Plus Ca Change ...

"These United States are confronted with an economic affliction of great proportions. We suffer from the longest and one of the worst sustained inflations in our national history. It distorts our economic decisions, penalizes thrift, and crushes the struggling young and the fixed-income elderly alike. It threatens to shatter the lives of millions of our people. Idle industries have cast workers into unemployment, human misery, and personal indignity. Those who do work are denied a fair return for their labor by a tax system which penalizes successful achievement and keeps us from maintaining full productivity. But, great as our tax burden is, it has not kept pace with public spending. For decades, we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present. To continue this long trend is to guarantee tremendous social, cultural, political, and economic upheavals. You and I as individuals can, by borrowing, live beyond our means but for only a limited period of time. Why, then, should we think that collectively as a nation we are not bound by that same limitation."(*)

Whatever you say, old man.

You call it "tremendous social, cultural, political, and economic upheavals". I call it "change we can believe in".

The Crisis of Credit Visualized

The following is a simple and clear explanation of the credit crisis in the shape of a visual guide. Jonathan Jarvis walks you through every step of the problem, from sub-prime mortgages to the economic recession end state.

Says Kalim Kassam:

This attractive video, a thesis project of art student Jonathan Jarvis, provides an impressively clear explanation of the credit crisis, tracing it's origins in low interest rates through interwoven homeowners, mortgage markets, investors, and complex financial instruments.

Though the story it tells is quite accurate, the video doesn't attempt to put forward a full causal explanation linking together all the elements; if you're looking for a hint about the wherefores, keep your eye on the market-distorting effects of easy money and loose credit during the boom period.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Stephen Harper On Wolf Blitzer's 'The Situation Room'

A very good performance, I think. I was most impressed by his tactfully implicit threat to Obama about the 'Buy American' clause of their porkulus package - a clause that is gone but definitely not forgotten. Also, Harper hit the point about the potential costs of protectionism for the global economy quite well when he said that there is no surer way to turn a recession into a depression than to pursue protectionism given our current state of financial affairs.

All in all, he earned an 'A-' grade. The minus is in there because I'm still a little sore with him over the budget. Only time will heal that wound.



Exit Question: Is it absolutely crucial that he begins every goddamn sentence with "Well, look..."?

H/t Lance

Inflation As Theft: Wisdom From A Disgraced Former Man Of Reason

Infinite Unknown:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

--Alan Greenspan

You can call it "quantitative easing" or you can call it "inflation" but, regardless of its name, it is nothing more than theft.

We're headed for hyperinflation over the next four or five years. This is especially true for the United States although we will hardly be exempt from the repercussions of their government's terrible mismanagement of money in Canada.

Keep that in mind when you're making decisions regarding your stock portfolio and are considering chasing the American dollar. As Peter Schiff says, the United States is the Titanic, financially speaking. All you can do is point survivors to the life boats.


UPDATE: Miserable little traitor

There Is Only One Sure Way To Weather The Storm of This Recession: Shrink The Size of Government

So some conservatives are still demanding that dissenters on the question of Harper's budget draw them a road map to a healthier economic policy?

Been there. Done that.

But if they need a little more help, I'll make this as simple as possible.

Despite a relatively strong showing overall in international rankings of economic freedom, Canada is still unacceptably weak in the areas of government size and freedom to trade internationally. We need to decrease the personal and corporate tax burdens and eliminate all barriers to trade immediately, shrinking the size of government in the process. I can't make it any clearer than that.

In the words of Thucydides, author of the blog Uncommon Sense, writing in the comments section of a previous post of mine, "The ultimate goal should be to make Canada a North American tax haven and attract American investors and skilled workers who will be looking for a safe haven from the high tax, high regulatory and eventually high inflation of 'progressive' America."

The following are some clear ideas put simply, courtesy of the Center for Freedom and Prosperity.

Please take notes, Mr. Prime Minister.

Four Lessons For Growth:

(1) Protect sound money, rule of law, and property rights

(2) Don't make multiple mistakes

(3) There is no single policy for prosperity

(4) Small government is good for the economy

For more information on Canada's relative standing in the world on the issue of economic freedom, please download Chapter 3 of the Fraser Institute's Economic Freedom of the World report at the following link and skip to page 25.

When Quebec Is Worried That The Stimulus Is Too Left-Wing ...

A group of Canadian economists have come together to sound the alarm regarding the devastating long-term consequences of recently proposed "stimulus" efforts to jump-start the economy. The website can be found at the following link.

Unsurprisingly, the economists are based out of Alberta, a conservative strong-hold in Canada and ...

