Thursday, October 14, 2010

Welcome to Canada! How Best May We Stimulate You?

This all our fault, Canada. I don't like Harper's government as much as the next guy, but at least they had some economic sense back in '08. We were running budget surpluses for a debt that can never be paid. Things seemed to be going good. Then US went and shat out whatever the hell had been up there since at least the 70's. Problem was, the shit hit the fan and the entire globe got splattered. We, Canada, got splattered too. We got splattered big time. And it doesn't matter how badly one gets splattered, when it comes to shit, it feels like you need to get that washed off right away. But sometimes you just gotta wear the shit for a while on your clothes. And in good time the brown stains will fade away...

Okay. That probably wasn't a good metaphor for the economy, what I was trying to say was when it comes to economics sometimes less is more. And when I mean less, I mean virtually nothing at all. Whenever the Canadian government finds a way to “help out” they only end up making things a whole lot worse.

Welcome to Canada. This has been the state of our country for the last 2 years.

Since 2004 the Harper government had been on a spending spree, but when the recession officially came to Canada in late 2008, everybody was forced to cut back. Perhaps weighing the reality of the situation, Flaherty and Harper decided that if they applied the tough medicine to the economy, it'd grow again in a year or so and they could go back to surplus spending (a great way to please the electorate). Learning from the American experience and not wanting to repeat it, real estate was dissected by the Harper government, (and they subsequently made it worse). The car industries would have to be dealt with later, if need be. The rest of Canada seemed fine, so Harper and The Flaherty Team decided to sit back and see how things were going to go. Like it or not,

In response to the global recession Canada had decided to do nothing.

I don't know how the rest of the world views Canada, but I can only imagine what the international response might have been had anyone really paid attention. Canada, the gentle country of 'peace keepers' and funny comedians have defied international expectations and refused to conform to the status quo. We would have done the opposite of the Americans and in Canada that's very popular. But we didn't pay attention to any of this. Instead we concentrated on trivial matters that had little to do with the economy. The Opposition parties were threatening a coalition if Harper didn't provide the country with stimulus spending, so the whole thing grew into a big stupid argument that involved the Governor General.

The Governor General for God sakes! That woman was a figurehead! She doesn't anything about constitutional law. Plus, Harper was wrong. It was a legal coalition, he should have called their bluff. Nobody wanted a new government after electing this government two months prior. And nobody outside of Quebec (except for me and one other guy) wanted the Bloc to have federal powers. So shame on Harper for putting up with this crap.

Because it went to the Governor General, there was a private meeting between her and Harper and when all was said and done, the Harper government had agreed to stimulate the economy by the means of deficit spending.

Fucking. Morons.

Parliament convened at the end of January 2009, during the worst of the recession. Flaherty's budget called for around $40 billion in deficit spending to boost the economy. It didn't stop there, soon Canadian car companies were being bought, the government started bailing out pensions. The result in two years? Over $100 billion new debt.

Flaherty says he'll balance the books in five years.... I think it's more likely the currency will go bad and we won't have to worry about this debt.

Which brings me to my next point – economic collapse. Flaherty either
a) sees it coming and is ignoring it for political reasons, (see, Re-election 101)
b) sees it coming and is getting paid to ignore it (see, Special Interests Lobbying 101) or,
c) Flaherty is a moron (see John Maynard Keynes And the Economics of Stupid 101).

A moron who in 2008 could have avoided this entire mess. Perhaps the Conservative PR machine should have been out talking about the economy instead of using fear of a “separatist coalition” taking legal, but illegal power (can you hear the Doublespeak, Canada?)

So why is Flaherty a moron? What would have happened if we hadn't tried to wipe this shit off? A lot of people would have lost their jobs. We would have lost GM plants, Stelco pensioners would have stopped receiving their checks, and a whole lot of other terrible things. But it would have been necessary. Clear all the bad debts, let bad businesses go bankrupt and let the economy restructure itself. The government could have cut taxes for middle class families and small businesses. They could have made Canada a great country to invest it. Now nobody wants to invest because everyone's afraid of the endgame to all these bailouts and stimulus programs.

