Economist Nouriel Roubini skyrocketed to fame as the first to foretell the crash of 2007/2008 (a claim that overlooks the even earlier warnings from Stiglitz and Krugman).
In 2011 Roubini sparked controversy by writing that capitalism was self-destructing, much as Karl Marx predicted.
Now, writing in The Guardian, Roubini warns of what may befall us in the anticipated crash of 2020. This time there'll be no repeat of 2007-8. Back then governments were relatively flush and able to fund bailouts and stimulus spending. Today, they're broke, their treasuries bare.
Roubini can't predict what our governments will do when the public demands they 'do something NOW, but he warns that "'crazy' policy will become a foregone conclusion." The only question is whether they'll do more harm than good.
In other words, we're heading for a crap shoot.
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Wednesday, October 30, 2019
Friday, February 20, 2015
Even the Fraser Institute Can't Look the Other Way But It Can't Tell the Truth Either.
There's a bumper sticker line that could double for the provincial motto of Alberta: Dear God, Please Give Us One More Oil Boom and, This Time, We Promise We Won't Piss It Away.
Now, with another boom gone bust, Alberta has fallen back into a raging deficit and even the uber-Right Fraser Institute can't bite its tongue although it can't face facts either. Naturally, the neo-liberal Fraser Institute sees workers' wages, especially government workers' wages, as the culprit.
Ten years ago, before the boom started in earnest, Alberta spent $8,965 (in 2013 dollars) per person in program spending. This does not include capital spending on items like hospitals, schools and roads.
The report argues that had the province increased program spending in the following years at the rate of inflation plus population growth, it would have spent $295 billion on programs over the next nine years.
Instead it spent $345 billion, a $49-billion difference.
So where did the money go? Mark Milke says a lot went to public sector wage growth, which in some years grew at nearly twice the rate of inflation.
"When you take these wage deals and unreformed pensions and start to multiply them by 200,000 people in the provincial public sector in Alberta, then over time, you get these big numbers."
Between 2006 and 2008, Alberta contributed $4.5 billion to the Heritage Savings Trust Fund. Nothing has gone in since then, and the fund's total sits at $15 billion.
In Alaska, a minimum of 25 per cent of resource revenues are deposited into its Alaska Permanent Fund. The income generated from the fund can be used by the state government, but not the principal. As of June 2014, the fund stands at nearly $64 billion US.
In Norway, 100 per cent of net proceeds from resource revenue are supposed to flow into a fund. According to Milke, that doesn't happen every year, but Norway has gotten close to that ideal. The Norwegian Petroleum Fund sits at $759 billion as of Sept. 30, 2014.
Of course, being the consummate neo-liberal Hack Shop, the Fraser Institute steers well clear of facts that don't fit its 'blame the workers' narrative. While the Fraser report extols the success of Norway, for example, the authors deceivingly avoid the heart of that story - that Norway negotiated far higher royalties for its oil; that the government wisely (and in keeping with Peter Lougheed's advice) did not take oil revenues to into current accounts but, instead, used hefty income taxes to support the generous services it provides to its people.
Lougheed, perhaps the last sensate premier Alberta has seen, knew that taking oil royalties into general revenue would create a dangerous government dependency on an insecure source of funding. When boom turned to bust the government and people of Alberta would be dropped into a stinking mess. Lougheed also warned that injecting that windfall revenue into the economy would overheat the economy, cause real wealth to evaporate as prices soared, and leave the province already wounded when oil prices plummeted.
Everything Lougheed foretold has been demonstrably proven - by both Norway and Alberta. Too bad the Fraser Institute is so intellectually compromised that it can't tell the simple truth.
Wednesday, February 04, 2015
What Neoliberalism Has in Store For You
| click to enlarge |
From Le Monde, a timely explanation of how disastrous neoliberalism continues to thrive despite an endless string of economic disasters and what it holds in store for you even as you continue to vote for those who inflict it. Hint. Neoliberalism is class warfare and it's being waged in our own Parliament against us.
Even neoliberal proponents recognize that it is a crisis-ridden system. In his popular book Why Globalisation Works, Financial Times columnist Martin Wolf writes: “Between 1945 and 1971, in what might be called the “age of financial repression”, there had been only thirty-eight crises in all.... Then, between 1973 and 1997, there were 139 crises. The age of financial liberation has, in short, been an age of financial crisis” (3).
