along with the populist farmer types, a large economically powerful neighbor with a similar language but a completely different perspective on things and a high GDP per capita.

    But it’s a very small country and tunnels are extremely expensive.

    You want a fast train through the rockies? Read The Last Spike by Pierre Burton. Technology has surely improved, but it would still be an outrageous waste of money.

    I can’t speak to Windsor-Québec but it sounds far. Someone who understands tunnels and trains should do an engineering study. I don’t think the government understands much about engineering. They should stick to their core competencies of bickering and stabbing each other in the back.

    Me, I want a tunnel from Vancouver to the rest of the South coast of the province. But I’m a crazy idealist who thinks that Vancouver is part of BC, not Seattle.

    Oh and my daughter said she would like a pony. Can the government do that for us too?

  6. Looks like the CPC is spreading its legs like the cheap whore that it is…yet again.

    And the magic word?

    E L E C T I O N


  7. Serious question time:

    If you’re against all this nonsense, who do you vote for during the next election? The opposition coalition seem to want to do even *more* of this – go further and faster. That’s the impression Jack Layton gives. So voting Liberal or NDP would appear out.

    The Greens would be a natural to oppose this – their whole “small is beautiful” outlook should make them oppose handing out billions to big business. But they’ve thrown their lot in with the coalition, for reasons I’ll never understand.

  8. Relax Andrew, you won’t have to pay it back — your kids will, and their kids.

    They are doomed to be ruled by the Moral Reclamation Party, and meet the Man Who Japed.

  9. Mike Moffat,

    I am neither for it or against it. Instead, I’m waiting for the unexpected. Then I can say I told you so with some conviction.

    And I will vote as I have always, on a whim.

  10. Mike, there is not alternative… I would say the libertarian party… but I heard one of their candidates speak in the last campaign.. and he needs to read some Von Mises – at least to get the arguments straight.

  11. The Greens would be a natural to oppose this – their whole “small is beautiful” outlook should make them oppose handing out billions to big business. But they’ve thrown their lot in with the coalition, for reasons I’ll never understand.

    Mike continues to demonstrate that he hasn’t been following GPC politics very closely over the past two years. Elizabeth May has been running an anything but Harper campaign since her days at the Sierra Club, well before becoming Green Party leader. She has since taken the party far to the left, and many Greens who previously held the more centre/centre right policies you describe have left the party – or have gone on “extended sabbaticals” including former deputy leader David Chernushenko, former leader Jim Harris, many members of the federal counsel, etc. etc. etc.

  12. At least I can’t complain about eastern bias on this one. I don’t know whether to cheer the fact that western resource industries are getting some delicious government pork or cry.

    Probably cry.

  13. Emperor Harper has no clothes.

    I must confess that I support most of the stimulus announced thusfar, although the infrastructure problem has not yet been addressed.

    It is amusing to watch the party that used to argue “the Liberals will say anything” to get elected do exactly the same all at the same time they are abandoning their principles on the Senate and a few years of breaking promise after promise.

    Perhaps the Reform Party will make a comeback

  14. Geeze, Mr. Harper, money for the forest industry? Remember that “You don’t negotiate when you’ve won” thing you said, yeah, too bad you didn’t follow through with that. and instead negotiated away a billion dollars of our forestry industries money to our US competitors, and negotiated a mandated maximum share of the US market you’d allow our logging industry to have.

    All I can say is if this “bailout” of the forestry industry is anything less than a billion dollars, would you mind terribly explaining your actions back in ’06?

    (And if it is more, then you need to explain your actions today as well)

  15. Doesn’t the BC government have a law against bailout/subsidy? Isn’t only okay if they’re not footing the bill?
    Doesn’t that betrayal of a softwood lumber deal forbid it anyway?

    You know, I actually oppose the auto bailout. For the simple reason that it’s not our problem…we don’t have a banking crisis, a “Job Bank” or silly dealership regulations. The only issue I have is that a post US bailout Big-3 would be very grateful to the US government and the Canadian divisions would suffer. Our government would be better off buying GM outright to prevent that anyway.

    But man…the Conservative movement has just been pathetic on this issue.

