Why are governments addicted to neoliberal #austerity?

The key to deficit reduction is not austerity - reducing government spending by cutting programs and personnel - but good old-fashioned employment. Stanford’s argument is in the Krugman reformist, Keynesian tradition. He doesn't seek a transformation, merely a technical economic readjustment, but, given our failure to transform capitalism so far - which can be brought about, in any case, only with a political strategy, not mere economic tinkering - it has value within the framework of a capitalist reality - a stopgap of sorts. 

As I've said many times in that context:

Without employment, no income; without income, no spending; without spending, no demand; without demand, no production; without production, no economy.

And thus no tax revenue to pay down the deficit. Frighteningly simple, especially when one realizes that government itself instead of firing people could be employing them and establishing employment programs in an effort to stimulate the economy when the private sector is failing to do so during these stagnating times.

Still, the question remains: why is it that so many governments continue to drink the austerity koolaid when it is so evident from countless global examples that it simply doesn't work? Because of course, as the main partner in corporatocracies, they serve their corporate brethren and their plutocratic masters. Austerity always privileges this investor class, and, while it may seem counter-intuitive, recessions, as Robert Pollin has suggested, actually benefit this class*. Ontario is no exception in its allegiance to the financial sector - after all Bay Street isn't in Boise -  especially since it necessarily controls so much of Ontario’s industrial economy too. As long as industrial economic activity is fulled by debt/credit, the financial sector and its capital will be in control.

We should nevertheless be grateful, I suppose, that the Ontario Liberals chose to ignore Don Drummond’s highly dubious classic neoliberal recommendations. Who knows the horrors they might have wrought.

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* In the eyes of the investor class, austerity presumably generates confidence by working to maintain government solvency and asset value, especially long-term government bonds, by way of keeping inflation in check through reduced spending. Thus Canada’s neoliberal fiscal policy complements the Bank of Canada’s monetary policy of low interest rates, which also keep inflation in check. This is important to the investor class because government is of course the final guarantor of the plutocrats’ investments and their banking institutions. The outsourcing of government services if they happen at all under austerity is only an incidental benefit as is increased neoliberal freedom in the “marketplace,” for spending, whether intended by the policy or not, is also seriously inhibited in the general economy..

Maybe its time to begin thinking about withdrawing our patronage from all retailers and services that offshore labour

"Yes, the Conservatives are focused on what they call the economy. But their economy is a ruthless, inhuman task-master. It demands that the very profitable Royal Bank be even more profitable. It demands that 45 highly trained people lose their jobs. It demands that Canada’s visa system allow all of this to happen. The government serves this economy faithfully. Whom does this economy serve?"      - Thomas Walkom, Toronto Star
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Maybe its time to begin thinking about withdrawing our patronage from all retailers and services that offshore labour - including perhaps even call centres, which are the most inefficient offshore labour* of all. That might be hard to do, but choices can be made on the scale of evil, even though it’s true, as Phil Soubliere once told me, the lesser of two evils is still evil.

One could also continue to educate one’s family, neigbours, and friends about the exploitative practices that lie behind their shiny new mobile phone or computer, their wonderfully au courant clothing, their expansive new internet service, and their friendly neighbourhood bank. I find, however, that most people, wanting to get on with their necessitated drudge lives, could care less. Yes, of course you’re right, my dear fellow, but what can I do about it? So good luck with that. Maybe your mother will listen.
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*English is indeed the language of business and global commerce thanks to U.S. imperial control of global finance, but the cultural differences, the nuances, the subtexts, the connotations, the rhythms among English language speakers are significant when it comes to communication efficiency - which is what a call centre should be all about. An English-speaking German really doesn’t speak the same language as an Indian or Texan. This is why offshoring call centres in the interest of profit and wage cost cutting is a failed business practice. It frequently if not always alienates clients.  The neoliberal habit of displacing domestic workers is also of course in and of itself morally reprehensible.