Neoliberal policies have been implemented from 1973 in Pinochet’s Chile, in the UK and US under Thatcher and Reagan in the 1980s and then across increasing swathes of the world. These policies include, privatization, the de-regulation of the financial sector, increasing openness to foreign trade and investment, and cuts to public welfare spending. Supporters of neoliberal policies argue that these will increase economic efficiency as state regulation of the economy is replaced by more accurate ‘market signals’. These are held to be better at encouraging and allocating investment, which in turn leads to higher economic growth and greater benefits for the economy and population as a whole.
So why do so many Western governments, including your own, embrace neoliberal, market-fundamentalist policies? That's because it's actually successful only not in promoting a healthy economy to benefit all. Its success lies in the quiet transfer of economic and political power out of your pocket and into the pocket of those it's actually intended to benefit.
In his film Inequality for All, Robert Reich, who was Bill Clinton’s labour secretary between 1993 and 1997, documents the collapse of US wages over the last four decades. In the late 1970s the typical male US worker was earning $48,000 a year (inflation adjusted). By 2010, the average wage had fallen to $33,000 a year. Over the same period the average annual income of someone in the top 1% of US society rose from $390,000 to $1,100,000.
Neoliberal policies aim to reduce wages to the bare minimum and to maximize the returns to capital and management. They also aim to demobilise workers’ organisations and reduce workers to carriers of labour power — a commodity to be bought and sold on the market for its lowest price. Neoliberalism is about re-shaping society so that there is no input by workers’ organisations into democratic or economic decision-making. Crises and austerity may not be intentionally sought by most state leaders and central bank governors, but they do contribute significantly towards pursuing such ends. Consequently, these politicians and leaders of the economy do not strive to put in place new structures or policies that will reduce the recurrence of crisis.
There is one downside for proponents of neoliberal policies however. Because they generate socio-economic crisis they erode public confidence in politics and economic policy. It is here that progressive political organisations can highlight the class basis of neoliberalism and propose a realistic alternative that favours the majority of the world’s population, not the minority.
It's hard to imagine that today's 'permanent warfare state' could ever have arisen absent neoliberalism and the commodification of state violence into for-profit warfare. Likewise disaster capitalism is utterly dependent on the life support of neoliberalism. What you need to understand is that, until we throw these people out of Parliament - the lot of them - this is only going to get worse, not just for you but even more so for your children and theirs.
Wednesday, March 27, 2013
Will Climate Change Drive Britain Back Into Recession?
Britain's Tory government is hoping desperately to avoid a "triple dip" recession on its watch. The Cameron government eked out a 0.1% growth for the three months ending March 1st, about as slender a margin as they come.
Recently, however, the British Isles have been plunged into a deep freeze that researchers are now attributing to atmospheric changes triggered by the loss of Arctic sea ice. Now it seems the cold snap could plunge Britain into yet another recession, the "triple dip."
...amid reports of empty shopping malls, closed schools and factory shutdowns, analysts said the weather increased the chance that the fall in activity in the final three months of 2012 would be followed by another quarter of falling gross domestic product in early 2013 – thus satisfying the official definition of a recession.
Economists said the cold snap would affect takings at pubs and restaurants, while parents would have had to take time off work to look after their children when the schools were closed. Manufacturing firms were likely to be affected by disrupted supply chains.
The outlook for Britain is anything but promising. The U.K. deep freeze is expected to continue until the end of April. April, Britain, freezing, really? It's difficult to grasp the enormity of climate change in the U.K. For centuries it's been a damp, soggy, mild sort of place save for the northlands. Over the past two years it has gone from mega-drought to mega-floods to sustained freezing conditions across the length of the country. Britain is not built nor is it organized for these conditions. British agriculture, for example, is facing a crisis worse than the foot-and-mouth disease outbreak of 2001.
Farming faces a perfect storm. Appalling weather – 2012 was the second wettest year on record in England – has coincided with disease in livestock, including bovine TB and Schmallenberg in sheep, which causes birth defects. On top of this there are commercial pressures, with retailers driving prices down because of the state of the economy, combined with the cost of animal feed needed to replace poor quality silage due to the weather, shooting up by 40%.
