Five Lumps of Coal for Canada's Economy

The recent IMF Report on Canada prompts me to remind everyone of some startling figures about the Canadian economy: 


1) The private and federal debt combined ratio to GDP is an astonishing 203%. 
2) The jobless rate in November is 7.4%, the worst in 5 months. 
3) Youth unemployment is 14% and even worse in Europe and the U.S. Expect much social unrest in 2012 -  which may coalesce around the occupy movement. 
4) Household debt to income ratio is a staggering 152%.The average Canadian household is $26,000 in debt over and above any mortgage debt.
 5) Real wage gains continue to stagnate in November: 2.4% while inflation is 2.9, a -.5 net loss in real income.


 As I and others - even a few neoclassical economists - have argued many times (see my other posts here), we need stimulus of some sort now, and both the IMF and Mark Carney are in agreement about both that and the problem of household debt. Such recognition by both the IMF and Carney is unusual since die-hard neoclassical economists tend to overlook household or private debt in their macroeconomic modelling. I'm beginning to think Carney may be the check we need against Flaherty and his misguided policies.


Where's Flaherty? It would seem all he can do is tinker with his beloved financial sector - banks and CHMC most recently. Does he even understand the real economy? Does he think it's only exports concentrated in oil and other natural resources? He might since that's the only sector apparently driving the economy, and that in itself is extremely worrisome.

Note:Thanks to the Supreme Court for rendering the right decision on the Federal Securities plan. SCOC rejects Ottawa's bid to create securities regulator

Unemployed people can't pay taxes, and they certainly curtail their spending

Like the good neoclassical economist he is, President Harper said on Friday that he and his bulldog want to indulge their pathological addiction to austerity and tackle that mean old junk yard federal budget when, in fact, we know that they should really be focusing on the job creation strategies we so desperately need. My last  few posts have painted a very bleak picture of the Canadian economy, and further austerity measures or implementing the ones in the works are only going to make things worse, draging out the recession/depression even longer.

There is only one reason to concentrate on reducing government debt at the expense of other economic inititatives, and that is to satisfy "markets" - that is,  to create investor confidence.  But we should always remember that the financial sector contributes next to nothing directly to real GDP.  And austerity in the cause of debt reduction does nothing directly for the real, industrial economy. In fact, it creates only more hardship for real people and the economy by, among other effects, increasing the number of people unemployed and by reducing correlated spending and tax revenue. Unemployed people can't pay taxes, and they certainly curtail their spending.

We need reasonable economic growth through job creation, through some kind of economic stimulus, infrastructure projects or otherwise, for without reasonable growth government revenues suffer, and that gap, in turn, increases the pressure for more austerity measures because the money simply isn't there.  It's a an economic whirlpool difficult to escape. But jobs fuel the economy because employed people spend money, and both they and the business which are recipients of their spending, who also spend as businesses,  pay taxes and thus increase government revenues, part of which can be used for paying down debt at at reasonable pace while maintaining government programs that service Canadians in general.

Not much chance of this kind of thinking in Harperland  given what's emerged for many as a disturbing psychoanalytic reading of Harper the man, whose resentful - sometime vengeful - personality is fully reflected, as Dan Gardner suggests,  in the way both parliament and the government in general are run. This is a regime in which, as someone suggested the other day, lying is not a moral issue but a political tactic and empirical evidence ("stastistics") is irrelevant.  We cannot expect truth from such a regime let alone a wise economic policy, the irony being of course that the Harperites presumably won their beloved majority on the basis of promising sound economic management. Hello! Read my last three or four posts.

The zombie-banker lives and roams the earth

Another follow-up;

Craig Alexander, TD's chief economist - it pains me to reference a classic neoclassical bank economist - noted on Lang and O'Leary last night that Canada's debt to income ratio is high less because of increasing debt and more because real wages are falling.  So the deleveraging I mentioned a few posts back continues slowly, mitigating spending, and slipping wages continues, also mitigating spending. It looks like stagnation or deflation on the horizon, but in either case Canadians are still just swirling around in an economic whirlpool in which they could be sucked down at any moment.

With shrinking wages, it might be tempting to take on more debt to maintain one's household, and of course today's low interest rates are designed both to encourage borrowing - this is how bankers make money after all - and to allow banks themselves to be speculative in their own money-making investments with less risk. Beware. As Max Keiser says, the zombie-banker lives and roams the earth and might be the process of destroying the EU, for it is bankers, not even neo-liberal politicians, in charge, almost all of whom have ties to the vampire squid.

We're in an economic whirlpool with no immediately conceivable way out

An addendum to yesterday's post with some additional observations referenced from Tavia Grant's report in The Globe and Mail today.

