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Ian Lee
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And one more thing. Trudeau is not Harper for those that detest Harper and he is not Mulcair for the 65% to 70% that do not support the NDP. In short, he is a perfectly bilingual, younger Canadian - who poses an existential threat to those two leaders.
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Determinant - you are unconciously drole. Is it "very right wing" to state that Trudeau poses an existential threat to both Harper & Mulcair? I think that the libs have a very good chance at regaining power in 2015 - by doing what the Lib Party did for 100 years in the words of Mackenzie King: "lean to the left, lean to the right and straddle the centre" (more "right wing analysis:)" Did you watch the CBC budget coverage with the media scrum around Trudeau only 10 feet from Mulcair? CBC did notice and did comment. Have you read any of the polls for the last year including Nick Nanos analyses in the Globe? Have you spoken to any young people about Justin Trudeau. If I was an NDP or Conservative Party strategist, I would be extremely nervous about Justin. And please note, I NEVER said he was not intelligent. He is bright and quick and disciplined. And he might be the next PM of Canada.
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Determinant - "So if you think the NDP has what it takes (and I do) then the Tories really have to get in touch with their base to be competitive". Oh my! If ever the wish displaced the analysis. The NDP are dropping like a stone in much of western Canada since Mulcair told the west they had some horrible disease while he has managed to alienate much of the rest of English Canada with his dalliances with his Quebec mistress (sovereigntists) over his proposal to water down the Clarity Act - opposed by 75% of English Canada in latest poll. And he is not breaking through in Ontario nor is he connecting with voters like Layton did. And then there was the Mulcair Washington trip that generated so much raw material for negative adds in 2015, it will be unfair to pay campaign managers a salary in 2015. No - the existential threat to Harper - and Mulcair - is the man with the flowing mane and no apparent ideas. Even though Justin has been vacuous thus far, having met him several times in media green rooms, there can be no absolutely doubt concerning his electricity and magnetism. He connects like no other politician today. I hear this from my students and even my own daughter (sigh). Election 2015 will see the NDP returned to their traditional and important role as the conscience of Parliament and Canada as the 3rd party. The much more interesting question is whether Justin can take them into power or "merely" return them to official opposition. The NDP are dead man walking because you can not write off half the country and major parts of the largest province Ontario. Livio - while I agree with your empirical analysis, I disagree with your conclusion. I am with Andrew Coyne that this govt will likely surprise us with more cuts revealed in the Budget Implementation Bill. Moreover, the US is - finally - turning the corner on housing and autos which are two major sectors. In turn, this will boost growth in 2014-15 which will drive tax revenues Finally, it is my judgment that Paul Martin taught Flaherty well with reserves and cookie jars tucked away in corners of the Finance Ministry that can be called upon to coin a phrase:), "manage earnings".
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Livio - this is merely another example of backdoor taxation by the three levels of government. Same issue with our electricity bill - provincially driven by several fixed charges or assessments - and our airline tickets with the cumulative taxes and airport surcharges (imposed by DOT or the airport authorities) often greater than the value of the actual travel portion of the ticket. Surely, it is time to revisit i.e. undertake fresh examinations, of the superb Economic Council of Canada deregulation and privatization research series of the mid 1980s (over 200 working papers) to analyze and estimate if the privatization of airports, electrical utilities and sewer and water would be cheaper under private ownership than under municipal or provincial or federal ownership. BTW, I recall that the privatization of the major airports in Canada by Mulroney 1993 was cancelled by the incoming Chretien Government who paid $600 million in cancellation fees to abrogate the contracts and instead provide us with the completely unaccountable airport authorities and the highest landing fees in the world in Toronto.
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Nick is on to something. And to turn the argument on its head, "slow food" in "fine restaurants" with meals prepared using butter and transfats with copious amounts of alcohol can have a high caloric and fat count. But I thought that in a market economy we believe we are individually capable of making these decisions ourselves - including making decisions that may be sub optimal. (and we may make mistakes concerning our partners or investments or ...) Or if we decide to regulate KFC and fast food for health reasons, what about potato chips, ice cream, candy, frozen fried food and indeed any food that is deemed not healthy sold in grocery stores? And if health of citizens is to be the policy objective, should we not compel obese people to enrol in exercise programs and compel drug addicts to enrol in rehab programs instead of safe injection sites? Perhaps fast food is simply part of a larger category of "that which is self-evidently socially undesirable" including fossil fuels (that keep my house warm at -25 and propel my car at -25 to Carleton), Tim Hortons, American multinationals (except Hollywood film studios), fracking, financial service execs (except those in non profit institutions).