  16. Actually, I saw the “shipbuilding” thing as a Peter MacKay For Conservative Leader campaign launch.

  17. I read a post by Greg Mankiw the other day and I thought it was very interesting.

    Mankiw wrote:

    “One way to think about the issue is the size of the fiscal policy multipliers. The multipliers measure bang for the buck–the amount of short-run GDP expansion one gets from a dollar of spending hikes or tax cuts

    In their new blog, Bob Hall and Susan Woodward look at spending increases from World War II and the Korean War and conclude that the government spending multiplier is about one: A dollar of government spending raises GDP by about a dollar. Similarly, the results in Valerie Ramey’s research suggest a government spending multiplier of about 1.4.

    By contrast, recent research by Christina Romer and David Romer looks at tax changes and concludes that the tax multiplier is about three: A dollar of tax cuts raises GDP by about three dollars. The puzzle is that, taken together, these findings are inconsistent with the conventional Keynesian model.”

    I guarantee Harper et al know this very well but have decided to embrace Gordon Brown’s attitude of ‘saving the world’ by stimulus spending. I think Harper/Cons are digging their own graves with all these bailouts, stimulus spending and deficits. Economic conservatives will sit on their hands come the next election, and I doubt very much he’s attracting new people to the party with these ‘plans’.

  18. The NDP are no longer socialists. They’re the Conservatives.

    Isn’t it the other way around? Isn’t it that the Tories are no longer conservatives, they’re socialists?

    ‘Cause of all the parties, if we’re gonna judge on CONSISTENCY, surely only the NDP get an A. The NDP is fighting for the same things they’ve been fighting for forever. The interesting switch is that the Tories (and Liberals and BQ) are now fighting WITH them (which I believe was the point Mr. Coyne was making until the last line above).

    What I love about the Tory strategy is how it keeps everyone on their toes. They spend every waking minute outside of the House announcing and enacting the policies that the opposition is calling for, and every minute inside the House denouncing the policies that the opposition is calling for. Inside the House, these policies are painted as though they’ll lead to the destruction of our nation. Outside the House, the Tories can’t enact them fast enough.

    It really does make voting complicated! Do I vote for the party that’s implementing a liberal agenda while viciously attacking it, or for one of the parties promoting a liberal agenda who seem incapable of enacting it? Do I believe what the Tories do and ignore what they say, or do I believe that the opposition can actually implement what they say as well as the Tories are?

    I feel like I’m on Survivor. The Tories keep bad mouthing me around camp and calling me names, but when it comes to tribal council they never seem to write my name down. The Liberals and NDP are great friends to me around camp, but I’m not sure they can actually help me win the game. Do I take the chance that the Tories actions will continue to completely defy their rhetoric, or go with the people I like, and hope they won’t stab me in the back?


  19. “There is no budget constraint. Deficits are no longer to be avoided. They’re ‘essential.’ Spending is no longer to be controlled.”

    Budget constraint went out the window the day Harper got elected. If you’re budgeting to just barely break even when the economy is on overdrive, what’s going to happen when the economy slows, revenues fall and program costs rise?

    Where were conservatives two years ago? Were they really so distracted by pretty shiny penny Harper gave them?

  20. With the price of oil plummeting the Alberta oil industry will soon be crying for a bailout. Since Harper can’t politically afford to flip them off he has to establish a pattern of bailing out any and all sectors that ask for it in order to justify bailing out big oil when the time comes.

  21. “I feel like I’m on Survivor.”


    Outfail. Outconfuse. Outsleaze.

  22. “Mike continues to demonstrate that he hasn’t been following GPC politics very closely over the past two years. Elizabeth May has been running an anything but Harper campaign since her days at the Sierra Club, well before becoming Green Party leader. She has since taken the party far to the left, and many Greens who previously held the more centre/centre right policies you describe have left the party – or have gone on “extended sabbaticals” including former deputy leader David Chernushenko, former leader Jim Harris, many members of the federal counsel, etc. etc. etc.”

    As one of those former Greens (I was CEO of the London-North-Centre GPC riding association, though not during Elizabeth’s by-election run), I think I have some idea of what’s gone on in the party over the last few years.

