Very much enjoyed the info you have posted.

There are various explanations in academic works why the Japanese ‘liquidity trap’ was not cured by Keynesian inspired deficit spending. I find the most credible and in fact the definitive explanation to be that quantitative easing (the printing of M0 money) was not undertaken at the same time.

You are right that failing enterprises must be allowed to fail and factors of production allowed at the earliest possible opportunity to reallocate to more productive activities. However, when such failures happen in a massive and simultaneous way, it incurs systemic risk. This crazy orgy of spending may just keep individuals and enterprises confident enough that things will not get too much worse that they will actually not get too much worse. If so, it will be well worth the price when faced with the deflationary alternative.

The Japanese lost decade is still under some debate. Yes rates were lowered but they didnt print money at the rate they needed to. As well, regulatory polcy kept the banks from realizing losses….this is the MOST important thing, getting the losses realized prudently and quickly. Once they are off the books the FI’s can proceed in a normal fashion. The Japanese banks hung on hoping to work heir way out, this prolonged the problem.

The losses realized should be as large as the institutions can take in these situations to clear the decks.

Fiscal policy is more about short term demand issues. Problem is that some of our drivers, oil, food, lumber, autos etc are exported, so we can’t make up for losses in foreign demand. There is only so much we can do, specific industry support liek the auto stuff, maybe support for home renos, which is coming, but if your customers are poor then there is little you can do.

I am not convinced that much of what will be proposed today will make much macro difference, but if it is done responsibly then it maybe we can get some things done that needed doing in the long run.

So dont get me wrong, we were in serious serious trouble in Oct Nov. I think we might have been within days, of some nasty stuff. we have pulled back from the brink and the moentary expansion is well justified to prevent significant deflation. Th US needs to do re-ordering, but they will be raising taxes. Canada was and is in a different situation, we dont realize how much better off we are, so I question why we need to drop the Deficit Bomb as big as we are about to.

If the GST cust were stimulus then I dont what is. Canada needs to ensure it doesnt blow its position. As I said, the next stage, the clean up on recovery, is the key one. Do that right and we are off to the races

Lowering taxes while increasing spending is idiotic. Harper is lowering taxes to satisfy his conservative leaning and base but increasing spending to satisfy everyone else. That’s a recipe for disaster.

Requiring matching funds from provinces and cities is also a terrible idea. The same taxpayer pays all three levels of government so that is just passing down more deficit. That means the the 7 billion dollar infrastructure deficit spending is really 21 billion dollar deficit spending as we know that the provinces and cities will go into deficit to match the funds.

The only justifiable deficit spending is in necessary expenditures and in spending that improves our competitiveness. Infrastructure is necessary because it’s falling apart. This won’t prevent the recession or be a cure all but it will lessen the pain. Montreal has experienced a ridiculous number of water main breaks and bridges are crumbling so dangerously that traffic has had to be restricted. I am sure that other areas of the country also have infrastructure in pitiful shape. It’s outrageous that our infrastructure has been allowed to deteriorate to this extent.

Globalization has resulted in the loss of well-paying blue collar jobs on which much of the middle-class was dependent. If we accept that these jobs are gone permanently we must figure out how to replace them. We can’t all be professionals and low-paying service jobs cannot fill the void. Saying “oh well those people will just have be poor now” is a recipe for social unrest.

So yes, deficit spending is reasonable if it is done right. Increasing the deficit to lower taxes is not reasonable.

I know many people want to use this to say that capitalism is dead….well we have seen things like this before, unfortunately, but we survive them.

And to say that the tourant de la riguer was because others didnt follow the Keynsian orthodoxy is ridiculous. It isnt others fault. Just as the current situation in the US isnt anyone elses fault other than the US’s. Lets try and boil past all the fancy names and cut to the heart of the problem, bad loans that cant be paid back on a large large scale. Those assets are the cre, they were amped up through some dodgy securities and abandonement of basic banking rules, know your customer being the main one.

Investing turned into raw bets, risk ignored and too many people not really knowing what risks were there.

For all the slams against “capitalism” I would ask what alternative is being proposed, or are we just saying that better oversight is required. Regualtion and oversight are not an ananthema to free markets. Free markets dont operate well where there is no trust, no resort to impartial courts or contract law. So those things that facilitate have any free marketeers proper support.