As a result, farmers are seeing incomes slashed. According to the Department for Environment, Food and Rural Affairs (Defra), some livestock farmers have seen incomes cut by more than 50% to only £14,000 a year, while dairy farmers have seen decreases of more than 40%
Britain should be a wake-up call for Canada and for all our parties, Conservative, Liberal and NDP. If ever there was a time to reinstate the "Precautionary Principle" this surely must be it.
A triple dip recession would be the first recorded in Britain. Wait a second, was the Black Death just a single dip recession?
Monday, February 23, 2009
Lorne Gunter Has His Eye On The Future
Lorne Gunter, loudmouth columnist with the National Toast, flagship of the soon to be defunct CanWest media circus, has written a piece on how to enjoy life on a lot less during this recession. I wonder if Grunter's been pondering his own future:
If we're not eating out as much, perhaps we're eating home more often, maybe even as families.
Sure you can talk together as a family over some spinach and artichoke dip and a thin-crust, brick-oven pizza at a restaurant. But without all the noise and clatter and would-you-like-fresh-ground-pepper-with-that interruptions, you might chat together even more.
You might have to dust off your playing cards and board games rather than hurrying to stand in line at the neighbourhood megaplex to see a movie no one is really happy to see, but which everyone has compromised on. (I make way better popcorn than those high school concession workers at the theatre, anyway.)
Maybe your vacation this summer will involve driving your van further than the airport park-and-ride. Maybe it will involve camping at a nearby provincial park or setting up in your cousins' backyard (provided the cousins don't object, mind you). You may have to be more Clark Griswold than Paris Hilton when planning your summer getaway.
My parents saved up for three or four years for good road-trip vacations --Expo '67, Disneyland--but in between we made do with sites closer to home. The vacation we still talk about the most was the camping trip to Saskatchewan's 1971 Homecoming. We have more funny, shared stories from that summer than any other.
Read a book. Read a newspaper (please, read a newspaper). Invite the next door neighbours over for burgers on the deck. Go for a walk instead of a workout. Rediscover the joy and excitement in conversation.
Relearning to appreciate the simple things -- playing with the box prosperity came in -- can be the silver lining in austere times.
Good advice for anyone facing the pinch in this recession, from a guy who should know.
If we're not eating out as much, perhaps we're eating home more often, maybe even as families.
Sure you can talk together as a family over some spinach and artichoke dip and a thin-crust, brick-oven pizza at a restaurant. But without all the noise and clatter and would-you-like-fresh-ground-pepper-with-that interruptions, you might chat together even more.
You might have to dust off your playing cards and board games rather than hurrying to stand in line at the neighbourhood megaplex to see a movie no one is really happy to see, but which everyone has compromised on. (I make way better popcorn than those high school concession workers at the theatre, anyway.)
Maybe your vacation this summer will involve driving your van further than the airport park-and-ride. Maybe it will involve camping at a nearby provincial park or setting up in your cousins' backyard (provided the cousins don't object, mind you). You may have to be more Clark Griswold than Paris Hilton when planning your summer getaway.
My parents saved up for three or four years for good road-trip vacations --Expo '67, Disneyland--but in between we made do with sites closer to home. The vacation we still talk about the most was the camping trip to Saskatchewan's 1971 Homecoming. We have more funny, shared stories from that summer than any other.
Read a book. Read a newspaper (please, read a newspaper). Invite the next door neighbours over for burgers on the deck. Go for a walk instead of a workout. Rediscover the joy and excitement in conversation.
Relearning to appreciate the simple things -- playing with the box prosperity came in -- can be the silver lining in austere times.
Good advice for anyone facing the pinch in this recession, from a guy who should know.
Saturday, February 21, 2009
China - Using American Wealth to Cement Its Supremacy
It's the way these things go - and it's too late to do a damned thing about it.
The West, particularly the U.S., spent the past two decades pouring wealth from Western economies into China's. That came in the form of moving manufacturing from Western factories to Chinese factories and from engaging in free trade (i.e. enormous balance of trade deficits) that left China awash in foreign currency, including something close to a trillion dollars in US cash.
We spent two decades bleeding our wealth away to grow China's economy, wealth we were too greedy and short-sighted to invest in our own economies. Now while the world is in a recessionary slow-down, China has all that money to go on a distress-sale shopping spree. From the G&M Report on Business:
Flush with cash at a time when most countries and corporations are struggling to gain access capital, the Asian economic superpower has spent nearly $60-billion (U.S.) in less than a week in a series of deals that will secure a long-term supply of iron ore, copper, zinc and oil.
