10.02.2011 08:40 AM

In today’s Sun: choose wisely (everyone)

In a newsletter to clients, Cooper warned the Harper government it was literally in danger of repeating the deflationary policies that caused the 1929 stock market crash and the Great Depression.

She went on to say that the fiscal tightening promised by Harper and Flaherty could, in fact, lead to an economic “rout.”

If those chilling words don’t give investors, job hunters — and voters in P.E.I., Manitoba and Ontario — cause for reflection, nothing will. The decisions we make now will determine our economic future in the months and years ahead. And if we make the wrong decision — as Depression-era President Herbert Hoover did, Cooper noted, with rash fiscal belt-tightening — we could be plunged into another recession, or worse.

We have a choice here, and it’s an important one.

36 Comments

  1. Michael S says:

    So while Tea Party Tim gets his landowners nominated via old school techniques a democratic leadership process in Alberta elects a Progressice Conservative leader that reads right from Dalton McGuinty’s playbook.

    Mr. Horner believes his supporters bought into Ms. Redford’s message of change, her focus on public health care and her commitment to education funding. “We’re very similar,” said Mr. Horner, who stayed long after the crowds had left the hall. He’d earlier told the crowd to rally behind Ms. Redford. “This province has a tremendous future, and now we have a tremendous leader,” he said.

    Imagine that?

  2. Finn says:

    This is no time for blindly sticking to fiscal tightening because, yes, when a government withdraws spending from an economy that has little demand, the feedback loop can be catastrophic.

    But it also doesn’t mean a blank cheque to spend irresponsibly either.

    There has to be an analysis where we will get the most bang for our buck economically. Traditionally, this will come from two things. Automatic stabilizers, like UI benefits which have a greater than one multiplier effect on the economy and infrastructure spending.

    And even here, there is a problem. With infrastructure spending, as we’ve seen with any government, there is the tendency to award money to projects that will reap the most political gains. That’s not responsible.

    There was a story recently about how the government hired these consultants (90k per day anyone?) to help them decide where to cut government waste. Flaherty said it made sense to consult with the private sector on these matters.

    I thought that was amusing because their whole election campaign was based on them being the best economic managers. I guess anyone with the ability to outsource to consultants would have been best….but I digress.

    I was a bit pissed off that nobody in the media raised the point that if it made sense to consult these guys when you were looking at cutting spending, why would you not consult them when you are looking at allocating money to stimulus projects.

    Surely the rationale that the private sector would be helpful would carry as much weight there too? Of course, that ends up being rhetorical because the consultants won’t recommend the projects that are politically appealing rather than economically so.

    One thing is true, the meeting between the three this week received little play in the press. And more eyes should be raised.

    • Finn says:

      So your faulty argument is that there are disincentives everywhere, is that it?

      Please tell me again exactly what biz you are in because you know SFA about risk management and capital budgeting.

      Moreover, your argument about capital gains providing liquidity is equally moronic when you consider the average holding period of corporate assets by key stakeholders.

      And in this rant, you’re going on about “too big to fail”…WTF bozo , I’m addressing the need for targeted infrastructure and you’re on GOP talking points.

      I’ll make this easy for you. Read it and then have your big glass of hot milk and go to bed old man……….everything begins with a demand curve. When you wake up tomorrow, go find the definition of GDP and find out what happens when AD is less than AS……….and how much more to the southwest AD is when government spending falls.

      Corporate taxes are already at their lowest and cash is still being hoarded……..why? BECAUSE THERE’S NO DEMAND IN THE SYSTEM.

      Enough time wasted with you.

  3. JStanton says:

    Mr. Harper took some economics courses while at school. Hell, who didn’t. So now he thinks he knows better than the world’s leading economists, people who have actually worked in the field all of their professional lives, and are as such at odds with everything Mr. Harper does in this regard.

    But it wouldn’t matter whether those courses had been in basket-weaving. Mr. Harper has opinions and beliefs, and that’s all that counts.

    To quote the prophetic wisdom of Tina Fey – “in five years we’ll either all be working for him – drawing UI or welfare – or be dead by his hand”.

    .