Pardon?

They're not out of Alberta?

These economists are out of ... Quebec?!

We economists would like to alert our fellow citizens to the inefficiency involved in increasing public expenditures in order to counter the on-going recession. Under the excuse of a false consensus and the pressure of political considerations, governments ignore the long-term consequences of their interventions.

The massive programs of expenditure and regulation that the federal and Québec government are pushing are essentially meant to satisfy the demands of organized interests.

In the light of economic theory and history, we think that those measures, far from rebooting the economy, will mortgage the taxpayers’ incomes, make producers even more dependent of the state, provide stimulus for protectionism, and set the scene for even worse turmoil in the future.

If their real goal were to promote economic growth, our governments would instead choose to shrink the impediments to investment, work and production, especially by reducing the fiscal and regulatory burden of individuals and businesses.

Well, I'll be damned. As it turns out, many Quebec economists have more common sense than our allegedly conservative Prime Minister. Go figure.

H/t Back Off Government

"With All Due Respect, Mr. President, That Is Not True"

Earlier this month, United States President Barack Obama began peddling his transparently Keynesian 'stimulus package' to the American people. Stimulus economics, he seemed to contend, has achieved universal endorsement among experts and so it would be grossly irresponsible to fail to allow the capable hands of the government to redirect funds from private pockets to public coffers.

Barack Obama on 9 January 2009:

There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.

Unfortunately for the president, several hundred economists beg to differ.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

Damn right.

Full page advertisement courtesy of the Cato Institute.

Harper's 'Stimulus' Budget Will Not Stimulate The Canadian Economy

There is nothing even remotely pragmatic about a 'stimulus package' that will fail to stimulate the economy.

So, ask yourselves: which camp in the Canadian conservative movement is truly practical?

The Western Standard:

Whether or not we can agree that the disaster that is the 2009 Canadian budget is necessary politically is up for discussion. More to the point is whether or not the budget will be anywhere near successful in achieving its stated goal of cushioning Canadians in the face of recession and coaxing the economy into recovery.

Tasha Kheirridin, with whom I've disagreed often over the past few years, has a great article over at the National Post's Full Comment.

One line in particular, which appears at the top of the article, is important to understanding what a disaster this budget will be for Canada:

The government cannot put money into the economy without taking it out of the economy first. Thus activity does not increase overall - it is simply redirected.

I can never get over the fact that people don't seem to get this. The government does not create wealth. It can take wealth from Canadians and direct it towards goals that Canadians wouldn't have pursued otherwise (though doesn't that seem odd?) or it can borrow against the taxes of future Canadians (thanks, kids!) to do the same thing.

Essentially, what any "bailout"-themed budget or bill is going to do is take money from the parts of the Canadian economy that have been productive and will continue to grow, or at least recover quickly, in the face of this recession and move that money to parts of the Canadian economy that have been failing or will not recover quickly. Further, intelligent, persuasive, and productive people will become lobbyists as the pot of government handouts becomes larger and work at redirecting wealth and economic activity rather than creating it -- deepening the effects of this redistribution.

How will increasing the proportion of the economy that isn't self-sustaining help us recover from a recession quickly? You've got me. But at least some conservatives and libertarian Conservatives are shaken enough by the budget to start bringing these questions to Canadians' attention.

This article points to one of the most basic flaws in the Keynesian economic scheme. Wealth is produced by private citizens and not by the government. Accordingly, when the state confiscates money from these producers and distributes it to failing industries that couldn't have survived independently of government hand-outs, we are, in fact, doing a great deal of infrastructural damage to the economy in the long-term.

Practical? Try self-destructive and immoral.


ALSO:

Conservative Party Policy: 20 Minutes Fresh -- Always



I can't claim to like Rick Mercer but this video certainly rings true post-budget 2009.

Memo From The Prime Minister's Office: No Principles Allowed!

In a recent interview, Kenneth Whyte of Maclean's Magazine sits Stephen Harper down to ask some questions related to the coalition crisis, the recent auto industry bailout, and even freedom of expression in Canada. Unsurprisingly, answer after answer from the Prime Minister touted the importance of the "pragmatic" approach.

Whyte asks:

We have Stephen Harper now embracing targeted bailouts and large deficits. Is conservativism dead at the federal level in Canada?

A chilling question, and one most Canadian conservatives haven't thought to ask since the right was united. But Harper's slow march to the center and the expansion of value-compromise within the Tory ranks makes it a perfectly pertinent issue.

Harper's response:

No, we’re just dealing with the times and the realities we have.