I suggested yesterday that we're in an economic whirlpool with no immediately conceivable way out, and Tavia suggests implicitly that what could suck us down to the bottom of that  pool is a significant jump in unemployment, falling house prices, rising interest rates or any combination of these - all of which I've mentioned as worrisome possibilities before in earlier posts, but which now take on a truly alarmist meaning.  Mark Carney also points out  that one in ten Canadians is in a vulnerable financial position, meaning that the cost of servicing debt consumes more than 40 per cent of his or her income.

Add to these observations everything I sadly offered yesterday, falling real wages, the lack of jobs and job creating initiatives, slipping stock prices, the absence of pensions in the case of many Canadians and, of those with them, a drop in their value because of eroding assets and we have ourselves an overwhelmingly serious economic crisis.

Why is it up to Mark Carney to tell it as it is? Where are President Harper and his bulldog, who, with the financial sector, are jointly responsible for this horrendous state of economic affairs? Would some courageous journalist please call them on this.

Note: Other stats from Stats Can that can be correlated with the above observations: The Daily, Tuesday, December 13, 2011. National balance sheet accounts 

1) Canadian household net worth declined 2.1% to $22.6 trillion, the second straight quarterly decline - probably because investment and pension assets declined.

2) Per capita household net worth dropped to $180,000 from$184,700 in the previous quarter.

3) Credit market debt  to assets reached a record high 20.1%.

4) Debt to net worth rose to a record high 25.2%

Neither Deleveraging nor Further Leveraging of Household Debt Works

Canadian household debt hits record high  Carney calls on businesses to step up - The Globe and Mail  

National balance sheet accounts 

Okay, so Stats Can tells us today that Canadian household debt has reached a record high 152.98%, a level relative to income that surpasses that of the U.S. and Britain and 13% higher than before the -so-called recession. But President Harper and his bulldog Flaherty continue to spin the "but we're better off" sop. At least Mark Carney is forthright in saying exactly what the problem is, as he did at the Economic Club of Toronto recently: Canadians must reduce their "debt-fuelled" spending while Canadian businesses step up to the plate and begin some serious investing.  He also recognizes that whatever capital is coming from abroad is being used to to push household spending, not investment in Canada's real, industrial economy. In other words, he recognizes that the financial sector is the source of all our woe even if he is reluctant to use language that aims at the sector directly.

Given the state of the world economy and a slowing Canadian economy, how likely is business to step up?  And given the new Stats Can revelations, it would seem that the deleveraging of household debt about which we learned a week or so back is not going to be a continuous process but one with ups and downs. This phenonmeon is no surprise really, for, as I've suggested before, the deleveraging process will take many years with all sorts of minor and medium crises along the way. To balance the absence of spending as deleveraging continues, however erratically, business investment, exports, government spending - some combination - has to step up with 7 % of GDP.  As I've suggested, business seems reluctant to invest, and President Harper and his bulldog worship at the altar of austerity. That leaves exports in a slowing world economy.  

So either way, deleveraging or increasing debt is a problem:  the former takes considerable spending out the economy, a potential vacuum that business investors seem unwilling to fill, and the latter pushes households to an unsustainable debt to income ratio. Nice mess into which the financial sector, Flaherty, and all the neoclassical economic advisors to government have brought us.

A Simple Solution for the Deficit that Might Please Both Progressives and Neo-classical Economists

Given the record profits of and incentives paid out in Cdn banks recently, there is no credible argument that says they can't afford a financial service transaction tax, and, as we know, it is the financial sector that is largely responsible for the economic mess in which we find ourselves.  It seems only fitting, then, that the revenue from this tax be used to pay down the almighty deficit about which neoclassical economists dream frettfully every night. This is a simple, easily doable solution, but one, alas, never mentioned in a Canadian context in public economic discourse for fear of upsetting our sacrosanct banks, who will claim, yeah, okay, we'll absorb your tax but you can count on us to pass it on to investors. 


Of course paying down this debt would do nothing directly for ordinary households which are leveraged at a 150% ratio to income and approximately $26,000 in debt over and above mortgage obligations.  But it will allow those poor neoclassical economists to get some sleep at night.