Toggle Commented Jan 27, 2013 on Freedom, fried? at Worthwhile Canadian Initiative
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Determinant - I do not want to stretch this out either. But Stephen will presumably be addressing these absolutely central issues in his course. I do not understand your argument or anyone who argues that on the one hand US mortgage underwriting standards (good or bad) had little or nothing to do with the financial crisis and on the other hand that some banks made high risk mortgage underwriting decisions - that was the principal or major driver of the US financial crisis. One more time. 1. in western countries, governments are directly responsible for regulation of financial institutions and especially of deposit taking institutions e.g. Canadian Bank Act, OSFI, European Banking Authority 2. the US Congress weakened the underwriting rules starting in the mid 1990s - on the record - embedded in the relevant legislation that later allowed banks to make the decisons they made (God may struck me down with a lighting bolt for invoking their names but Stiglitz & the billionaire Soros make very similar arguments) 3. some (many?) banks seized this Congress mandated opportunity of de facto deregulation - to approve high risk mortgages to people with low or no down payment, weak credit scores and/or low income 4. see Prof Liebowitz original empirical research as well as Gretchen Morgenson analysis in her columns in NY Times (not known as a right wing paper) and the 4 NYU profs in their Princeton University Press publication My overarching thesis is clear - governments ought to and must regulate banks - including mortgage underwriting - including minimum down payments, GDSR, TDSR, loan to valuation ratios etc. The US Congress did the opposite in deregulating the banks in certain important product markets in the mid and late 1990s, culminating in the Financial Modernization Act of 1999 championed by Robert Rubin, Larry Summers et al. The Congress is ultimately to blame for any failures of regulation including deregulation because the Congress or Parliament is sovereign in passing laws and regulations to regulate, inter alia, financial institutions. To suggest that the banks - and ONLY the banks - were responsible for their high risk decisions is to implicitly deny the role and responsibility of government in regulating financial institutions (or of any area of the economy and society). Any financial market failure is ultimately a government i.e. a legislative, failure for we elect MPs and Congresspersons to do pass laws and regulations to properly regulate our institutions. That is why democracy is remarkably just as Winston Churchill noted - for we get the governments we deserve for we elect them - good or bad.
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I agree with everything said thus far. But Jim - lets go further. None of the four countries of southern Europe are competitive with the countries of northern Europe according to Eurostats and ECB data (and working papers published). The GIPS (or PIGS) countries are approximately 35% less competitive. The austerity is not enough. It will require the restructuring of these economies - their very way of life - that has met such resistance. In an Op-Ed in FT 3 days ago, (Papandreou will fall but he is right to take this gamble, Stathis Kalyvas), a Greek-American prof at Yale argued that Papandreou supported the austerity program (cutting public servants and their wages) but did not support the restructuring to privatize hundreds of Govt corporations, eliminate the closed guilds for many professions restricting entry and opening up the economy to foreign capital and foreign firms (said system established by his Grandpapa and Dad and is the system, he argued, that both PASOK and New Democracy parties are completely dependent on). In other words, we will cut as much as you demand - but we will not change the underlying structure that is causing the problems in the first place. And to be provocative, why should the northern countries impose their way of life on the Greeks, Italians etc. Why not allow and encourage them to exit to their own currencies or a southern Euro (as proposed by Hans Olaf Henkel(?) former President of the German Employers Association). Yes, the currency will depreciate - that is what should happen - as they are 30% to 35% less competitive - but with IMF help can then develop with a depreciated currency - without Germans et al telling them what to do. Finally, is not the much larger issue for all western countries that we now have a response to Krugman et al concerning demands that we stimulate the economy with more borrowed money. The answer being: yes of course we can, but one day, some countries may find they are dependent on foreigners to bail them out telling you what to do. And I am not even referring to the worst case of Greece. After all, Italy agreed yesterday to IMF supervision.