Off balance sheet items, imporper risk assessment, government guarantees on debts these are things that twist the markets.

What started out as a reasonable idea, helping people access credit so they could buy a house turned into a worldwide orgy of debt, because nobody thought they could lose, so nobody did the hard work required.

Getting us out of the “mess”. The big things have been done, the anking system isn’t verging on collapse, but we haven stabalized fully yet. Everything else is cuased by the financial system going wonky and revealing the true state of risk of problems. People are doing a massive “All Change”.

I remain skeptical about Canada’s need to “stimulate” to the extent it is about to. However, as long as it can be removed quickly or time’s out then at least it is being done in the least damaging manner.

I think GM not taking the loans is a great example of how things might not be as bad as some portrayed, although I supported the offer. Once again the lack of normal bankruptcy financing was the reason for the government to step forward, a legitimate role for government I think.

The criticism is overwrought, the worst of the storm has passed, it isnt over and could restrengthen. I worry more that the UK is about to slide into major problems and or that China is worse off than the dictatorship is letting on, we will know in April when Q1 results are posted. Canadian Bank results come out in late Feb early march. That information will tell us a lot.

The cranes in downtown Toronto are still operating, this is nowhere near as bad as 1990/91.

So pack away your Gailbraith, interst rate cuts and money supply increases have done their job of preventing the meltdown and they are about to cause a refloat. Managing that is the REAL CHALLENGE.

Approx. $30 million a year.by cutting politicians subsidy alone is a good starting point. This will stock the food banks with plenty for our less fortunate fellow Canadians.and the lines will only get longer during this trouble economic time.
As the old saying goes, look after the pennies and the dollar will look after itself.

In the US, there were no effective standards, you could get a loan by breathing. The standards for downpayments were non existent, lots of no money down.

Do those conditions apply in BC, or are there just lots of people who put money in thinking Real Estate would never go down, but they have jobs, and downpayments?

Both situations are sad, but one ends up threatening the health of the lending system, the other results in financial hardship for those forced to sell.

Is there mtg fraud going on in BC?

I believe somewhere in the order of 5 million new immigrants to the USA yearly not to mention the world’s most sophisticated economy bar none!

There are housing bloggers here in BC who have bothered to put a tremendous amount of information together. If you search for them do by-pass 99% of the Real Estate Industry blogs ( I know of 1 notable exception in North Vancouver) where you will only get the “buy now or forever..” spin or the “it is different here..” spin. That’s ok because I know it is their personal incomes that depend on this spin so they must spin, spin, spin.

But guess what? There are bloggers in the USA who have documented these exact same spin sentences spoken by the US Real Estate Industry. Spoke for the same reasons and spoken all the way down to where they are now in the USA and the UK and, and and. The spins are in quotes for all to see and they are identical to what we see and hear in BC. Isn’t the internet wonderful.

I read and watch the official stats and spin pumped out by the Real Estate Industry (and their “experts” which includes politicians and banks) but I rely on the bloggers for the actual truth. It takes a lot more work to get at the truthful information as opposed to reading the main stream media “stuff”. The bloggers have simply been more truthful, more accurate and most of all have demonstrated more critical analysis.

Starting with the US bloggers, where the worldwide housing bubble began and is now ending and then reading the local bloggers I have seen for myself that the housing bubble here in BC is almost identical to the one in the US, the UK and Spain to name but the most flamboyant cases. The only differences are the timelines.

Look at the blogger’s charts and calculations. In particular look at the charts based on the US Case-Shiller Index and a Seattle and a Vancouver bloggers’ efforts combined. Some local blogger put the Vancouver numbers on to the US Case-Shiller chart and well…. see for yourself.

The numbers look the same as the USA and possibly worse! In fact the chart I am looking at right now shows Vancouver housing prices falling faster than anywhere in the USA to date! The housing price percentage decline is smaller than in the USA but we are also 12 months or more behind the USA timeline. Other than that Vancouver looks like Miami or Las Vegas or San Diego. See for yourself.

You have to dig for this information because your elected officials and and the Real Estate Industry and their supporting “experts” do not want the population to see it. It is deemed better to “manage” this crisis a little bit at a time by putting a positive spin on all the bad news (reality).