  23. You can thank the coalition for the destruction that will be reaped upon our freedoms and our economy.

  24. The Harper Conservatives have never acted like fiscal conservatives since they took office, you have said so yourself on various occasions. Political expediency wins out over ideology every time for Harper. What makes you believe that this behaviour will suddenly change ? Perhaps you are the eternal optimist.

  25. As one of those former Greens (I was CEO of the London-North-Centre GPC riding association, though not during Elizabeth’s by-election run), I think I have some idea of what’s gone on in the party over the last few years.

    Then you’d be well aware of how local riding associations and the grassroots no longer matter in policy development in an Elizabeth May lead party, despite what the local candidates and associations say, or members blog (outside of election periods when the blogs mysteriously disappear).

    The answer to your original question is Elizabeth May.

  26. Mike, do a diamond-E analysis on it, if you don’t see the imbalance.

  27. Hasn’t the NDP railed for years against “corporate welfare”?

    Well what the heckis this? What’s fundamentally (or ideologically) so different between giving tax breaks and cold hard cash to a corporation?

  28. So is May.

  29. @jwl – that assumes the tax decrease gets spent. Normally that would be true.

    But right now people are using extra cash to de-leverage, as are banks, businesses (story on this in some paper today, but it’s irrelevant – the story is correct).

    It is not as clear that a tax decrease would yield as much.

    Regardless, I think this stimulus approach is getting a bit out of hand.

  30. Deficit financing? During a recession?


    That sounds like Keynesianism, and that man Keynes was not only a communist but a sissy besides! Rock-ribbed (small-l) libertarians like Coyne will not stand for this! Especially considering Coyne has demonstrated that he can go it alone, without any intervention by the goverm…

    [frantic whispering]

    what’s that?

    [more whispering]

    Coyne regularly appears on government-financed public television, and edits a magazine that as, of 2006-2007, received $3.1 million from the “Publications Assistance Program” and $400,000 from the “Support for Editorial Content” component of the Canada Magazine Fund?

    And also benefits from all the spending the government does on keeping foreign publications out and piracy prevention?

    [confirmatory whisper]

    Whoops. Er, never mind then.

  31. (I won’t throw up links here because it tends to end up delaying publication. For those interested in confirmatory links on those numbers, though, it’s over at my own humble (and not government-financed in any way) site. Link’s to the left.)

  32. SAB

    I don’t understand your argument. If people are paying off their debts, and trying to save more now, which is a good thing in the long run, why is stimulus spending going to help but not tax cuts? We are talking about the same people here, it’s not like we give people tax cuts and they will save more but if we bailout industries and create more make work jobs they are going to spend their money like drunken sailors.

  33. jwl, think about it. The point is to stimulate consumption, right? Consumption is spending money to buy goods or services, right? Consumption ensures that there is a market for your goods and services, right? Which means your employees get to keep their job and you get to keep your business, right?

    Well, government spending is spending. So it’s consumption. So there’s a market for goods. So there’s a need to produce those goods. So people get jobs producing those goods. And since it’s government spending, it’s predictable and safe, since governments aren’t going to go bankrupt on you and tend to spend on big multi-year projects. So you can consume yourself.

    Tax cuts, meanwhile, often just get squirreled away, or used to pay down debt. And while paying down debt is both admirable and a good individual idea, it doesn’t do a damned thing for stimulating the economy, because that money isn’t being spent and so isn’t prompting people to producing anything and so isn’t doing a thing for job growth or security.

    And if there’s no job security, guess what? People hoard all the more. Which means less spending etc. Basic macroeconomics.

  34. As for the long run, I can only quote Keynes: “In the long run, we are all dead.”

    But, actually, no it’s not good for the long run. Deflationary spirals are devastating, far more than the moderate inflation that even the wildest spending spree might provoke in modern western economies. Just ask Japan.

  35. “The Harper Conservatives have never acted like fiscal conservatives since they took office, you have said so yourself on various occasions. Political expediency wins out over ideology every time for Harper.”

    Same was true for the Mulroney PCs. It really seems to be a sad fact of life, but voting (Progressive) Conservative, does NOT result in fiscal conservatism. The Chretien Liberals, OTOH, reined in the Mulroney era’s massive deficits, and went on to produce surpluses: i.e. spending did not exceed revenues. One can argue that the Chretien Liberals spent too much, or spent on the wrong things, or did not properly monitor how money was spent (gun registry comes to mind); but they did not spend money that wasn’t there (after taming Mulroney’s deficit).