Well-educated Cardiologists Don't Know Everything about the Occupy Movement

Had a debate with a well-educated cardiologist this morning who said the occupy movement is missing a political opportunity because it doesn't have a single focused message.  How many times have I heard that, and how many times have I answered that the occupy movement is not a conventional protest movement.  It's sloppy democracy in motion -  slow, jagged, uneven, a little bit here, a little bit there a month later, a tiny bit a week later, everybody talking to everybody about everything. So I argued once again that it has many messages and that he just isn't hearing those messages because of his liberal expectations of a conventional demand protest. As Naomi Klein has said, this isn't a negotiation. If he listens hard, however, this is what he might hear: it's okay to utter the word capitalism in public, and it's okay to say it's irrational and dysfunctional.  It's okay to say we need to change the economic-political system, which is undermining real democracy.  It's okay to say there's an appalling income disparity in the U.S. and Canada and that clearly the financial sector is largely responsible.  It is at "heart," I tried to tell him,  a fundamental recognition of the weaknesses of neoclassical economic theory and the ideology of neoliberalism driving governments that support it. It's simple, my dear cardiologist:  the reality of the unjustly disadvantaged  99% resonates with people. Democratic discourse and political awareness:  we have not been able to say such things for forty years. 

In the meantime, some U.S. groups are occupying a different kind of political space, pumping up the discourse by confronting the current U.S. system head on.  Check out these two videos.

Hundreds 'occupy' US Congressional offices 

Labor Activists "Occupy Congress"

slipping down the pot-holed road of recession towards the sink hole of depression

Paul Krugman remarks below could easily apply to Canada, for it is essentially homeowners with their massively extended debt load who have bumped our debt to GDP ratio up to 203%, and we too require expansionary fiscal and monetary policies to support the Canadian economy.  We won't be getting them from Flaherty or Carney, of course, the latter linked, after all, to the vampire squib in NYC and the former a devotee of pathological austerity.  I fear all three jurisdictions slowly but inevitably slipping down the pot-holed  road  of recession towards the sink hole of  depression.

 "The combination of austerity-for-all and a central bank morbidly obsessed with inflation makes it essentially impossible for indebted countries [in the EU] to escape from their debt trap and is, therefore, a recipe for widespread debt defaults, bank runs and general financial collapse.

... In America, as in Europe, the economy is being dragged down by troubled debtors — in our case, mainly homeowners. And here, too, we desperately need expansionary fiscal and monetary policies to support the economy as these debtors struggle back to financial health. Yet, as in Europe, public discourse is dominated by deficit scolds and inflation obsessives." 

Killing the Euro - NYTimes.com

Elsewhere, Krugman says that "Europe’s march toward a common currency was, from the beginning, a dubious project on any objective economic analysis" - one doomed to failure.  As I've suggested more than once, the process will be slow, but potentially this could happen over that dragged out process:  If Europe goes, the U.S. goes, and if the U.S.  goes, Canada goes.

 Boring, Cruel Euro Romantics - NYTimes.com

Jobs Waning, Debt Mounting, Wages Slipping: A Bleak Outlook

Here are some followup comments that supplement my last post.


The emerging picture of the Canadian economy is bleak.  Inscribed as every government in the Western world is in neoclassical economic policy that shapes the global economy, the blame can be easily spread around, but our own government could be combatting the situation meaningfully with different policies instead of just going along with mainstream economic theory that privileges the financial sector over the real economy and austerity over job creation in the mistaken belief that that sector drives the industrial economy.


First some  relevant remarks from Jim Stanford's post about recent GDP numbers that reveal how bad things really are:


"Exports account for 134% of the expansion in GDP. If it weren’t for the sharp rise in exports in the third quarter, real GDP would have declined.


Energy exports accounted for 60% of that growth in exports in the third quarter.The energy industry alone directly accounted for 26% of the increase in real GDP at factor cost by industry between June and September. Considering that this sector employs about 1% of working Canadians, that is a stunning dependence on one sector.


Consumers and governments have pretty much hit the wall, as far as new spending. Consumer spending and government consumption barely grew at all in real terms. Government investment spending (all that infrastructure money) is now falling at a 5% annual rate, putting a big hole in the demand side of the economy.


Another weak spot was business investment spending, which also declined at a 4% annual rate in the third quarter — even with the enormous spending on tar sands projects (not to mention the “stimulative” impact of Harper’s corporate tax cuts).


In fact, business non-residential capital spending is the only sector of Canada’s domestic spending that is still well below its level in the third quarter of 2008 (as the recession hit). 


All other domestic spending categories (consumer spending, government investment and consumption, and residential investment) long ago regained and surpassed their pre-recession peaks. Government investment spending is 32% higher than that peak (although it is now being clawed back by austerity-minded politicians)."


The Progressive Economics Forum » Canada’s Petro-Recovery 


Here's another set of revealing stats from George Athanassakos - The Globe and Mail


Total Canadian government debt combined with total Canadian household debt is 203% to GDP. Greece is 195%. Just luck, not good economic management, is the main reason we're surviving economically. But if natural commodity exports begin to shrink - and they will as both China's and India's economies slow down - and the housing market begins to slacken off - which it will in an economy clearly slowing down - we're in more trouble than we already are.