I can certainly understand why the Grand Poobas think this way.

On the other hand it is these same Grand Poobas that got us where we are.

Give or take a few Grand Poobas here or there.

I stand by what I said earlier –>> Hello Mr. Coyne… From the BRITISH COLUMBIA perspective you are 100% WRONG with your comment ” We did not undergo anything like the same housing boom that the Americans did… “.

I dont deny there is a bubble in BC and that prices will fall, but California and Nevada are seeing 40% drops. Not unlike what Ontario saw in 1989/90…we HAVE seen this before and we live through it.

I suspect BC’s boom is being fuelled by specualtion but also a lot of legit demand. The interior, the Okanogan, was being fuelled by money from Alberta’s oil boom. While both generate froth and sepculation there are differences in the kind of bubbles they generate and more importantly differences in the effects that happen when they burst.

Ontario’s boom in 89/90 was full of leveraged specualtion. I am not sure that BC’s is as much. It will still be painful, 20%, maybe 25%, but not 40 to 50% that they are seeing in the US.

Banks up here also learned to try to work through those, they learned that the liquidations they were doing in the 80′s didnt help matters. Us, liquidation of whole streets.

There is an interesting debae about mtg cramdowns. It may be better to force the value of the mtg down to its new level, and force the bank to realize a partial loss, than for the bank to carry larger hidden unknown losses for longer, while they hold onto the asset of the house. We will see what happens.

It is ugly, and has been caused by forgetting basic rules of lending, in aprticular know your customer. Teh Americans remain very good at industrializing things…..in thi scase they industrialized mortgage origination. Liek any process that tries to gain scale, without proper controls you lose control of quality ad on a large basis.

The problem originated in the US, and has spread to Europe and now Asia as demand falls. It is hitting Canada because ou customers arent buyong what they used to. That will change, likely, and things will improve.

If we are goign o spend the money then lets hope it is on longer term stuff rather than short term things.

Oh, one thing people forget about the New Deal. FDR broke strikes and unions to ensure wrk took place and government workers were paid below scale to ensure that they would go back to private work when the jobs reappeared. Layton and Jom Stanford seem to forget that in all the Bromance Novellas they write how to end a small recession.

One final point, I was in downtown TO yesterday, and the cranes are still operating. Unliek 1990 when they stopped completely. The moneument to that recession was at Bay and Adelaide, a building that went unfinshed for 15 years. Doesnt seem to be happening this time.

As I said at the time of the “crisis that none foresaw” an election at 300,000,000 was a reasonable insurance premium on ensuring consensus for an increase in spending of 30,000,000,000. Of course that is now more like 64 billion when you factor in 2 years.

The problem was and still is the US financial system combined with the overextended nature of the US consumer.

The US consumer is apparently repairing their balance sheet quickly. But the job losses are mounting. The imperative was and will remain ensuring there are no catastrophic events that would not normally have taken place, or are not fixable due to unique circumstances.

I mean things like lack of Debtor in Posession financing that is/was preventing the normal bankruptcy procedures from taking place.

My hope for the budget are that any “stimulus” is cancellable quickly. The politics of this makes it difficult to avoid in a minority situation. The one difference between the cons and others is that at least the conservatives leave room for tax increases later, if necesary. If you want an example of what a continual tax and spend government looks like, the UK under Labour is model. They have nothing left and there is a good chance that they will be in bankruptcy and default before the decade is out.

The only people who can’t see or refuse to see through the B.S. are the usual sheeple who can always be counted upon by the opposition to bleet out their talking points.

Paradigm shift, a concept introduced in the philosophy of science by the physicist Thomas Kuhn takes place when the existing theory in a field of science repeatedly fails to adequately explain certain outcomes. The buildup of such anomalous results over time often lead scientists to the construction of a newer and stronger theory that can also predict and explain those occurrences that were earlier viewed as anomalies.

For sure citing certain elements of scientific approach that Thomas Khun’s and his followers advocate with the opportunistic tactics that Harper and his team follow all in one paragraph – notwithstanding the sarcasm intended by the author- would still give Harper a huge undeserved credit.