    I have a theory that perhaps only Liberals can form a fiscally conservative government. The reason being that when the Conservatives form a government, all opposition parties are to the left of them (or at least, nominally so), and thus pulling on the Conservatives to spend more money. If the Conservatives don’t spend, they are “heartless bastards”; if they do, well good bye fiscal rectitude. The Conservatives, feeling the precariousness of their electoral success, eventually opt for the latter. However, when the Liberals form a government, in addition to the NDP and BQ on the left constantly pulling for more spending, you have the Conservatives on the right pulling for less spending and being extremely eager to point out spending screw ups (e.g. again gun registry). It also helps that when Liberals don’t spend or make actual cuts, they at least seem to do so reluctantly; whereas the optics, if nothing else, are that the Conservatives do so with relish. This make it easier for Liberals to do the needful and harder for Conservatives. So, to get a fiscally responsible government, it may be necessary to vote Liberal – a sad state of affairs, but apparently what we are stuck with. An “only Nixon could go to China” kind of thing.

  36. Demosthenes I agree that what you’re saying is pretty conventional Keynesian economic wisdom. Further to your example of Japan, the path that conventional thinking in macroeconomics is pointing towards is exactly what led to their decade-long slump.

    Deflation is a horrible thought, but it is not clear why increasing consumption will cure this for us. I think it’s clear to even the most casual observer that rampant consumption is what has led to the crisis we are facing.

    I think most economists would agree that the current situation is “unprecedented” (a word for pundit drinking games if there ever was one). In fact, you can find quite a number of respected economists who believe that conventional thinking is wrong.

  37. It is savings and investment which create wealth, not consumption. If Demosthenes was correct then the richest family on your block would be the ones that run up gigantic credit card debts and treat their home equity as an ATM machine to fund cars and vacations, rather than the family who works long hours and invests their money in solid businesses. As with individuals so it is with nations.

    The poverty-creating policies advocated by Keynes are however extremely popular. Popular with the public because they are comforting fairy tales in which throwing money away on toys and luxuries is deemed to be wise. Popular with politicians because telling fairly tales is a good way to win elections in the short term, and in the long term the poverty produced by throwing away the national savings is a good excuse to implement massive government intervention.

    Inoculate yourself from economic fairy tales by reading “Spotlight on Keynesian Economics” and other papers at the von Mises institute. Your children will thank you.

  38. “As with individuals so it is with nations.”

    oompus boompus

    A couple of months ago, George Will was talking about households and governments. Will said for years, pols would point to regular people and say this is how the government should behave when it comes to spending/budgets.

    However, over the past 10 years or so people started to behave like governments and decided it would be good idea to rack up huge debts to pay for baubles. And now we find ourselves in this mess and everyone seems to be arguing we should continue on the same path but with even more government, and personal, spending. WTF?

  39. Demosthenes it seems you are economically literate, so I am keen to have your insights.

    I was tripped up by the link moderation system this weekend, but since this is the topic of the decade, I wonder if you could give us your thoughts on what Yves Smith has to say about this:


    In particular, I found the following comments interesting:

    Now to my doubts about the proposed remedies, namely monster stimulus and monetary easing. First, as mentioned before, the analogy is to the US in the Depression, which we have said repeatedly before is questionable. The US in the 1920s was the world’s biggest creditor, exporter, and manufacturer. Our position then is analogous to China’s now. Indeed, Keynes in the 1930s urged America to take even more aggressive measures, and argued that it was not reasonable for the US to expect over-consuming, debt-burdened countries like the UK and France to take up the demand slack. So even though most economists are invoking Keynes, it isn’t clear he’d prescribe such aggressive stimulus for the US and UK now.

    Second, the argument is that the US in the 1930s and Japan in its post bubble era failed to engage in sufficiently large stimulus. That is mere conjecture; there is no way to prove that argument (we cannot go back in a time machine and test different remedies in both economies).