The issue is not #capitalism under new management, but the transformation of #capitalism itself. #neoliberalism #cdnecon

More and more I tend to agree with George Monbiot that it is not neoliberalism in and of itself as an ideology or economic theory that is the root cause of our economic/political/social woes, but the ruling oligarchy’s alibiing use of that model to further their own wealth no matter the harm that results from that quest. (Is it any wonder they’re called “the feral rich.”) The distinction is important because it shifts the strategic focus to the plutocratic investor class itself and in turn their banking, regulatory, and corporate institutions - their agents of destruction -  which are served of course by compliant governments everywhere and nowhere more so than right here in Canada. Our banks are now “too big too fail.” This is, sad to say,  the point to which the financialization of the Canadian economy has descended: 80% of  financial assets are held in these institutions. Be prepared for the socializing of bank debt down the road now that the framework's in place; that is, you'll pay for any bailouts.

More and more too I find myself in agreement with both Greg Albo and Leo Panitch, who have argued persuasively that progressives groups here (including the Council of Canadians) and elsewhere are very big on tactics and “micro-politics” but woefully lacking in overall strategy and considerations of  long-term consequences. I would add to their basic argument that the self-interest of the progressive groups each with its own agenda determined largely by their executives - as is the case with political parties - will no doubt continue to inhibit any collectivizing co-operative movement towards a larger, focused pragmatic goal of institutionalizing social democratic controls.

For a brief moment, there was a ray hope with the establishment of CommonCauses, but apparently all they wish to do is replicate the actions of other progressive groups and to replace the Harper Regime. The issue of course is much larger than that simplistic goal. The issue is not capitalism under new management, but the transformation of capitalism itself. Else all is lost.

Is it hopeless? Perhaps not. Perhaps all that is required is patience, As Richard Wolff has said, "As has happened often in human history, what provokes change is less any clear vision of where we go next and more the intolerability of where we are. Capitalism is no longer "delivering the goods" for most people. The circle of its beneficiaries grows smaller and richer and more out of touch with the mass of people than ever."

Inform your "fiscally conservative" friends please of this astounding failure

#neoliberalism Under Flaherty the #cdnecon since 2006 has been a debt-fuelled financialized one only with little real production, productivity, or significantly increased employment to drive demand. Credit card debt has gone from $35.6 billion in February 2006 to $77.4 in February 2012, a staggering 117% increase.  

Mortgage debt has gone from $672.5 billion to $1111.8 billion in February 2012, an eye-popping 65.3%. And these figures do not account for the past 12 month period, in which we already know personal debt has substantially increased even more.  The personal debt to income ratio is 165% - which ought to be an embarrassment to all Canadians not just the so-called Finance Minister.

 Why has Flaherty remained credible to the mainstream media? Because he's enabling them to make record profits, we know why he has to the financial community, especially since all his private sector economic consultants are from the banking sector. And of course it is these same consultants to whom the press turns for its stories. They're both inside the neoliberal bubble.


Yes, I'm repeating myself. 

A 516.7 billion increase in personal debt and 140 billion in federal debt since Flaherty took over

#cdnecon An Appalling Performance from a Finance Minister. »

Whatever economic movement we've had has been fuelled by essentially personal debt, an astonishing  516.7 billion increase since 2006, at a staggering 165% debt to disposable income ratio. Only #banksters and the investor class benefit from such a financialization of the economy. And we’re 140 billion deeper in federal financial debt since Flaherty took over with a net debt balance of 650 billion and a stagnating global economy - the effects of which will be hard to escape since, lacking a diversified domestic economy,  all our economic growth eggs are in export markets and in particular commodities - namely oil and mining. The classic neoliberal agenda has failed miserably. Time for Drummond, Hyder, O’Leary and Co. to wake up from the dream.

 

Where is the $14-billion from the GST rate cut now? #cdnpolisoa.li/MOQwOlB
— barrie mckenna (@barriemckenna) March 25, 2013

Reading Economic Health into the Recent StatsCan Jobs Data is An Exercise in Fantasy

Reading Economic Health into the Recent StatsCan Jobs Data is An Exercise in Fantasy

Here’s the reality in that data:

1) As Derek Holt points out, there is no hours worked increase. That remains static. But it is hours worked that “drive incomes, not body count.” Holt speculates that the already employed are working fewer hours, and there is plenty of anecdotal evidence to suggest such a situation is probable.