In today's Globe and Mail,  Tavia Grant reports the the Canadian economy unexpectedly shed 18,600 jobs last month, the third drop in four months, and the first back-to-back drop since the so-called recession - so-called because we're really still in it, as we can see from the small and medium crises I noted in the previous post that continue to occur. That's roughly 72,400 jobs lost in the third quarter with one more month to go.


And to fill in this disturbing picture even more, Tavia Grant reported yesterday in The Globe that the average weekly earnings for an employed Canadian fell 0.3% in September to $872.75.  Of course annual wages are growing at only one-third of inflation, meaning real wages are slipping, as they have been for quite some time - some would argue over decades. Canada also has, according to the U.K.-based Resolution Foundation, the weakest median wage growth of all OCED countries since the so-called recession.


The bottom line: with such weak wages and so many jobs pooling in low-paying and part-time work, both the resulting reduction in spending in particular and debt servicing will unquestionably slow the economy down. Add to this situation government austerity programs and a lack of government spending and job creation initiatives and we have a recipe for a long drawn out recession - maybe even, as Steve Keen suggests, a depression.


How can either Harper or Flaherty look any us in the eye with such an appalling Canadian economic performance?

Combined with Harper Regime's Austerity Program, Continuous Deleveraging of Household Debt Could be a Serious Issue

House prices have been speculatively bid up to 29% over real value with all the low interest, easy credit banks have been only too willing to give us. They're just sooo good to us. But a little recent fear has begun a deleveraging of household debt in Canada - which is, relative to income, at an untenable 150%. If it is widespread, shallow, and long, such deleveaging could be an issue since it will mitigate demand, a process that will in turn affect production or supply. In other words, it will take considerable spending out of the economy. Add to this possibility the fact that, despite corporate tax cuts theoretically designed to spark hiring, corporations have merely hoarded their cash and not spent it on employing more workers or much capital equipment, both of which could have led, in turn,  to more spending as a spin-off.  Of course the Harperities are also deleveraging severely with their misguided austerity program. So overall spendings is slowly winding down, but, remember, spending generates at least 62% of our economic activity. This is a serious situation worth keeping an eye on. Here are some disturbing figures from The Globe article:

"According to the most recent data from the Bank of Canada, chartered banks in this country had $68.3-billion in personal loans outstanding in October, up from $67.7-billion in August but compared with $61.5-billion in October of last year. Credit card balances grew to $62.4-billion from $62.2-billion between August and October, and compared with $57.3-billion last October. Lines of credit rose to $229.8-billion from $227.4-billion, up from $218.9-billion a year ago.

Mortgage assets held by the chartered banks, meanwhile, hit $563.5-billion in October, up from $561.2-billion in August. But, illustrating how growth has slowed, that number was $500.2-billion in October, 2010."


Meanwhile, meaningful deleveraging to some sort of reasonable balance between debt and income for households might take a decade, some say, but realistically expect small to medium cyclical economic crises to occur instead - which is much more likely given the irrational nature of capitalism and the excessive power of the financial sector.  Banks are greedy for profit, after all, and when credit's easy, it's difficult for households to remain disciplined. It's not likely the Bank of Canada is going to raise interest rates anytime soon, but if they do, look for some serious economic fallout for overextended households - which is just about everyone.

Once again the greed of the  financial sector, supported by western governments who have fully bought into the neoclassical paradigm - as we can clearly see today by the EU's importation of a U.S. style bailout economy - the real economy and real people continue to suffer. We should never have been allowed or encouraged to borrow such exorbitant amounts.*


Note: Notice that just about all the economists consulted for mainstream media stories, with the exception of The Toronto Star,  are connected to the financial sector. Occasionally, someone likes Jim Stanford or Armine Yalnizyan are called upon, but, notice, only in conjunction with neoclassical economists, not by themselves.
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Government should spend like a household  
Canadians rein in debts amid uncertainty
Economics focus: House of horrors, part 2
Canada's Real Wages Fall As Inflation Outstrips Income Gains 
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*I've been writing about economics a lot lately because everything we do socially, politically, existentially is grounded in it. We are all cradle capitalists inscribed ideologically in it from birth. It needs to be hollowed out from within to create system change. Progressives, who focus on the political understandably, have to begin paying much more heed to the economic ground to which their political concerns are inextricably bound. What I see on the horizon is scary to me, especially since I don't think it will be dramatic but long and drawn out.