    In the US, the claim generally made is that the US did not emerge conclusively from the Depression until it engaged in massive wartime spending starting in 1939-40, and therefore a stimulus of perhaps that large a magnitude is required. However, quite a lot happened between 1930 and 1939, including going off the gold standard, the securities law reforms of 1933 and 1934, the creation of the FDIC, refinancing homeowner debt to longer-term mortgages via the Homeowner’s Loan Corporation, and the closure of a lot of business, some of which were probably victims of circumstance, but others probably deserved to be put out of their misery.

    There is another huge extenuating circumstance with the war spending that observers choose to forget. The US’s problem in 1929, like China’s appeared to be (at least in part) overproduction, that there might be too much global capacity relative to consumer demand (that is certainly true for the auto industry now, which had managed to forestall the day of reckoning by converting consumers to leases that had them trading in cars after 3 years, when buyers generally keep them longer, Decreasing the effective life of cars was tantamount to increasing demand). In addition, the US suffered a fall in GDP of 11% in 1946 and 1% in 1947 in transitioning off a wartime economy.

    But perhaps more important, at the end of WWII, productive capacity in the next two biggest industrialized nations, Germany and Japan, had been destroyed. The US had effectively no competition for its bulked up industrial capacity.

    Also, as I posted earlier, I have grave concerns about the ability of every country in the world to simultaneously increase its debt, in an environment where US treasury bills are being issued at a rate that is incomprehensible to anyone who isn’t an astrophysicist.

    It seems to me that if all the G8 countries are rapidly issuing bonds that the ability to lower interest rates is going to be severely curtailed. If the credit markets are truly “broken” due to a lack of demand for anything but US Treasuries, increasing the supply of other government securities seems unlikely to have any predictable consequences.

  40. Learning and evolving, thanks everyone (well, most of you).

    What is infrastructure? Roads, bridges, public transit, sewers, civic buildings? Is infrastructure comprised only of steel and concrete? Would a power generation plant (be it gas, coal, wind or solar)qualify? If it was privately funded and owned? Would the transmission lines qualify? I guess part of my confusion is whether or not ‘infrastructure’ by definition is owned by everyone (a government (city/province/federal)) and/or paid for through a tax structure. Is Rogers Centre part of Toronto’s infrastructure?

  41. I did write on Paul Wells’ blog wondering if Harper will give Harper Days to his civil servants some day.

  42. Yep, we are on our way to destroying our economy all on our own. We don’t need a global crisis to wreak havoc; we — i.e., through our inept politicians — can it ourselves.

  43. Seems to me that spending on consumer goods is unlikely to give us nearly as much of an economic multiplier as spending on infrastructure, in part because, last time I checked, nearly all consumer goods sold at the mall were made in China, not in Canada. In contrast, building infrastructure — for example, a national HVDC grid to help us harvest wind power from all over the Prairies and deliver it to major cities, or fast trains in the Montreal-Ottawa-Toronto corridor, or thorium reactors, or even just a massive energy efficiency building retrofit program — these kinds of things would both create wealth, on a lasting basis, and stimulate the Canadian economy, because they’d rely on Canadian inputs and workers. Also, I’m not even sure this has to be done with deficit spending. It could be achieved by having the government lend money to itself, i.e. by having the Bank of Canada issue low- or no-interest loans to agencies of the Government of Canada, loans which could, in time, be quitely forgiven. Printing money only creates inflation if the money printed is not used to create an amount of new wealth corresponding to the increase in the money supply resulting from printing that money. This is why printing money and throwing it from helicopters to waiting crowds below is a bad idea (and printing money via loose credit to stimulate consumer frenzies amongst people who may not be able to pay back those loans is a worse idea), but printing money and using it to build real long-term wealth-generating infrastructure is, quite possibly, a brilliant idea. As long as it’s done at an appropriate scale, and projects are chosen well and managed intelligently (which might happen if project managers are paid largely by cleverly formulated, measurable performance criteria, rather than straight salaries).

  44. How demoralizing for anyone who loves children and who has an ounce of respect for present and future taxpayers. If the Harper Tories were so hell-bent on preventing the Coalition from gaining power in order to spend away our future, can anyone please explain why they are now implementing the Coalition’ s plans to spend away our future? They may as well have handed over the keys last week. I am truly at a loss.