Henry David Thoreau said “That government is best which governs the least, because its people discipline themselves.” Truer words were never spoken. One need only to look back at the Great Depression of 1920-21. A lot of people haven't heard of it probably because it only lasted 18 months. This 18-month period was a time when the economy was restructuring itself. High inflation and reckless spending during World War 1 had the government living beyond its means. When the bills came due instead of intervening the government stepped out of the way. Prime Minister Mackenzie King stayed out of private lives and concentrated on balanced budgets and paying down the national debt. Compare that to the stimulus spending during the 1929 to 1945 Great Depression. Perhaps it time Canadians start reexamining history and ask themselves why the Great Depression was so long? And don't say World War 2 saved our economy because that's stupid logic. Think about it.

So so much for the stimulus. Who would have thought that throwing money at problems might not solve them? And apparently printing more money will debase everyone else's. I don't know where everyone got the idea that printing more money is supposed to be a boost to the economy. Has anyone ever looked at history before? Germany after World War 1, Chile in the 70's, and today's Zimbabwe. If we don't learn from it, we're bound to repeat it.

Even if the stimulus could save us, why is the government giving this money away? If they're going to print a bunch of money up, shouldn't it be given to Canadians to spend as they please? Invest in some businesses, hire some more workers. Instead the government has created a new bureaucracy, “Canada's Economic Action Plan” to roll out a bunch of useless 'job-creating' projects.

What it amounts to is construction all over the damn country. Ripping up roads and bus stations and replacing them with the exact same thing. These are classic make-work schemes and it's a classic example of Bastiat's “What is Seen and What is Not Seen.” We see people working, therefore the plan must be a success. What we don't see are the jobs that could have been created if Canadians were left to their own merits. So instead of the market of voluntary exchange directing where best to invest the stimulus money, government bureaucrats have chopped up the country into sections and decided who needs the money the most and working with local politicians – interested only in their re-election – what projects this money should go towards. Without any realistic price structure, there's no way to tell if these projects are an efficient means of allocating resources.

A perfect example is the $50,000 that was allocated to Boissevain, Manitoba (a town of 1,500 people) to build a 9/11 memorial. But it's justified because the government expects a $150,000 value when the project is completed. Clearly our government has fallen into the old Keynesian trap that the government can spend a dollar, wave a magic wand and see it increase to $10. I think few people will make it out to Boissevain just to see a 9/11 memorial. And when they make it there, I don't think they'll spend enough on the local economy to justify a $150,000 figure.

This stimulus is utter insanity. Just look at this map –, the entire country is polluted with “shovel ready” projects that are making everyone a lot poorer. The map describes each project, how much they've spent on it, and how much they expect to make off of it. I've gone over it before, and I don't feel like going over it again so just take my word on this (or do your own research) – the government cannot create wealth. It does not have any money. It can only tax the private wealth of its citizens, and when it does that (even for good intentions) it makes all of us poorer. Printing money does the same thing. Inflation is a hidden tax.

And now here we are facing what's being called a 'double-dip recession'. Total bullshit, this is a depression and the worst of it could have been over by now if the government had got out of the way and made some dire changes to our monetary policy. People may want to blame the Opposition parties (they are partly at fault here) but once the flood gates where open, Flaherty went bonkers with deficit spending. Now he's saying he doesn't want to do it anymore, but more money might be necessary (and politically helpful to a country full of economic illiterates) for a recovery that is “fragile”.

In reality things are going from bad to worse. The massive money printing going on all over the world has only put a bandage on the New Great Depression, and it's starting to peel off. Underneath is an infected scab that's been picked so many times it will inevitably leave a scar (and hopefully a cool looking one that will help us get all the ladies). It's about time we stop picking our scab and let the economy heal.

1 comment:

  1. All of this aformentioned and the artificially low interest rate housing bubble and the global turmoil which will spread as minions turn on their masters - Canada not excepted - we are looking at at nothing less than s$%t hitting the fan this 2011.