Desperate for financing amid stalled capital markets and investor abandonment of the sector, resource producers are turning to China for a commodity it has in spades: ready money.
China is the world's largest consumer of commodities. While the country's economy has slowed due to the global economic downturn, its gross domestic product is still expected to increase by about 6 per cent this year compared with 9 per cent in 2008 and 13 per cent in 2007. A $586-billion (U.S.) stimulus package will spur infrastructure spending, which is expected to underpin commodities demand.
The country's voracious need for metals helped push prices for iron ore, coal and copper to record highs last year. The global financial crisis has now cut prices for most metals in half; China is throwing its cash around to secure a cheap supply.
It's those last two words, "cheap supply," that will come back to haunt us. By the time our own economies have recovered sufficiently to restore demand for energy and metals, prices for those commodities will have recovered - except for our main competitor, China, which will have locked in both supply and price at recessionary values. It was one thing when we were all competing for resources at the same price. Now, thanks to our investor-classes and their greed, China will have the one remaining strategic advantage it didn't already possess.
The West, particularly the U.S., spent the past two decades pouring wealth from Western economies into China's. That came in the form of moving manufacturing from Western factories to Chinese factories and from engaging in free trade (i.e. enormous balance of trade deficits) that left China awash in foreign currency, including something close to a trillion dollars in US cash.
We spent two decades bleeding our wealth away to grow China's economy, wealth we were too greedy and short-sighted to invest in our own economies. Now while the world is in a recessionary slow-down, China has all that money to go on a distress-sale shopping spree. From the G&M Report on Business:
Flush with cash at a time when most countries and corporations are struggling to gain access capital, the Asian economic superpower has spent nearly $60-billion (U.S.) in less than a week in a series of deals that will secure a long-term supply of iron ore, copper, zinc and oil.
Desperate for financing amid stalled capital markets and investor abandonment of the sector, resource producers are turning to China for a commodity it has in spades: ready money.
China is the world's largest consumer of commodities. While the country's economy has slowed due to the global economic downturn, its gross domestic product is still expected to increase by about 6 per cent this year compared with 9 per cent in 2008 and 13 per cent in 2007. A $586-billion (U.S.) stimulus package will spur infrastructure spending, which is expected to underpin commodities demand.
The country's voracious need for metals helped push prices for iron ore, coal and copper to record highs last year. The global financial crisis has now cut prices for most metals in half; China is throwing its cash around to secure a cheap supply.
It's those last two words, "cheap supply," that will come back to haunt us. By the time our own economies have recovered sufficiently to restore demand for energy and metals, prices for those commodities will have recovered - except for our main competitor, China, which will have locked in both supply and price at recessionary values. It was one thing when we were all competing for resources at the same price. Now, thanks to our investor-classes and their greed, China will have the one remaining strategic advantage it didn't already possess.
Thursday, December 18, 2008
Harper's Ever Worsening Economic Forecast Of The Day
Well, there it is. The Globe has Harp's Minister of Funance saying two years of recession is possible. Canadian Press has the very same Minister of Funny Forecasts warning that we're in for four years of recession. Did Flaherty goof up? Wasn't he supposed to save the "four year recession" warning for tomorrow?
But fear not. Weeks after Obama put together the best and brightest economics minds in America to help him forge a recovery plan, Flaherty has finally gotten off his backside to announce he'll be going to Canada's corporate elite, apparently that's good enough for True Northerners.
What in hell do Canada's business czars know about putting together a federal budget? You'll be playing this time for the matching lawn furniture. The answer: you guessed it, SQUAT! They're Boardroom Barons, not economists, Jimbo. If we wanted the country run like a second-rate, mismanaged corporation - oh wait, I guess 38% of us did vote for just that.
Anyway I'm sure L'il Jimbo's "experts" will give him all the advice he needs on how to recession proof Bay Street. As for you and me? Ah, who cares?
But fear not. Weeks after Obama put together the best and brightest economics minds in America to help him forge a recovery plan, Flaherty has finally gotten off his backside to announce he'll be going to Canada's corporate elite, apparently that's good enough for True Northerners.
What in hell do Canada's business czars know about putting together a federal budget? You'll be playing this time for the matching lawn furniture. The answer: you guessed it, SQUAT! They're Boardroom Barons, not economists, Jimbo. If we wanted the country run like a second-rate, mismanaged corporation - oh wait, I guess 38% of us did vote for just that.