Steve Keen on BBC HARDtalk [good sync] - YouTube

Steve Keen on BBC HARDtalk [good sync] - YouTube: ""

'via Blog this'

Stephen Keen "Progress Occurs one Funeral at a Time" - Capital Account (11/10/11) - YouTube

Stephen Keen "Progress Occurs one Funeral at a Time" - Capital Account (11/10/11) - YouTube: ""

'via Blog this'

Occupy Economics - YouTube

Occupy Economics - YouTube: ""

'via Blog this'

We Do Have a Moral Licence to Resist the Dictates of Harper Regime

McQuaig: Occupy moves us into a new era - thestar.com

Linda McQuaig says "Canada isn’t a dictatorship, and so protesters — like the group now ordered evicted from St. James Park — don’t have the same clear moral licence to ignore bylaws that their Egyptian counterparts had." I'm not so sure, Linda, given all the autocratic, authoritarian, centralizing policies, protocols, and legislation perpetrated by the Harper Regime since their first ascendance to power. It seems to me, to countless activisits, and to many even in the mainstream media that we have all the makings of a dictatorship. And so I'm beginning to think we do have the moral licence to resist the unjust and democracy destroying initiatives of the Harperland bunch, be they nominally legal or not - a growing conviction that many others also share. Couple our growing awareness of the malfeasance of the Harper Regime with the ever widening conversation the occupy movement has begun, and we're on our way to some sort of revolution. Something is slouching towards Ottawa.

Note: In the meantime, we also have a right to do a Pat Martin whenever we see an outrageous breach of democracy inflicted on us by, as Joe Thomas calls them, Harper and his Stepford wives.

Armine vs. Canada's Poster Boy for Capitalism

On last night's Lang and O'Leary Exchange, given that the odds were 3 to 1/2, Armine Yalnizyan held her own against Kevin O'Leary (Canada's poster boy for capitalism), a bank economist, and a corporate CEO. Amanda Lang did her best to make sure that Armine was heard in the din of male, finance-first sputtering from these gleefully drooling mouths: profit first; real people, nothing more than clients. Their only concern was should clients buy in at 3%, 7%, or 10%. But, being the generous folks they are, they're also going to lower their rates. Whew!

There is much to object to in this Pooled Registered Pension Plan proposed legislation, but three things stand out:

1) They are different from RRSPs only in that a small business can set up - with a third party investment agent - automatic contributions from employees (with an opportunity to opt out or not join). Yeah, sure, but there is no obligation to match contributions from an employer, as there is with the CPP, and most small businesses have already claimed that they cannot afford to contribute to such a plan. At one point, Armine asked why are employers being let off the hook? The implied if not fully articulated answer: we've already got a bunch of suckers lined up; we don't need them.

2) They're voluntary. So how many people of the 60% demographic without pensions are going to opt in when many are living paycheck to paycheck as it is, already up to their proverbial eye balls in debt, a record 62% of the economy in mortgage and credit-line debt? (god [yes, Pat, my homage to you: a small g] help them if housing prices decline significantly or interest rates climb appreciably.) Compulsory participation in the CPP based on income level is the only way to enhance pensions effectively, and there is nothing, so far as I know, preventing any business, small or otherwise, from buying into that except the proft motive.

3) Pooling both expands the asset base and presumably diversifies or lessens investor risk, but, as Armine pointed out, there is no better diversified asset based and risk secured pension operation in Canada than the CPP. Why not take advantage of it?

The provinces have still to buy in on the legislation, but it seems clear then that this is another for profit, market-driven, capitalist, private sector scheme hatched by the Harperites to favour their sometimes friends in finance, though, to be fair, they did try to float a CPP enhanced proposal earlier this year only to be shot down by, as Armine reminded us, Alberta and subsequently Quebec, both of whom feared the political ramifications of increased CPP premiums. This is really no surprise, for almost all policy decisions on taxes or the economy are investor or financial sector driven ones in the Harper Regime. And we should also remember on occasions like this to take what any bank economist says on a talk show with a full sack of salt, for they have an undeclared conflict of interest and speak essentially not for the general economy but the financial sector. CEOs of course should axiomatically be viewed with scepticism on such shows.

Incidentally, The Taxpapyer Federation of Canada wants the government to shift away from CPP support for government employees to PRPP plans on the grounds of projected pension liabilties. Isn't that just ducky?

Lang and O'Leary Novmber 17

Krugman and Summers: A Reading of the Munk Debate

What happens to the U.S. economy, as we all know, will affect Canada profoundly - which is no doubt why this Munk debate garnered so much attention here. The debate is repeated several times on BNN.