  45. “Deficits are no longer to be avoided. They’re “essential.” Spending is no longer to be controlled. It’s “stimulus.”

    Is there where I get to say, “I told you so“?

  46. Helicopter money. It’s the only way. I want mine.

  47. Bloomberg is reporting that the new US “car czar” may have the power to force bankruptcy on the automakers


    Here is the text of the letter I sent to the Minister of Finance:

    “The Honourable James M. Flaherty, P.C., M.P. Minister of Finance”
    date Sun, Dec 14, 2008 at 9:21 AM
    subject Spending provisions for automotive manufacturers

    Dear Mr Flaherty,

    I am writing to express my concerns about the spending provisions recently announced for US automakers operating in Canada.

    I have recently returned to Canada after living overseas for the past seven years. I am not a member of any political party or news organization. I am a private individual who is concerned about my family, my community and the economic health of my country.

    I understand that the situation is changing as I write this, and I am confident that the government is taking steps to ensure that funds are allocated responsibly. However I hope you can reassure me about some specific issues:

    1. Can you confirm that the three firms entitled to receive these funds are GM Canada Limited, Ford Canada Limited, and Chrysler Canada Limited?

    2. Can you stay whether and how the privately-owned Chrysler will be treated relative to the other two firms?

    3. One report indicated that US Government is taking a 20% equity stake in GM. Will the Government of Canada also receive warrants with the terms of this deal?

    4. Another report indicated that the US government is mandating management changes and instituting an “auto czar” to provide governance. Will the Canadian government be insisting on management changes in the firms? What guarantees do we have that the government will stay out of the car business?

    5. What will be the priority for repayment of the debt to the Canadian government if one or more of the US manufacturers files for bankruptcy under the provisions of Chapter 11 of the US Bankruptcy Code? Will the Canadian government have the same rights as a Debtor in Possession under the terms of US Law?

    6. What legal recourse does the Canadian government have in case the US manufacturers use the funds provided by the Canadian people to support US operations instead of Canadian operations?

    I am sure that your staff have been working hard at answering many of these questions to your own satisfaction. I would greatly appreciate any help they could provide to reassure me that the Government of Canada is still committed to conservative fiscal policies and liberal economic policies.

  48. oompus: Without consumption, there is no market for production. Without production, there is no need for investment. “Wealth creation” is therefore irrelevant without consumption, even by your own (obviously biased) accounting.

    (The Austrian school is for quacks.)

    Steve: There’s a whole lot of speculation and assertion in that blog post that doesn’t really stand up. He spends a lot of time speculating about what creditors do or do not think of the current situation (judging by the banks, it appears to be a mixture of blind panic and anguished cries to Washington); makes the rather odd assertion that somehow the current situation can’t be compared to either the 30s (why is being a net creditor necessary for stimulus?) or Japan (since when are historical comparisons impossible?); and clearly hasn’t paid attention to what Krugman has been saying for months, which is that Keynesian stimulus worked in the 1930s, and the relapse into depression in 1937 was due to FDR easing up, not because he had gone too far!

    madeyoulook: it must be nice, knowing that no matter how bad the future economy gets, your childrens’ biggest concern is national debt. Most would probably prefer said debt to, say, 30% unemployment. But I suppose perspectives vary.

  49. Dem, it must be nice to take away the future citizens’ freedom to make their own decisions by saddling them with liabilities they never approved. That’s merely a polite code word for THEFT.

    You want a miserable future economy? Try taking so much of its wealth away from it before it has a chance.

  50. Unfortunately, without a majority, the Conservatives are between a rock and a hard place. They cannot carry through with their own plans for the economy because the coalition threatens to takeover. So they have to spend like drunken sailors to keep the coalitionists happy, or the coalitionists will do that for them when they overthrow them.
    These days I’m a conservative supporter, but in a way would like to see this coalition thing run its course – overthrow the government, spend like crazy, get screwed by the Bloc, anger most of the Canadian population, and then in the next election let voters return a majority for the Conservatives (this all seems like a very predictable path).
    I really hope the Conservatives keep this coming budget within reason and semi-dare the coalition to make their move. Even with Iggy at the helm, you just know they would love to dump Harper if only for their own greedy satisfaction… can they resist?
    Interesting times for sure…

  51. Demosthenes stimulus of the sort you’re advocating is what we’ve been getting, at least from the Bush administration, for the past 8 years. How Canada can craft policy around that needs some more creative thinking than what we’ve been seeing from any party.