Anyway I'm sure L'il Jimbo's "experts" will give him all the advice he needs on how to recession proof Bay Street. As for you and me? Ah, who cares?
Monday, October 20, 2008
Spending Like There IS A Tomorrow
There's a growing consensus in the United States that this is no time to be waging war on deficits, just the opposite. The idea, proposed by Krugman and others, is that the US government needs to stimulate the economy by a variety of means, a key one being infrastructure projects. In essence they're talking about a new New Deal.
Unlike government giveaways, infrastructure projects are an investment, the sort of thing designed to reap big dividends in years to come. They're also a means to introduce major technology shifts.
Why restore obsolete or unproductive infrastructure? Maybe in the future the rising cost of fuel will mean you won't need three highways in some places but only one. Restoring all three, therefore, would plainly be little more than a glorified, make work project.
However, past experience shows this sort of depression-era infrastructure spending can, by its very size, allow governments to introduce new technologies and major changes that would otherwise have been impossible.
Look at Germany in the 30's. Monster that he was, Hitler's Nazi government brought that country back to life through some key pre-war infrastructure projects ranging from public housing to autobahns. Similar benefits came to Americans from Roosevelt's interventions which are neatly summarized in this from Newgeography.com:
"Together with a plethora of well-built public schools, libraries, post offices, parks, water systems, bridges, airports, hospitals, harbors, city halls, county courthouses, zoos, art works and more, New Deal initiatives spread the wealth and enriched the lives of uncounted Americans."
http://www.newgeography.com/content/00170-excavating-the-buried-civilization-roosevelt%E2%80%99s-new-deal
Most of North America is well overdue for a serious makeover. There's the essential infrastructure decay that needs fixing - water and sewer systems in many Canadian cities, for example. But there are also opportunities to get our nations aligned for the 21st century realities. I'll give you an example.
Rail transport. We know that rail is up to five times more fuel efficient for transporting freight over great distances than long-haul truck transport. Unfortunately the rail system we have today isn't up to the job. What if the government was to commit to a mega-project to construct a new, high capacity railway system for the 21st century? Use rail in lieu of trucks. Not only would it reduce fossil fuel consumption but it would make the transport of goods far more affordable. Trucks would be used for short and medium-haul delivery, not inefficient cross-Canada transport.
I'm sure there are several other equally sound ideas for overhauling and modernizing Canada's infrastructure to meet the changes we'll face this century. Let's identify them, see what can be done and what rewards we'll reap from them in the future.
If you see this as just standard, socialist babble, take a look at the 401 highway from Windsor to Montreal. Read about the old, pioneer path 2-lane routes it replaced and then learn about the role this one superhighway played in Ontario's economic rise in the postwar decades. Once you've digested that, you can come back and rail on about socialism. Look at the expansion and development of secondary airports and microwave communications and the role they played in opening up Canada's north and then you can bleat anti-socialist mantras.
We all pretty much realize that a real future lies in so-called green industries, everything from carbon capture technology to alternative, clean power projects. Those are industries that will create jobs and wealth. What better time to kickstart things like that?
Of course it will take a government with real vision to recognize the opportunities and exploit them for the benefit of the country. I doubt very much that's within the scope of the one-dimensional administration we have today.
Unlike government giveaways, infrastructure projects are an investment, the sort of thing designed to reap big dividends in years to come. They're also a means to introduce major technology shifts.
Why restore obsolete or unproductive infrastructure? Maybe in the future the rising cost of fuel will mean you won't need three highways in some places but only one. Restoring all three, therefore, would plainly be little more than a glorified, make work project.
However, past experience shows this sort of depression-era infrastructure spending can, by its very size, allow governments to introduce new technologies and major changes that would otherwise have been impossible.
Look at Germany in the 30's. Monster that he was, Hitler's Nazi government brought that country back to life through some key pre-war infrastructure projects ranging from public housing to autobahns. Similar benefits came to Americans from Roosevelt's interventions which are neatly summarized in this from Newgeography.com:
"Together with a plethora of well-built public schools, libraries, post offices, parks, water systems, bridges, airports, hospitals, harbors, city halls, county courthouses, zoos, art works and more, New Deal initiatives spread the wealth and enriched the lives of uncounted Americans."
http://www.newgeography.com/content/00170-excavating-the-buried-civilization-roosevelt%E2%80%99s-new-deal
Most of North America is well overdue for a serious makeover. There's the essential infrastructure decay that needs fixing - water and sewer systems in many Canadian cities, for example. But there are also opportunities to get our nations aligned for the 21st century realities. I'll give you an example.