2) The so-called new jobs have not increased labour productivity one iota. There is, in other words, no output growth, no real economic growth resulting from job increases.

3) All the job increases were in the low paying service sector, while jobs in both manufacturing and construction decreased significantly.

The Canadian economy under the weak neoliberal stewardship of the arrogant Harper Regime continues to stagnate, and, as a result, while the 1-10% continues to live well, the middle and working class suffer. A global economic implosion is on its way, and, given the average debt load of Canadians, we will be hit hard when that happens.

StatsCan:

Job Gains too Good to be true:

Canada’s economy in a stall, StatsCan reports

There’s every chance we’ll have at least a technical recession in the fourth quarter given these statistics:

“The economy slumped to 0.6 per cent in the third quarter — below even the gloomy 0.8 consensus and about one-third what the Bank of Canada had predicted as recently as the summer — as trouble loomed on the export side, housing and business investment….

In addition, Statistics Canada revised downward the second quarter one notch to 1.7 per cent and September, the last month, was flat, meaning the handoff to the current fourth quarter was weak… The big shock in the third quarter report was that business investment, which the central bank has been counting on to support the economy, fell two per cent per cent annualized, and residential construction dived 4.4 per cent…As expected, net trade also weighed heavily on the economy in the third quarter as exports plunged 7.8 per cent on weak global demand and soft commodity prices.”

Only Christmas consuming will save the economy, he said facetiously. It will be amusing to see what propagandistic spin Flaherty and Co. put on this one. One thing's for sure: he won't ever admit that the neoliberal growth model is failing.

Canada’s economy in a stall, StatsCan reports

Banksters will be on a Desperate Prowl for the Rest of 2012

As I've suggested many times, the current global economic conditions were to be expected. We are in a static, no growth economy forever, the maximum growth hovering around 2%. for the foreseeable future.  I could live with that, but market-driven neoliberals couldn't, and they are the ones who, alas, control economic policy in the world. Europe, the U.S., and China in particular are all suffering serious economic woes, and the Canadian economy  grew by only 1.9% in the first quarter - much less than all the neoliberal, market-driven Canadian economists predicted -  including the Governor of the Bank of Canada and the Finance Minister. That meagre growth was driven by business development, not by consumers, who have pulled back on consumption while sinking into debt by another $454. per capita - just about the limit of debt load, reasonable or otherwise, for the average Canadian relative to income. The banksters will thus be on a desperate prowl for profit. Be prepared.

a tiny glimpse into the ways our government serves the corporate and financial world, not the people of Canada

Some Key Areas Where Neoliberal Policy Undermines both the Industrial Economy and Canadian Democracy

Under the Harper Regime, the investor class is constantly being protected at the expense of the real industrial economy, for just about all policy decisions privilege both the financial sector, with its market-driven initiatives and debt-driven growth strategies, and of course corporations - in particular resource corporations in oil, gas, and mining, all of which combined have a heavily weighted presence on the TSX and, in fact, together with financials drive the TSX index. The obsession with deficit reduction and austerity are part of this process in order to maintain socalled  “market confidence,” played off ironically, as they always are around the world, against sustainable growth. And do I need to mention successive corporate tax cuts presumably designed to attract investment, but the success of which no economist has ever measured accurately? Much if not all of the financial sector is, of course, composed of corporations.

Foreign worker policy is designed both to drive wages down with differential pay scales, and targeted immigrant recruitment is designed to enhance a neoliberal policy of economic growth in the sectors the Regime favours as being in “Canada’s national interest.”

Anti-labour, anti-union, policies and back-to-work legislation are obviously designed to suppress wages and erode workers’  benefits. Throw the newly proposed changes in EI into the mix here too, and it’s a war on  the majority of Canada’s very own citizenry.

Reducing in effect government financial participation, pension reforms clearly favour the financial class because of the profit possibilities of the  Pooled Registered Pension Plan proposal, as do the OAS changes that will force many to seek private pension arrangements if they can afford it or otherwise to stay in the workforce for longer than planned.  Add the corporate management shift to defined contribution plans, which also obviously aid corporate bottom lines and, in turn,  shareholders and the investor class, and we see another neoliberal triumph.