I just found a great article today which describes how ordinary savers and investors are pooched. Google up the whole thing if you want more details. The essence of the racket is that ordinary people are unable to invest their money in productive companies and receive dividends, because the companies can more easily raise money by borrowing fiat currency printed out of thin air by the central bank.

“…the effect of [central banking] is to shunt profits away from investors in productive enterprises to the payment by productive enterprises of interest to financial institutions which … themselves require little capital because of the nation’s banking laws and [the central bank's] unlimited cheap credit. This system is a bankers’ dream come true because it maximizes the borrowing of money [by minimizing the need for companies to raise money from shareholders]. Unfortunately, the moral hazards of (i) such a near complete supplanting of capital and, (ii) (thanks to the [central bank's] legal monopoly) interest rates untested by competitive market pressures and hence dissociated from reality, virtually guarantee an ultimate crash. It is hard to imagine a system with a greater built-in predilection for boom and bust.

“… So long as the [central bank] is running the show, your money will have no place to participate in and profit from the economic growth of this country. Your place will be to spend your money to make profits for others, particularly banks.”

That’s why ordinary investors and good companies get wrecked. For a government to step in and claim to be fixing the wreckage by pumping more money into the system from the central bank via the banking cartel is only to prolong and exacerbate the tendency to moral hazard and malinvestment.

Toronto Star columnist Chantal Hebert once said that if the NEP had been inflicted on Quebec it would have been an independent country a long time ago. It blows my mind that Dion tried to have a second go with his Green Shift aka NEP version 2. If people like Andrew don’t put a lid on it and if the Liberals don’t smarten up you’ll see a second separatist movement in this country. For my part, I will not forget the NEP and there is not a chance I will ever vote Liberal.

What a colossal waste of our children’s money. What a colossal failure of policy. What a colossal mess. I’m so mad, yet what am I to do? Vote Liberal? No political representative has opposed this, thus NO ONE in the wider public even understands the implications of this; no one has even bothered to consider that this is all a load of BS, that this won’t do a damn thing to stimulate the economy.

The non-partisan Congressional Budget Office just called Obama’s plan a waste of money that will be ineffective in helping the economy (yesterday) and they are about to do 10%+ GDP. We are doing 2.5% and this will magically rescue our economy? How are we letting them get away with this? Who are these “economists” that are proposing this? Who still believes in Keynesian economics?

The alternative is far better than you think, and in any case is inevitable.

The roots of this crisis are in governments’ use of central banks to create vast amounts of fiat currency and then hose it around their jurisdictions creating a false “boom” in whatever sectors benefit most directly from the new money. Money is easy to acquire during a boom, for the favored sectors, and the businesspeople receiving the money lose touch with financial reality and massively overinvest in whatever it is they do. For a few years up until 2000, hi tech was the favored sector and you got hundreds of startups which were doing nothing particularly original or profitable. When that blew up in their faces governments redirected the firehose of cash towards real estate and I think you know what happened there. Banks, many of them the largest in the world, were the willing accomplices to this monetary fiasco, and no wonder. Their executives pocketed literally billions in salaries and bonuses from handling the “boom” money, and when their bad investments inevitably blew up, they started whining and pleading to governments that the alternative to letting them pay the price for their greed and corruption is “far worse”.

But bad investments are bad investments, and the solution to a problem in which people or companies have borrowed far more money than they can ever pay back is not to lend them more money. Don’t listen to anyone who tells you otherwise, even if they have $2000 dollar suits, PHDs in economics and they work for the IMF.

All bad investments will be liquidated eventually. Governments can delay the liquidation but they can’t prevent it. The longer it takes for bad investments to be liquidated, and the more money which governments print and borrow in order to delay the liquidation, the more painful and severe it will be when it happens. But it is going to happen. Until it happens you will see economic conditions become worse and worse as the people, money and resources which should be re-allocated to sensible, profitable activities will instead be locked into unprofitable activities. Entrepreneurs and investors will refuse to commit to truly profitable and worthwhile projects because the moment they enjoy any success, governments will swoop down on them like vultures to confiscate their profits and use them to bailout the idiot sad sack bankers and politically connected corporations (or should I say sad sachs).