Rail transport. We know that rail is up to five times more fuel efficient for transporting freight over great distances than long-haul truck transport. Unfortunately the rail system we have today isn't up to the job. What if the government was to commit to a mega-project to construct a new, high capacity railway system for the 21st century? Use rail in lieu of trucks. Not only would it reduce fossil fuel consumption but it would make the transport of goods far more affordable. Trucks would be used for short and medium-haul delivery, not inefficient cross-Canada transport.
I'm sure there are several other equally sound ideas for overhauling and modernizing Canada's infrastructure to meet the changes we'll face this century. Let's identify them, see what can be done and what rewards we'll reap from them in the future.
If you see this as just standard, socialist babble, take a look at the 401 highway from Windsor to Montreal. Read about the old, pioneer path 2-lane routes it replaced and then learn about the role this one superhighway played in Ontario's economic rise in the postwar decades. Once you've digested that, you can come back and rail on about socialism. Look at the expansion and development of secondary airports and microwave communications and the role they played in opening up Canada's north and then you can bleat anti-socialist mantras.
We all pretty much realize that a real future lies in so-called green industries, everything from carbon capture technology to alternative, clean power projects. Those are industries that will create jobs and wealth. What better time to kickstart things like that?
Of course it will take a government with real vision to recognize the opportunities and exploit them for the benefit of the country. I doubt very much that's within the scope of the one-dimensional administration we have today.
Friday, March 07, 2008
Jobs, Jobs, Jobs - What's Going On?
Jobs are in the news today, in Canada and in the United States.
The good news is here at home where we added 43,000 more jobs last month, a fivefold increase over the 8,000 forecast. This comes atop 46,400 added in January.
The bad news is in the United States. The Americans lost 63,000 jobs in February, following a loss of 22,000 jobs in January. The New York Times calls it the, "...fastest falloff in the labor market in five years."
“I haven’t seen a job report this recessionary since the last recession,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”
So, what's going on in Canada? Are we defying gravity? From the Financial Post:
"Mind boggling," said Derek Burleton, senior economist at Toronto-dominion Bank. "I'm obviously a little shocked right now."
"The last two-months blowout in employment certainly goes against this notion that Canada's economy is really beginning to slow, especially after the Bank of Canada statement earlier this week."
The manufacturing sector, hit hard by the strong Canadian dollar, shed 23,700 workers in February but that was partially offset by job growth in the construction sector. The goods-producing sector lost 12,500 jobs while the services sector gained 55,800."
Nobody seems to be able to account for the disparity between the Canadian and US numbers. With buoyant world grain markets and energy markets, are we better poised to withstand an American recession and, if so, for how long?
Canada's good news would be a lot more welcome if it wasn't for the weakening situation to the south. Now that NAFTA and Rust Belt unemployment have become a prominent issue in the presidential campaign I don't think our job performance is going to be welcome to those who blame NAFTA for their misfortune.
The good news is here at home where we added 43,000 more jobs last month, a fivefold increase over the 8,000 forecast. This comes atop 46,400 added in January.
The bad news is in the United States. The Americans lost 63,000 jobs in February, following a loss of 22,000 jobs in January. The New York Times calls it the, "...fastest falloff in the labor market in five years."
“I haven’t seen a job report this recessionary since the last recession,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”
So, what's going on in Canada? Are we defying gravity? From the Financial Post:
"Mind boggling," said Derek Burleton, senior economist at Toronto-dominion Bank. "I'm obviously a little shocked right now."
"The last two-months blowout in employment certainly goes against this notion that Canada's economy is really beginning to slow, especially after the Bank of Canada statement earlier this week."
The manufacturing sector, hit hard by the strong Canadian dollar, shed 23,700 workers in February but that was partially offset by job growth in the construction sector. The goods-producing sector lost 12,500 jobs while the services sector gained 55,800."
Nobody seems to be able to account for the disparity between the Canadian and US numbers. With buoyant world grain markets and energy markets, are we better poised to withstand an American recession and, if so, for how long?