Gutting of a myriad of regulations and other laws and policies wherever and whenever possible to allow corporations to exploit both people and the planet at will for profit is now commonplace for the Regime. The legislative assault on long-standing environmental regulations is only the latest, but countless not-so-subtle manoeuvres in foreign policy, whereby Foreign Affair diplomats become sales people, so-called shifts in foreign aid such as the new CEDA relationship with mining companies, and the assault on charities  through the CRA also come readily to mind.

All the free trade agreements negotiated by the Regime serve a neo-liberal agenda, as they did, to be fair, under Liberal rule as well.  Even as we can’t change NAFTA through parliamentary process, we will not be able to change any of these other, more recent international trade agreements, including CETA, simply because they’re international. We lack the power nationally in law to do so, though there are costly international mechanisms we could avail ourselves of but, it would seem,  never do.

 Gutting expenditures and a host of smaller programs  for Social Services, including limited Health transfers to the provinces, wherever possible is de rigueur in such neoliberal driven government such as ours.

This is a mere but, alas, sad glimpse into some of the ways our government serves the corporate and financial world, not the people of Canada.

14 economic advisors Flaherty consults on policy and budgets are all from the financial sector: Fiscal contraction doesn't work

The 14 economic advisors Flaherty consults on policy and budgets are all from the financial sector, mostly banksters.

Here's what James K. Galbraith says about the implicit danger of such a stacked deck:

 "....economic policy should not be under the control of bankers, and any economic team which is dominated by the financial sector is going to be largely serving that sector's interest. Now, that, I think, is a very clear fact and something which everybody should be prepared to resist and to object to when it occurs and to protest until it changes. Until that happens, very little else will happen."  http://goo.gl/sMidp

 Let me reiterate by way of paraphrase that last bit:  we should be resisting, objecting to - whenever and wherever we can -  the Harper Regime's deep privileging of the financial sector through its overt neoliberal agenda. There's nothing remotely subtle going on here. As I've noted many times, it's such a classic neoliberal agenda it ought to be taught in university political economy classes. If we can't shift that ideological policy ground, none of the social and poltical transformations we seek has a chance. This should be our primary concern in our efforts to bring about system change. Everything else is a symptom.

And here's what even Larry Summers, Harvard professor, late of the White House advisory staff, has to say about misguided austerity such as that implemented by the Harper Regime:

"Fiscal contraction reduces incomes, limiting the capacity to repay debts. It achieves only limited reductions in deficits once the adverse effects of economic contraction on tax revenue and benefit payments are accounted for. And it casts a shadow over future growth prospects by reducing capital investment and raising unemployment, which inevitably takes a toll on the capacity and willingness of the unemployed to work."   http://goo.gl/GyZri

This is what protests around the world yesterday were really about.

Most Commentators and Economists Say Threshold Change for OAS is Unnecessary

Surveying recent media coverage including economists referenced or interviewed, one will discover that a substantial majority of commentators argue that the age threshold for OAS does not require changing to maintain sustainable funding for the program despite swelling seniors' ranks and a decreasing Canadian population.  Neither the argument  that seniors are living longer now nor the claim that the age threshold should be raised because other countries have done it is carrying much weight with economists or thoughtful journalists. Even Jack Mintz, frequently referenced by the Harper Regime itself, says it's unnecessary. It's clear, then, that it's not good fiscal management that's driving this agenda item, but, as I've argued,  good old neoliberalism. 

Four recent markers we have witnessed along the road to Canada's incremental destruction: 1) proposed changes to streamline environmental assessment on pipelines and other projects, 2) changing immigration policy to favour those who can contribute more directly to the neoliberal project, 3) abandoning a leadership roll in Health Care, and now 4) re-engineering our pensions. What next? 

Yeah, right, President Harper and his Stepford Wives Are Such Good Economic Managers

Let me get this straight. This past week we learned that the Harper Regime spent $53.8 million in 2009-10 spinning their "Economic" Action Plan to a gullible populace - a budget that is more than the annual advertising budget for the entire federal government before 2006, the year the Regime took power. That's bad enough, right? But the Regime's spending on spin in general has also tripled since that year, going from $41. 3 million in 2005-06 to $136.3 million in 2009-10.  I wish I could say I'm surprised, but, unfortunately, such bad behaviour from the Harperites has become the norm, to be expected. No one - least of all the media - is shocked any more since it's become so commonplace.