Bad businesses must fail and be liquidated, even the gigantic sacred cows – especially the sacred cows. People must leave their jobs doing unprofitable things for too much money and find reasonable jobs in profitable businesses. Imprudent people who gambled away their money in bad investments mustn’t be bailed out by confiscating the money of prudent people. If governments absolutely refuse to let this happen then it will eventually be forced on them through revolution or war. Better to let the laws of economics slap you in the face now, than procrastinate for years and let them fall on you like a ton of bricks.

Coyne and other right wing money pundits are in such an extreme minority these days because they fail to see reality for what it is. Doing nothing would a) bring down most banks, b) bring down a lot of major companies and c) create a further wave of failures unnecessarily who simply get caught in the tsunami.

So, despite the problem of deficits and stimulus spending, the alternative is unthinkable. And that is what this is all about.

I’m not so sure there are broad agreements (according to the IMF guy) on WHAT governments should spend on – he seemed to think it would be different in every country given their own circumstances. Hungary has far different problems than the UK or Canada for instance. We’re sort of ok at the moment.

In Canada, we should probably have some infrastructure construction – but not so much as to over extend the construction workforce – and simply support the poor and newly unemployed so their spending power is strengthened and they do not default on their loans. Support learning, support pension funds and keep Canadians afloat who have been caught in the crossfire and get shot up as innocent bystanders.

So, Mr. Coyne, do not get your shirt in a knot over this. It has indeed been done many times before and it merely kept us from the abyss. We need to face reality and TAX the more well-off (a horrid idea I know) to balance the sheets. As in America, giving tax breaks to the rich and then spending even more, the strategy doesn’t do any good, does it. If governments need to spend more, tax more to even it up. We are all so scared of taxing the well-off because they threaten to take their money elsewhere. Elsewhere just got a lot further away.

Yes, there are a lot of things that need fixing as Coyne points out so let’s do that.

a) ….. Greed was the problem for the crash but greed is good as it is productive in the financial industry as drives profit margins….?????

b) ….. There is no such animal as Ethics in the financial industry because regulation will not work and there will be another crisis after this one but they do know what it will be so how can stop it …..

I sat still knowing bankers are just like real estate agents …… hands in your pockets rang in my ears ….. and financial advisers are like Alcoholics …… it’s always going to be different next time but after that first drink …. they want more and more ….. and these people will more profit and more profit and will want to make up for lost revenue all at the cost of the unsuspecting investor…….

It’s only “stimulus” if you consider PCP to be stimulating.

The role of pork-distributor is the same as that of a drug pusher. No, no, don’t thank them for their trouble! They are being amply rewarded.

PMSH’s attempt to be everyone’s crack daddy is going to fail badly. I mean, it will fail to help ordinary people – it will be a roaring success at improving the positions of those who are situated closest to the spigot of cash. When that failure becomes obvious in a year or two he’s going to be branded by his political opponents as being insufficiently interventionist. He’ll be called a cold-hearted capitalist SOB for failing to implement Marxist-inspired boondoggles with sufficient alacrity and zeal.

Then, the people will elect a bona-fide class warrior. Probably it’ll be Just-Watch-Me Jr., who is now drooling with envy at the revolutionary potential in the hands of the new POTUS BHO. But in practice, no matter who actually wears the purple, I expect it’ll be a kind of triumvirate of Little Castro the communist visionary, Boob Rae the silver spoon socialist and presumed Power Corp favorite, and the egghead from the ‘States with national socialist tendencies.

Blame everything that happens on the will of the people. They want their cake, and in the end they’ll be surprised at how much of it they will be forced to eat.

Caroline Grosso
Sudbury, ON

Off to Saint Mary’s University this evening for this ….. interesting?

PANEL DISCUSSION

ETHICS IN THE FINANCIAL MARKETS?

Transparency, Leadership, Accountability

Who are the key players, what questions should we be asking them, what are their roles, and are they fulfilling them?

Unemployment leaps closer to 2 million• Jobless rate expected to hit 3 million by 2010

And they like the Yanks have spent billions (pounds) to try and stop this world wide change in the work force….. once again “World Wide Change in the Work Force” get in Andrew? the middle class is about to put back into it’s old grove …… no more middle class wealth,