Canada's good news would be a lot more welcome if it wasn't for the weakening situation to the south. Now that NAFTA and Rust Belt unemployment have become a prominent issue in the presidential campaign I don't think our job performance is going to be welcome to those who blame NAFTA for their misfortune.
Monday, January 28, 2008
The End of the World As We've Known It
These are fascinating times and we just may be witnessing a geopolitical power shift of seismic proportions; the decline of the West and the ascendancy of the East. The vehicle for this could be the looming recession.
There's an excellent analysis of how empires rise and fall in a book I reviewed earlier, "American Theocracy, The Peril and Politics of Radical Religion, Oil and Borrowed Money in the 21st Century." It's author, a prominent Republican named Kevin Phillips, examined the consistent patterns found in the rise and fall of previous dominant states including the Dutch, the Spanish and the British empires and applied those patterns to his own country to conclude that America was approaching the end of its glory days.
One of Phillips' key observations was how mighty nations fell into decline when they abandoned their own manufacturing base in favour of offshore production, thus using their wealth to grow another nation's economy. Sound familiar? Accompanying this phenomenon, Phillips identified the shift from a production-based economy into a financialized economy (see "The Bubble Up Economy - Part Deux" posted here yesterday).
This transition is also discussed by Fareed Zakaria in his latest article in Newsweek entitled "The World Bails Us Out" in which he observes, "The United States is in the beginning of a period of relative decline. This is not defeatism, it's math."
"As the American economy slows down, there are no indications that other countries are tumbling. In particular, the fastest-growing big economies in the world - China, India, Brazil—appear set to continue with their robust growth. While a sharp American downturn will surely slow them down somewhat, those emerging markets will all continue to expand—to buy, sell and trade—and this will help the United States.
The quarterly results of many large American multinationals (other than banks) show how. Their profits are growing extremely slowly in the United States—at best a few percent—but are surging by 15 or 20 percent abroad. Adding all these companies together, we can see why America's trade deficit—which ballooned for decades—has begun shrinking dramatically, by $100 billion over the past year. This trend will accelerate as the U.S. dollar's decline continues to make American exports more affordable across the world.
The past few years have been very good to the world's energy-rich lands—Kuwait, the United Arab Emirates, Saudi Arabia, Norway. Add to the list China and Singapore; they may not be big oil exporters, but they still have huge surpluses. These vast savings have to go somewhere, and sovereign wealth funds—the investment arms of these nations—have provided infusions of cash to otherwise desperate American financial firms. Imagine what the U.S. economy would look like without these investments. Many of its most illustrious banks and financial companies would have gone bankrupt, triggering cascades of gloom and doom across America.
These trends represent a large, ongoing shift in the global economic order. Power is moving away from the traditional centers of the global economy—the Western nations—to the emerging markets. To put it more bluntly: the United States is in the beginning of a period of relative decline. It may not be steep or dramatic, but the fact that it's happening is clear. Even if one assumes a slowdown, the other big economies will still grow at two and three times the pace of the West.
All this means that the political and economic clout of the West—and centrally of the United States—is waning. You can see this reality in the discussions at Davos, where Indian businessmen, Russian officials, Saudi investment advisers and Chinese academics are moving to center stage.
On the American campaign trail, the candidates talk about a world utterly unrelated to the one that is actually being created on the ground. The Republicans promise to wage war against Islamic extremists and modernize the Middle East. The Democrats deplore the ills of globalization and free trade, and urge tougher measures against China. Meanwhile Middle Eastern fund managers and Asian consumers are quietly keeping the U.S. economy afloat.
Friday, January 18, 2008
It's Mardi Gras in Washington
President George w. Bush has just the cure to avert America's looming recession - borrow money. It's the same answer he uses when he wants to wage war without end or let the very richest people in America slip their fair share of taxes - borrow money (just make sure you put it on the little guy's tab). Oh sure it causes big deficits and enormous long-term debt but, hey, that's for the kids to worry about 20 years from now, huh?
So here's the deal. Bush wants to borrow America's way out of recession to the tune of about $145-billion. That would be doled out in the guise of tax "rebates" although the idiocy of purporting to rebate money you don't have isn't being mentioned in the White House or in Congress for that matter. From the New York Times:
“Letting Americans keep more of their own money should increase consumer spending,” the president said, repeating a theme he has embraced time and again during his presidency, although perhaps never when, in the opinion of many analysts, the economy was teetering on the brink of recession.