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Nick - one more quick point that I should have made. Contra Krugman and the myriad number of critics who condemn the Germans for "not realizing that austerity will only produce deepening recessions, make the problem far worse and why don't the Germans understand basic economics" etc., it is clear that the Germans understand this well. It seems pretty clear the Germans have come to the decision and determination that they are not willing to become the de jure or de facto guarantor for all Europe or even for all of the Eurozone. Restated, they will support the Eurozone on their terms which they believe are the only policies and terms that are effective in the long run - even if it causes a great deal of pain and suffering in the short to medium term - but not on any terms simply to save the euro at all costs. After all, the Germans have very deep and extensive experience in pain and suffering - albeit often due to their own bad behaviour in the past - and yet they survived and prospered mightily after two wars of unimaginable destruction. (I was in Gdansk a few years ago teaching and my students took me to the war museum which showed photos of incredible destruction - bombed flat with almost no buildings standing - similar to photos of Hiroshima. I remarked that the Germans did a really good job blowing the place up and my students noted with a faint smile, no it was the Brits and the Americans as this was the submarine pen of Danzig). Properly decoded, the Germans are saying yes to Eurozone and euro - IF and only if - the countries that need assistance are willing to adopt and execute brutal austerity to eliminate the competitive imbalance between north and south. And if any of those countries decide that the pain and suffering of austerity is too much, Germany will facilitate that country's exit from the Euro. I argued in my paper last year that once the Greeks finally really realize that the Germans are really serious and there is no more borrowing at German bund rates and there really are no more bailouts, the Greeks will eventually collectively conclude there is no national interest in remaining in the Euro and exit to the drachma - which will collapse by 50% to 70% and then seek IMF support, as did Argentina, Mexico and other independent countries during currency crises. The shameful behaviour and disservice to the Greeks has come from FT and European leaders who continue to argue for policy options that the Germans have flatly publicly repeatedly rejected, thereby giving faint hope to desperate Greeks that the Germans will change their mind at the 11th hour - when the Germans will not.
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I agree with everything you said. But is this not an additional signal of the desperation of the European leadership? By way of explanation, we now know the answer to Henry Kissinger's famous question when he was Secretary of State: "who do you call in Europe if there is a problem?" - acidly highlighting that if everyone is in charge, then no one is in charge. But 40 years on, we have the answer. The Chancellor of Germany has emerged - because of the crisis - as the de facto President of Europe while the President of France is the consigliere to the real EU President (German Chancellor) and all the other European Presidents and Prime Ministers have been downgraded to mere provincial premiers. What Germany failed to achieve in two world wars- the domination of Europe - has now been achieved through the force of competitiveness. My late Brit father, an RAF bomber pilot in WWII, would not be surprised as we lived in Germany in the late 1950s during the extraordinary Marshall plan reconstruction and again during the entire 1980s and witnessed the unbelievable discipline and focus of the Germans. We also learned this week the answer to the question why these countries joined the Euro. As I argued in my paper to the EC sponsored conference on the eurozone last August, the Germans entered on the assumption they would ""Germanicize"" the Europeans to become more frugal, fiscally responsible and disciplined - Bundesbank values - while the Europeans wanted to ""Europeanize"" the Germans by allowing the southern countries to join and benefit from German bund borrowing rates. Buried in the Summit Communique last week was the announcement that the troika will actually take over the administration of the austerity and privatization programs in Greece - from the Greek bureaucrats - as they do not trust them to execute. Per Spiegel and the Telegraph, this astonishing demand for the abdication of Greek sovereignty came directly from the Germans. Equally clearly (per Pritchard, Wolf et al), the Germans will not support fiscal union nor Eurobonds nor ""transferunion"" nor ECB as lender of last resort nor indeterminate bailouts of southern Europe. Germany will support austerity as the only route for these countries to regain competitive balance (estimated at 35% gap) with Germany, Austria, Netherlands et al. Alternatively, the GIPS countries can refuse to adopt the austerity program, and thereby be denied further assistance - effectively forcing them out of the eurozone. The EU leadership realize this and are desperately seeking a "third way" (instead of austerity and restructuring or exit from Euro) - i.e. are seeking a bigger banker, a bigger "sugar daddy". And that would be China. Drowning men grasping at straws ...
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While these responses invoking psychological generalizations concerning the minds of boomers and guessing consultants on the American network CNBC may obtain a decent grade in some schools, the responses did not address Stephen's very interesting research question: why do Canadian banks give away their research? Some (many?) large banks and other financial institutions in the very crowded London market (frustratingly) lock their research behind a client subscription wall. (Unfortunately, as Don Drummond noted in the festschrift to Ian Stewart, there is not a lot of public policy economics research being done in the academy. That is why I gravitate to bank economics research depts for instant micro analysis and to OECD for longitudinal comparative analysis such as their superb 2010 Tax Policy Reform Study). By contrast, in Canada, there are only a few banks, each of which are very large, and each have invested significant resources in economics research. Yet, (thankfully) they make it free (best empirical analysis I read concerning Canada's homeowners at risk was by CIBC Deputy Economist Ben Tal segmenting Van and Toronto from the dataset and segmenting by percentage of equity). Oblivious: I find your suggestion helpful. The amount invested in their economics departments probably does not measure a meaningful number as a percentage of total banks assets, while the banks have an overarching interest in the health of the economy. Related question to supplement Stephen's question: why have the Canadian banks recently started to hire politicians or public servants e.g. Kevin Lynch, Jim Prentice, when they did not do this in the past? Restated: the trend started with the smallest bank at the time (TD) when they hired Clark and then Don Drummond. Why the smallest and not the largest i.e. Royal, which presumably would be more vulnerable - due to size - to criticism?