We also learned this past week that Our Glorious Leader (John Doyle's term, which alternates for him with Hair-in-the-Fridge) ran up the PS by 33,000 employees and wages by $5 billion since 2006.   And, now, demonstrable hypocrite that he is, he's instructed one of his bulldogs, Tony the Pork-Barreller, to slash and burn the PS in the interests of  the festishized  deficit, a strategy which of course is a smoke screen for introducing "efficiencies" - a common neoliberal tactic in the private sector - a euphemism for firing people. 


Oh, yeah, and we also learned on the occasion of yet another completely unnecessary corporate tax cut - even several neoclassical economists said it was not called for in these recessionary times -  that Canadian businesses are sitting on more than $583 billion in Canadian currency and deposits and more than $276 billion in foreign currency. That's not to mention what is stashed away in tax havens like the Bahamas. Thanks, Steve, for the New Year's present. See you at the Fords or at our place offshore soon.


And of course before all these revelations this past week, let's not forget who slashed the GST by 2% to keep the red meat hounds from yapping more and who  blew a substantial Liberal surplus recklessly. These indulgences were such sound economic policies, yah? 


We're sinking, as I've suggested several times in this blog, and still we have no job initiating strategies. Why? Because neoliberal captialism thrives on a financial crisis. It's always a marvellous opportunity to introduce measures that will benefit the financial class and their neoliberal buddies - a sort of variation on Naoimi Klein's shock doctrine - in the name of emergency measures while the populace is in a condition of alarm and extremely receptive to spin.


We must find a way to begin educating the mainstream media about how deeply they themselves are inscribed in neoliberal ideology, as the three stories defending CEO salaries this past week clearly indicate, and we may have to begin moving from protest to reveolution of some sort, I'm beginiing to think, before this Regime becomes a full-fledged neoliberal fascist one. What emerges from the occupy movement in the spring is the key.

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%

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.

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

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.

Global News | Interactive map: 'Occupy Wall Street' events taking place across Canada on Saturday

Global News | Interactive map: 'Occupy Wall Street' events taking place across Canada on Saturday

"Occupy Wall Street" events across Canada are continuing the movement that began with a small group of people in New York City weeks ago. “Occupy” events have since spread beyond Wall Street to cities across the U.S. and international borders.

Here are some of the events happening in Canada this weekend:

Occupy Vancouver:

• October 15 starting at 10:00am
• Vancouver Art Gallery, 750 Hornby Street
• http://www.occupyvancouver.com/
• 
  

Occupy Kelowna:

• October 15 starting at 10:00am
• Kerry Park, 1480 Mill Street
• http://www.facebook.com/OccupyKelowna?sk=info
• Follow on Twitter @occupykelowna
• 
  

Occupy Edmonton:

• October 15 starting at 12:00pm
• Sir Winston Churchill square, (99st & 102 Avenue) Edmonton
• http://occupyedmonton.org/
• Follow on Twitter @OccupyYEG
• 
  

Occupy Calgary:

• October 15 from 1-3pm
• Outside Bankers Hall, 8 Avenue between 2 & 3 Streets SW, Calgary
• http://occupycalgary.ca/

Occupy Saskatoon:

• October 15 starting at 9:15pm
• Protesters will meet at the U of Sask. at 9:15am, then march from the top of University Bridge to River Landing. The event will move to Friendship Park at 1:00pm.
• 
  

Occupy Toronto:

• October 15 beginning at 10am
• The Exchange Tower, 130 King St West, Toronto
• http://occupyto.org/
• 
  

Occupy Ottawa:

• October 15 starting at 12pm
• Confederation Park, Ottawa
• https://www.facebook.com/groups/Occupy.Ottawa/
• 
  

Occupy Montreal:

• October 15 starting at 9:30am
• Victoria Square, Montreal
• https://www.facebook.com/groups/occupymontreal/
• 
  

Occupy Moncton:

• October 15 starting at 12:00pm
• City Hall, 655 Main Street, Moncton
• https://www.facebook.com/OccupyNB
•