    Thanks for being so predictable. If I want arguments that fall back on the authority of Krugman, I’ll go to the Times. At least when he insults the monetarists he does it with some reasoned arguments. Oh wait, I’m mistaken, he sounds just like you. You do a great impression. Other than that I’m pretty disappointed.

  52. Here is the question on stimulus…..if you do the high speed train thing, or bridges etc…..what pay does the contruction industry pay for welders, general laborers etc? Does it come anywhere near the price the automakers pay currently…assuming thats what all of these people are going to do.

    The answer is no they dont. So if a wage adjustment is what there going to get hwy dont they take it on the job they already have and keep the business going? A 20% wage cut on Candian Autoworkers is worth between 750 million and a billion annually. That gets you 1/4 to a 1/3 of the way to the rescue package (this year)…..bondholders have to contribute and overhead also has to be cut.

    Windpower? What are we going to ship all the money to Denmark to Vestas who make the turbines.

    The high speed train….do you have ANY IDEA how much that will cost? The issue is that you have to build an underass or overpass for every single road crossing, let alone seperate land and track. Is it for freight or people only….or both? Not against it jsut like to see a proper business plan rather than Bombardier’s wet dream.

    If the Auto industry can put forward a credible plan, that shows transition to sustainability, not a happy path plan, then it might be worth it since the credit environment isnt in its normal state or range right now. But outside of that, what the heck are we doing?

    China, and the undervalued Chinese Yuan is the issue. China will have to raise its standard of living by letting the Yuan rise, that is answer but that means some Chinese unemployed. The Chinese government is a little afraid of that, but it is going to happen anywya if they cant sell to anyone else. Might as well let the locals generate more demand locally.

  53. The purpose of ‘stimulus’ isn’t to create demand or anything. It is simply an increase of the money supply to create inflation. The indebtedness of corporate and private (and government) in Canada will decrease as the value of their debts decrease due to inflation.

    So let’s think about this. Housing prices have dropped already, double digits. By next march, probably 30-40%, more in some markets. That is in 6 months.That deflation is scaring the living daylights out of banks and mortgage vendors, because they don’t know how much houses are actually worth, so how do you figure your equity.

    Commodities have dropped 50% in one year.

    So, to create inflation that will decrease the debt load, how much inflation do we need? 10%? That would make housing prices reach last year’s prices in 3-4 years. Commodities in 5 years.

    This is pure madness. Utter foolishness got us here, and more madness is not going to fix anything. It will make it worse.

    Anyone who mentions Japan as a model for what we are seeing is deluded. Japan had it’s downturn during a worldwide boom. They refused to let bankrupt firms go bankrupt. Their real estate bubble made ours (or the US’) look like a picnic.

    The only thing that can be done, but it won’t, is to write down the debt. Bankruptcy, reorganization. A real tough 2 years, and at the end of it a working economy with manageable debtloads, lean well run organizations with cost structures that allow profit during slack times. Government also needs to shave and cut and get real. Then Canada will be the northern tiger, the only economy able to jump at the increasing opportunities. Everyone else will be saddled with more debt and dysfunctional structures that they refused to let fall.

    This is an ugly mess of our own creation. We have gotten used to spending more than we can afford, from top to bottom. We penalize ownership, penalize asset accumulation. We have government obligations that demand 5% economic growth and still can’t keep up.

    We’ve hit the wall. Backing up for another run at it will only make it worse.

    Expect to see economists being absolutely and utterly wrong this time around. Come to think of it, that will be the only non-surprise.


  54. Well said, Derek,

    somewhere else on Macleans’ blogsite the topic of chidren’s mental health is taken under discussion. While we’re at it, perhaps we could combine that one with this one: from all to all, indeed!

  55. Jim R
    Dec 15, 2008 13:36

    Very interesting and insightful observation.

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