Krugman has the edge for me since he has always recognized that all economic theory is grounded in the political. Summers is a technocrat, and I simply don't trust technocratic economists whether they're on the left or the right. And despite what Don Gardner says in a tweet - that Summers is unconsciously channelling Future Babble, Gardner's book (a very large claim) - and despite the notion that Summers "doesn't think in forecasts so much as in probability distributions — a much less constricting way of thinking" - Summers' vision remains a rosy, U.S. excepeptionalist view of the future.

I agree with Summers, however, about the weakness of the analogy with Japan and that U.S. economic woes are different from either Europe's or Japan's and about the desirability of government stimulus spending, a position he shares with Krugman - something of course we should be doing in Canada as well. But his argument for U.S.'s uniqueness is based on yesterday's vision of economic America, a perspective that excludes the reality of a political descent, both internationally and domestically, that has been going on for at least 10 years and that has shaped - and continues to do so - economic policy and the real U.S. economy. This missing political dimension undermines Summers' pure economic argument in my judgement. And this is why I've called him a technocrat.

Krugman vs Summers: The debate | Felix Salmon
Paul Krugman, Lawrence Summers take their corners for Munk Debate - The Globe and Mail

Krugman: His Lucid Best on Euro Crisis and Its Implications

Legends of the Fail - NYTimes.com

Borrowing, if you must, in your own sovereign currency matters, and austerity never works, especially during a recession. Here are the facts, though I coud add the caveat if I were a neoclassical economist that those high interest rates for Spain and Italy are also, no matter what the currency, the result of lack of investor confidence in the economies of those countries. But I'm not, so I'll just say had the countries been able to manipulate fiscal and monetary policy with their own currencies instead of being locked into the Euro, which is controlled by the more wealthy EU countries - namely, Germany and France - there would be no investor confidence issue.

"... if you look around the world you see that the big determining factor for interest rates isn’t the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy’s 7 percent. Britain’s fiscal prospects look worse than Spain’s, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent.

What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies. In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem.

The other thing you need to know is that in the face of the current crisis, austerity has been a failure everywhere it has been tried: no country with significant debts has managed to slash its way back into the good graces of the financial markets. For example, Ireland is the good boy of Europe, having responded to its debt problems with savage austerity that has driven its unemployment rate to 14 percent. Yet the interest rate on Irish bonds is still above 8 percent — worse than Italy."

See too my earlier posts:
Pathological Commitment to the Ideology of Austerity Brings Only Economic Stagnation
Fiscal Austerity: Does it Work?

Pathological Commitment to the Ideology of Austerity Brings Only Economic Stagnation

The curse of austerity - thestar.com

This is a very insightful analysis of our current situation. Here's a bit of a gloss on it:

Neither the private sector nor consummer spending seems to be able to stimulate growth in the economy. This is the real issue. Only public spending can do that, but a pathological commitment to the ideology of austerity on the part of so many Western countries - bred by the tenacity of neo-classical economic theory and neo-liberalism politics - has created nothing but economic stagnation. We are beginning to see the real results in Canada now even without the full launch of cuts next year. Imagine that disastrous scenario.

This is not a simple economic or fiscal issue. It's a political issue - a question of the political brain trust actually understanding the real crisis. If they don't, we can certainly look forward to a lot more social and political unrest as they continue their misdirected austerity programs - implemented of course really to please the investor class - for it is real people who suffer, as always, from the pathologically inflicted leadership of the Western world. In Canada, we can only hope Harper pays a price for his blindness.

Cancelling the Greek Referendum and Angela Merkel's Steely Focus

Two final thoughts today on the Greek crisis: 1) Under immense political pressure from within his own party, the opposition, and the EU - i.e., Germany - Papandreou was forced to cancel the referendum. But the basic idea was a good one: he knew Germany would demand even more austerity as part of the bailout payments, but he also knew how much horrible economic pain and suffering has already been inflicted on his people by the current austerity regime. As Mark Carney recognized, seeking their consent was the right thing for a democratic leader to do, as challenging as that would be given the circumstances. 2) Ms Merkel doesn't really care about Greece: all she cares about, as she has made clear yesterday, is stabilizing the Euro. That's all anyone else in the EU, for that matter, cares about too.

Live chat: Should we worry about Europe's financial crisis

Live chat: Should we worry about Europe's financial crisis

Steve Jobs was no technological visionary; he was a disturbed and disturing individual

Limits of Magical Thinking
Steve Jobs wasn’t a technology visionary, but he convinced the world that he was.

Steve Jobs was a disturbed and disturing individual, and he was no technological visionary but a crafty marketer who knew how to create a cult of Mac, iphone, and ipad worshippers, three of the most ideologically loaded pieces of technology in the world. Think of how many people, consciously and unconsciously, have been sutered into this cult in the mistaken assumption that technology is inocent and that Apple products are inherently superior simply because, well, they're Apple after all, and think of the control Apple exercises in the world as a result of its cult following. Any and all religious analogies are appropriate.