    • JStanton says:

      Big deal. As I said, Mr. Harper took some economics courses while at school. We all did. I have multiple post-graduate degrees, and neither I or anyone I know similarly educated would have the arrogance to pretend we actually knew more than professional practitioners. It’s only the educated who fully understand how little they know, which explains Mr. Harper’s lack of competence on economic files, and lack of self-awareness too, I might add. He has never worked in the field, and has no professional credentials in economics, or anything else, for that matter. And it shows.

      Shine away Gord; it still stinks.

      .

      • The Doctor says:

        So when has Harper actually said that he thinks he knows more than professional economists do? Do you have a quote in which he actually says that?

  4. Pete says:

    I totally agree and it will just be a matter of time before Harper turns the spigots on again but like beofre the money will go to ensure his ministers get re elected and not to long term job creation. Hudak in power will do the same and we will truly be fcuked.

  5. nic coivert says:

    Didn’t Bob Rae used to refer to Harper as Herbert Hoover in blue sweater? Prescient.

  6. bugzy says:

    Again we see the stupidly and lack of common sense from the Harper lovers. I would say from the adolents attending grade school likely. Pardon me but I believe even they are more knowledgeable then some on this thread.

    • bugzy says:

      Should have read: Again we see the stupidly and lack of common sense from the Harper lovers. I would say from the adolescents attending grade school likely.

  7. Finn says:

    Supply side solutions to an economy lacking demand never work.

    All you succeed in doing is lowering the overall equilibrium level of real wages.

    Explain to me how capital gains tax cuts favor the average unemployed worker or how the marginal impact of them helps corporate Canada when they are already having their corporate taxes cut to their lowest levels.

    • mike says:

      Ughhh Gord. Ughh.
      How did you manage to get “several hundred clients and associates”?

    • Finn says:

      CG taxes rob the market of liquidity?

      That line alone shows your complete lack of understanding.

    • Cam Prymak says:

      This is sort of like the Republicans down south defending no taxes for rich and super rich because *their* investments are job creators.

      There you have a situation where Warren Buffet is saying the tax structure is out of whack and the non-billionaires defending it.

      Misguided and outrageous.

      • Cam Prymak says:

        Which is what I said.

        You’re no billionaire or economics major my friend.

      • Cameron Prymak says:

        Buffett was talking about fareness. Obama is talking about sharing the workload. Stimulus, spending cuts and revenue generation are all needed.

        Pare down some of the more egregious programs, look for efficiencies and introduce fare means testing for some social programs. The Rob Ford experiment shows you can’t cut your way out of a massive deficit problem without potential social and economic turmoil, do we want to see that on a country-wide scale?

        The realistic objective is to grow the US economy by finding a way to fix the hangover that is the personal debt/home mortgage markets in the US. The US consumer has driven the economy for the last 10-15 years and those that aren’t completely underwater are not feeling compelled to spend money. But until the upside down market corrects itself they’re not going on any spending sprees. So who’s going to pick up the slack?

        Government can keep the fragile recovery from failing by a comprehensive stimulus plan. Let’s hope they start with schools and government buildings and fix the roads and bridges that don’t meet code. That’s all good use of taxpayers money and a way to introduce energy saving technologies (jumpstarting new business formation).

    • Justin says:

      “Deregulation of labor”, aka be just like china. Thinking that corporations can regulate their own labor policies is a fallacy. Just look at the meatpacking industry in the United States.

    • Philip says:

      Exactly, Finn. But again Conservatives have a vested interest in lower the real wage of working Canadians. Afraid, broke and in debt is exactly how the Conservative want Canadians that earn a hourly wage.

      • Philip says:

        How so?

      • Philip says:

        Just like you have done countless times about those who hew a progressive, or left wing philosophy? Physician, heal thyself.

      • The Doctor says:

        Philip, if we were all afraid, broke and in debt, I don’t think the government of the day — you know, Harper and Co. — would have a chance of getting re-elected. Grab a brain and ditch the hyperbole.

      • Philip says:

        Really Gord? Do you even read what you post? Examples: the opening sentence in your first post on this story, every post in which you mention President Obama (you might take heed that I didn’t feel the need to include the colour of the man’s skin), every post in which you reference organized labour, anything you posted on Quebec and separatism (except Western separatists, obviously), any post with/about Michael Ignatieff/Stephan Dion. Need I go on or have I made my point Gord?