There was speculation beforehand that the relief package would amount to $800 rebates for individual taxpayers and $1,600 for households. Based on the $140 billion to $145 billion range of the entire package, it appeared that the rebates would not exceed $800 and $1,600.
The president called again for Congress to make permanent the tax cuts that were enacted several years ago and are to expire in the next three years. Otherwise, he said, there will be such uncertainty that jobs and economic growth will be jeopardized. But the president did not insist on getting his way as a condition of negotiations on short-term relief.
Letting Americans keep more of their own money? No, chum, you're doling out money you're borrowing in their name, loans a lot of them couldn't get right now. All you're giving them is some cash and an equivalent in interest-bearing debt - leaving aside the question of how the working and middle class are going to repay that faux largesse to be sorted out by another government at another time. Meanwhile, let's enshrine those tax cuts for the rich. They deserve them after all, they're rich aren't they?
So here's the deal. Bush wants to borrow America's way out of recession to the tune of about $145-billion. That would be doled out in the guise of tax "rebates" although the idiocy of purporting to rebate money you don't have isn't being mentioned in the White House or in Congress for that matter. From the New York Times:
“Letting Americans keep more of their own money should increase consumer spending,” the president said, repeating a theme he has embraced time and again during his presidency, although perhaps never when, in the opinion of many analysts, the economy was teetering on the brink of recession.
There was speculation beforehand that the relief package would amount to $800 rebates for individual taxpayers and $1,600 for households. Based on the $140 billion to $145 billion range of the entire package, it appeared that the rebates would not exceed $800 and $1,600.
The president called again for Congress to make permanent the tax cuts that were enacted several years ago and are to expire in the next three years. Otherwise, he said, there will be such uncertainty that jobs and economic growth will be jeopardized. But the president did not insist on getting his way as a condition of negotiations on short-term relief.
Letting Americans keep more of their own money? No, chum, you're doling out money you're borrowing in their name, loans a lot of them couldn't get right now. All you're giving them is some cash and an equivalent in interest-bearing debt - leaving aside the question of how the working and middle class are going to repay that faux largesse to be sorted out by another government at another time. Meanwhile, let's enshrine those tax cuts for the rich. They deserve them after all, they're rich aren't they?
Monday, January 14, 2008
Wringing In The New Year
In a debt-ridden, import-addicted, consumer-driven economy, any cut in consumer spending can be the economic equivalent of an aneurism. This is the very scenario that appears to be developing in the United States just as the president and congress try to come to grips with the aftershocks of the credit crunch resulting from the subprime mortgage meltdown.
About the only debate in the business news is whether America is already in a recession or on the eve of one. From the New York Times:
"Strong evidence is emerging that consumer spending, a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.
The abrupt pullback raises the possibility that the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth. Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year.
There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.
And consumer confidence, an important barometer of economic health, has plunged. Andrew Kohut, president of the Pew Research Center, says consumer satisfaction with the economy has reached a 15-year low, according to the firm’s polling.
Even wealthier consumers, who were seen as invulnerable to rising gasoline prices and falling home values, are feeling the squeeze.
Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending. Since 1980, they have cut spending in only five quarters — a total of 15 months — most of them in the depths of a recession. The 2001 recession passed without a cutback in consumer spending.
Fresh evidence of a pullback is pouring in from many quarters as Americans confront the triple threats of higher energy costs, falling home prices and a volatile stock market.
Perhaps the strongest barometer over the last 30 days is the performance of the country’s big chain stores. December turned out to be a blood bath for retailers at every rung on the economic ladder, with sales for the month growing at the slowest rate in seven years.
But it is the trouble at the highest reaches of retailing that has economists most worried about a recession. Over the last year, even as low-wage and middle-income consumers have cut back, the wealthy have spent freely, keeping high-end chains insulated from the economic turbulence.
That started to change in December, as shoppers held off on buying $300 designer shoes and $500 dresses. For example, store sales fell 4 percent at Nordstrom, the high-end department store.
A "made in America" recession would be felt globally throughout the developed world, probably in Canada as much as anywhere. This time, however, the effects may be softened by sustained, strong growth in the 7% range in the developing world which may offset some loss of trade to the United States.
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