And let's not forget that Apple still hasn't revealed its carbon footprint and is still dragging its corporate ass on conflict minerals.

All shopping is political.

A Marvellous Interview with Steve Keen: His Justified Assault on Neoclassical Economic Theory

Steve Keen has led the way in the assault of neoclassical economic theory, the model that has caused so much economic, social, and political havoc since at least the 70's, reaching its devastating crescendo in the recession that began in 2007 and which we still suffer. This is a good introduction to his must-read book Debunking Economics, now in its second edition. both the book and the video, which can serve as an introduction to the book, should be of interest to the occupy movement.

Envy and Resentment about DB Pensions: Do Something About It

Pension envy grows as boomers retire

Here we go again. Instead of acknowledging how unfairly to varying degrees workers in the private sector are frequently treated by their employers, how exploited they are in the name of profit since they are the most vulnerable component in the production process -commodities, as Marx noted, owners of only saleable labour - these writers, like so many on the right spectrum of economics, once again choose to resent the just achievements of collective bargaining in both the private and public sector. Teachers, firefighters, police officers, armed forces, government workers: our esteemed authors - probably graduates of the CD Howe Institute Neo-liberalism - are saying they do not deserve their defined benefits pensions. Why? Because most of the private sector employees don't get the same sort of benefits, and such benefits dig too deeply into government coffers, where austerity of course should rule.

Okay, all you folks in the private sector without DB plans who feel that way do something about it by confronting your employers instead of resenting the negotiated achievements of collective bargaining. I know that's a tough thing to do when almost everyone in the private sector is in effect a just-in-time worker living in fear, who can be axed at any moment. This is the established culture of neo-liberalism. You are instantly replaceable, and you know it. You feel powerless and your are, caught in the vicious web of capitalism. So join the occupy movement, wear a mask if you have to, and check out senior mangement's paycheck if you still want to feel envious and resentful.

Revised: Once Again the Financial Class Gets Help at the Expense of Ordinary People

Europe Agrees to Basics of Plan to Resolve Euro Crisis - NYTimes.com
Belatedly, Europe finds a quick fix to its financial woes - The Globe and Mail


This does little for real people. When the EU talks about saving the economy, they really mean of course banks and their investors, those holding the sovereign debt. So the reason for insisting on further capitalization of the banks is to guard against potential soverign debt defaults and, in turn, to protect investors who hold soverign debt bonds through those banks. In other words, it's about financial panic, serving the 1% again, though if the banks were to collapse, it would indeed affect everyone: small and big businesses and those who work for them.

The big banks can no doubt find the capital by selling some of their assets or shares, but that might affect their balance sheet and tighten lending to their customers. The smaller banks won't have the same option and will probably have to look to governments to bail them out, a desperate move thus increasing the sovereign debt and adding even more pressure to the already deeply burdened taxpayer. It's difficult to say whether there is or will be a liquidity issue. But it's clearly a vicious circle. Add to all this the fact that the European Financial Stability Facility can only be jacked up with borrowed money - probably from China, whose economy itself is slowing down - and we have a recipe for continual disaster.

What I don't understand in this process is at a time when stimulating growth is vital why demanding further austerity measures from Greece and Italy help matters when the bond holders are already asking for premium interest rates on their sovereign debt, and why wouldn't they given that they've been asked to take a voluntary 50% haircut. Won't austerity paradoxically actually increase the amount or extend the term of sovereign debt if governments wish to keep functioning, and won't cutting jobs and slashing services create even more unemployment and thus erode the tax base and government revenues even further? Won't the GDP be further reduced?

All this is becoming a nasty habit, one the occupy movement clearly recognizes, for the real industrial economy and the ordinary citizen once again suffer for the sake of the investor class.

See too elsewhere on this blog: Fiscal Austerity: Does it Work?

Deconstructiing the Binary Opposition of Politics and Policy in the Harper Regime

Where good politics meets good policy :Dan Gardner's column in the citizen today. I can count on one finger "good policies" from the Harper Regime, and that finger shakes when the wind blows and twitches when I sleep. Yes, no question Harper would seem to choose politics over policy consistently, and when he would seem to choose policy at all, it's for political reasons, as in the ship building contracts through absentia. But when, on occasion, he would seemingly choose policy directly - unlike the ship building contracts - at the expense of politics, the policy is almost always not in the interest of all Canadians, but instead serves a narrow voter rich segment of the population, as is the case with the tough on crime bills, the Wheat Board abolition, and the slaying of the long-gun registry - which thus means that the policies are in reality politically motivated. And of course using surrogates, as in the gun registry business, is in itelf a political strategy to distance oneself from direct blowback should there be any. Sorry, Dan, such simple binary oppositions always fall apart. it doesn't matter whether the Harper policies are good or bad. It's politics - sometimes overt, sometimes subtle - all the time for the Harper Regime.