      • Philip says:

        Brain is just fine as it stands. I honestly believe what I wrote about Conservatives and Canadian hourly workers. I can’t share your faith in Mr. Harper and company. We shall have to agree to disagree on that score.

    • Justin says:

      I have, they have awful working conditions in many cases. Low rates of pay, poverty, no medical insurance, stress, and fear of loss of job especially when they speak up. And there is nobody to speak for them. But who am I to tell somebody who Im sure doesn’t know how the other half lives.

  8. Chris says:

    Warren. I think you missed the big news in the SUN today. They didn’t, I repeat didn’t endorse Hudak or the Conservatives. That says a ton right there.

  9. Gord, the agenda you propose has been public for years. Everybody knows. This agenda is to run up deficits and downsize government to the point that cuts to hated government-funded programs (defence, foreign affairs and justice excluded) will be accepted by voters. “We can’t afford these any more”, while the top 5% of earners see their incomes soar. No one is buying ‘trickle down’ economics anymore. Witness the consumer collapse in the US.

    http://www.thestar.com/opinion/editorialopinion/article/1038961–apocalyptic-crisis-budgeting

    • Cam Prymak says:

      Gord – the US, bastion of the policy you defend, is entering an hour-glass economy structure, i.e. the evaporation of the middle class, Wal-Mart wages for an increasing number of middle aged and retirees, forced back to make ends meet and super wealth for the top class.

      Further rebuke of ridiculous tax cuts for the wealthy courtesy of David Stockman, former head of the OMB during Pres. Reagan’s time in office.

      It’s published in the NY Times, http://www.nytimes.com/2010/08/01/opinion/01stockman.html?pagewanted=all

    • Shaun says:

      Gord, stick to selling widow some insurance product they don’t need because that’s all you can sell. As an economist, and formerly of the very right end of the economic spectrum where I would find the likes of you, these old price-theory ideas are losing ground quickly. As Bill rightly points out, as with the others that have called out your advocacy for supply-side economics (i.e. ‘voodoo economics’) above note, the theory barely holds water in the face of rapidly mounting empirical evidence. Behavioral economics is demonstrating what most of us knew: trickle down economics does not work.

      Anyways, I don’t take economics lessons from insurance salesmen; but I thought that, as an economist and researcher that no doubt has my finger closer to the pulse on these issues than the guy that wants to take your grandmother’s limited financial resources in exchange for term life, I would add something apropos.

    • Gord, try this out….

      n the last 20 years, the income of 80 per cent of Americans has stagnated while that of the richest one per cent has nearly doubled. Similarly, the Conference Board of Canada reported this week that a third of the wealth created in this country in the past 22 years has gone to the top one per cent of the population. The story for most other Canadians was income stagnation or slight growth.

      That top one per cent of Canadians – who number about 246,000 – made their phenomenal gains mainly in the years 1998 to 2007, years when Canada experienced its fastest economic growth since the 1950s and ’60s. Fifty years ago, however, the richest one per cent of Canadians took a much smaller portion of the country’s income growth: eight per cent.

      Read more: http://www.montrealgazette.com/business/Canada+growing+income+dangerous+trend/5410812/story.html#ixzz1ZfwLUIZH

  10. allegra fortissima says:

    Debt Deflation on the Rise

    “Without consumption, markets are going to shrink. Companies won’t invest, stores will close, ‘for rent’ signs will spread on the main streets and local revenues will fall. Companies will lay off their employees, and the economy will shrink more. Why aren’t economists talking about these effects of debt deflation, which are becoming the distinguishing phenomenon of our times? They advocate giving more money to the banks, hoping that somehow everything will be okay, as if the banks would lend out the money to fund new production and employment. Mainstream economics and political leaders in both parties are failing to ask why the banks are using these giveaways to speculate abroad, pay their managers bonuses and high salaries or to pay dividends rather than to lend to small businesses or to do other things to actually get the economy moving again. This phenomenon cannot be explained without seeing that debt service is siphoning off revenue into the financial sector, which is not recycling it back into the production- and consumption economy.” (Michael Hudson on Bonnie Faulkner’s Guns & Butter)

  11. Andrew says:

    Yes, we must all live beyond our means to save the economy…

Leave a Reply

Your email address will not be published. Required fields are marked *


*