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An alternative hypothesis. There are only 6 - very very large - banks in Canada, that routinely and regularly attract the ire, anger and wrath of people who do not like banks or those that do not like large corporations. In short, the banks are a target, day in and day out. Thus, they have an image/reputation problem that they wish to address. What can be done? Create an Economics Research Department and staff it with highly educated and respected economists to undertake credible, applied economics research (that is probably not being undertaken every day in university economics departments - but that too is a hypothesis). Adopt a policy that the research be given away to the public for free. Advise bank economists they are expected to speak to and meet with the media when called - which they do. The media exposure on national TV news shows brings attention to their respective bank, to their research and allows the bank to present a favourable, credible image - which implicitly contradicts the criticism at the general reputational level - while simultaneously illuminating, informing and perhaps influencing public opinion on specific issues (and at the same time that the criticism that banks are "big and bad" is perhaps misleading). This is vastly more valuable than having a seat at Finance's table - which they will have regardless - because of their size cf Charles Lindblom (Yale economist who was architect of Lyndon Johnson's Great Society), Politics and Markets: The privileged position of business.
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Determinant - Nick beat me to it. And BTW, the Baie de Chaleur is stunningly beautiful - but probably not near the top of the productivity list of countries or regions. And, Portugal is a really lovely place - which made me immediately think of the Maritimes - as very little economic development, many traditional villages and a traditional way of life and good people. But like the Maritimes - and especially NB, lots of shiny new 4 lane highways - courtesy of the EU development ministry. But Portugal and Greece are so very obviously to the naked eye, not even approximately competitive with Germany (which I have visted many times). Why Greece and Portugal agreed to join the Euro is a complete mystery. A very ordinary meal in a very ordinary restaurant in Albufeira (not Lisbon) - that would cost $75 in Ottawa came in around $150 - when I converted back from Euros to CDN$. On the main highway from Lisbon down to the southern coast, there were no factories - but farm after farm after farm. And a lot of what seemed to me to be poverty or at least no prosperity. Most troubling, there were signs in very public places around Lisbon area, "Nazis - go home" in English.
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Nick - I agree with everything you said in this set of posts. You will recall that I made very similar arguments in my paper to EURUS in March 2010 - either a full political transfer union which will not happen as Germans do not "feel the love" for Greeks or Portuguese and if not, Greece, Portugal and possibly Spain and Italy will leave the euro, as it is in their self interest. However, I disagree with the following comment: Patrick: Absolutely! I would like to think it was because we Brits were smart enough to see it coming. But I don't think that was true at all. It was sheer conservative (very small c) Anglo Saxon suspicion of big fancy Continental theory. Chalk up a big victory for the "Stupid Party". Please see Telegraph Peter Osborne's analysis: "Margaret Thatcher knew the single currency would devastate Europe" "she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies”. http://blogs.telegraph.co.uk/news/peteroborne/100064330/margaret-thatcher-knew-the-single-currency-would-devastate-europe/ When Thatcher returned from European Summit of Rome in October 1990 - where she was the ONLY European leader opposed to Delor's vision of a European monetary union - she faced a cabinet revolt over her position concerning the proposed Euro. Her cabinet minister, Geoffrey Howe publicly criticized her for her opposition, she fired Howe and he started the revolt that led to the ouster of Thatcher a short time later. In her autobiography - published years before the current crisis - Thatcher went into extensive deal explaining that the small, uncompetitive countries of southern Europe would not be able to survive against the German industrial machine. A quick anecdote. My late father - a Brit through and through like you Nick - bought his sons a timeshare in Portugal before he passed away, as he wanted us to remain connected to Europe. In finally visiting Portugal last year, I discovered that putting Portugal together with Germany in the eurozone, brought together the productivity of rural northern New Brunswick, with the service quality of Ottawa and the prices of Germany - albeit with stunningly beautiful beaches and very old buildings. In the run up to the last UK election, a British wag said that Gordon Brown should have campaigned each day with a single line: "I kept the UK out of the euro - and then sat down without saying anymore " (he forgot to sit down). So maybe, just maybe, Polanyi's tacit knowledge or Edmund Burke's recognition of unintended consequences, is operating at a subterranean level in the "stupid party", which is absent in the "smart parties" and the oh so clever European elites that gave Europe the Euro - the gift that keeps on giving.
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Sep 8, 2011