The American Dream: You have to be Asleep to Believe It

George at his most prescient, ranting best. How he would have loved the occupy movement.

The Progressive Party of Ontario is Fundamentally Unrepresentative of Ontarians

Just about all of the pco seats won in the recent election are in rural ON, and all of those elected seem to be white. How representative of the people of Ontario are the Hudakians when they clearly lack ethnic diversity and are so deeply concentrated in rural Ontario? And, add to these two glaring weaknesses, those rural ridings constitute only 25% of the average Canadian population but disproportionately have as much political power as an uban riding with three times the population. Ethnic diversity, rural concentration, disproportinate riding power: three fundamental ways in which the Hudakians are starkly unrepresentative and a clear reminder that we need to change both our riding structure and our voting sytem if we want really broad democratic representation. See my remarks on Proportional Representation elsewhere on the blog

The Challenge of Envisioning Something Other Than Capitalism

Naomi Klein is dead right about our suspicion that we can never imagine our way outside of capitalism since we have been ideologically inscribed in it unconsciously for time immemorial it would seem - so much so that we have thorougly "naturalized" it as a given way of life. We are all cradle capitalists.

Tabatha Southey once told me everything is economics. She might have really meant capitalism. For Capitalism is indeed everything, and it involves of course much more than an economic system: capitalism informs and structures our political, social, psychological, biological, and economic daily lives. There is no facet of our existence that is not inside capitalism. Is it any wonder then we have difficulty trying to think outside it since we really aren't even aware that we're inside it? We've known nothing else. This is our reality. We are all prisoners of capitalism, and most of us, sad to say, are suffering from Stockholm Syndrome.

And a simple reform or tweaking of capaitalism is not really the answer - such quick remedies as regulating investment banks, for example. For the occupy movement at its root is about system change, not reform, even if that change can't be either envisioned or articulated at this particular early moment. This is indeed the beginning of a shift or full disruption, as Thomas L. Freidman suggests, but that full change will not happen overnight. It may take years. I call it sloppy democracy. and the important point is patient perseverance in small and big ways everywhere.



Naomi Klein Interview at Occupy Wall St. Grounded News, video report 7

Jim Stanford: Out of Equilibrium: The Implications of CETA

Out of Equilibriam from Jim Sadlemyer on Vimeo.

Here's a link to the full report: Out of Equilibrium | Canadian Centre for Policy Alternatives

Simulation of Ontario Vote Suggests Proportional Representation Has Merit

                                        Voting system affects outcome, simulation finds - Ottawa - CBC News


This experiment is fascinating. What I find most intriguing are the hypothetical outcomes in terms of both a percentage of the popular vote and seat distribution based on the actual results of out first past the post Ontario election:

                                                    Actual FPTP Election Outcome and Weighted AV and PR Vote Results

	FPTP (Actual election outcome)	AV (first preferences)	PR
Liberal	37.6 %	33.6%	32.1%
PC	35.4%	32.7%	28.4%
NDP	22.7	24.6	26.2
Green	2.9%	6.5%	7.2%
Other	1.3%	2.6%	6.2%

                                                    Actual FPTP seat distribution and estimated PR seat distribution

	FPTP (actual election outcome)	PR
Liberal	53	36
PC	37	31
NDP	17	31
Green	0	8
Other	0	1

Notice how radically different, in particular, the distribution of seats would be under an actualized PR system and how much of the power shifts to both the ONDP and the GPO away from the OLP and PCPO.

There is little doubt that PR is a more fundamentally democratic system of voting for the simple reason that it is more representative of actual voter participation and presumed intention. It does lead to an entirely different kind of governing structure involving much negotiation and many  trade-offs, true, but it is representational government at its most core level - which is why so many around the world use it as their voting system despite the challenges.

And our voting system of FPTP is certainly one but not the only reason for such profound voter indifference and apathy, especially from young and less educated voters, who feel  -  given that they think at all about an election - that  were they to take the time to vote, their vote would almost always be wasted unless they voted for the FPTP winner:  you vote for candidate x, but you don't see that vote reflected in the results in any way.  With a PR system, no matter for whom you voted, you do. It seems to me that this potential for real political participation is a very good reason to begin a serious public conversation about our voting system.