[...]

We have to be pragmatic. We have to handle each problem according to the reality we’re in.

And how about you tell us about the government's inaction on section 13.1 of the Canadian Human Rights Act, a section that has been used by quasi-judicial bodies to restrict the freedom of expression of Canadian citizens?

The government has no plans to do [anything about 13.1] ... And it is a very tricky issue of public policy because obviously, as we’ve seen, some of these powers can be abused. But they do exist for valid reasons, which is obviously to prevent public airwaves from being used to disseminate hate against vulnerable members of our society. That’s a valid objective. It’s probably the case that we haven’t got the balance right, but I’m not sure the government today has any answer on what an appropriate balance would be.

Great. Thanks for nothing, Mr. Prime Minister.

Let Them Fail: Auto Industry Bailout Would Reward Irrational Business Behaviour

It has recently been calculated by the Center for Spatial Economics that the failure of the auto industry would immediately result in the loss of 323,000 jobs in Canada. This would be particularly disastrous for the already-devastated Ontario economy since approximately 87% percent of the job loss would occur in that highly industrial province. As a result, Ontario Economic Development Minister Michael Bryant has stated publicly that it would be irresponsible for the government to allow such a collapse to occur and so, joining a chorus of voices all across the North American continent, Bryant called for a bailout of the auto industry.

But is a bailout the truly responsible decision for the government to make? Would it serve the interests of the Canadian people and save the economy from the brunt of what promises to be a terrible recession in the long run? The answer is absolutely 'no'.

Canadians are being fed the tired bromide that the fluctuations of the free market are to blame for the current financial crisis and that governmental manipulations of the economy are how we are to best achieve the economic stability and security that we seek. This notion could not be further from the truth. The auto industry is failing because it has been chained by government restrictions for decades and, furthermore, because it has pursued and continues to pursue highly irrational business policies. Rather than being punished for their errors, which would occur naturally in a free market that would force them to adapt or else fail, state representatives are declaring that these businesses are simply 'too big to fail' and that more government involvement is the solution to a problem caused by too much freedom. These businesses cannot be allowed to fail, they say.

But, as Amit Ghate writes, the failure of businesses is not merely a normal occurrence in a capitalist economy, but a crucial phenomenon for the emergence of the highest quality ideas and products. Technological advancements have driven numerous industries completely out of business - Ghate offers typewriters as a relevant example - and these advancements, and the resulting industry failures, are healthy in a free economic system. So why are we hearing so much noise about the necessity of saving the auto industry?

The Big Three are failing because investors have no interest in risking their money on poorly run companies that are already forced to work within the confines of unacceptable governmental restrictions. These restrictions include labour laws that have required companies to submit to short-sighted and financially calamitous union demands as well as fuel economy laws requiring companies to produce small vehicles at extraordinary costs that have no chance of turning a significant profit. A popular mechanics article explains the real cost of these laws:

"It takes money to build more fuel-efficient cars and trucks—lots of it. Want a diesel engine? That’s a $3000-$5000 premium per vehicle. Tack on at least another $5000 for hybrid technology. Plus, new cars and trucks have to meet stringent safety standards, and that adds weight, which in turn lowers fuel economy. Try asking a consumer to forgo the leather interior and rear-seat DVD player in their minivan to save weight. I don’t think so. Not that consumers want pokey cars and trucks anyway: No, Americans like vehicles with good passing power and low-end torque. So automakers struggle to meet all these needs, and it’s still expensive."

Rather than campaign against these governmental intrusions, however, the auto industry has turned to their powerful lobby to attempt to coerce money from taxpayers who weren't willing to give it to them voluntarily. Rather than fighting against the real cause of their trouble, these companies have accepted even greater state involvement as the solution to their current state of crisis. Unsurprisingly, we've seen the entirely predictable consequence of this decision in the United States where the price of the auto industry bailout has been a commitment to produce more small cars that meet high fuel efficiency standards, thus guaranteeing the recurrence of the exact same problems the industry is currently facing. The auto industry is guilty of a complete evasion of the realities of their business. And we believe that this is behaviour worth rewarding?

The loss of Canadian jobs is a terrible thing. However, this wrong will not be righted by prescribing as the solution that which has been the main contributing factor to its current state of crisis. Consequently, the only rational course of action is clear: let them fail. When the government runs the auto industry, the auto industry fails. Let these companies go under and hopefully from their ashes will rise rational profit-seeking businessmen and women who will be able to produce stable long-term jobs for the people of Ontario. The bailout alternative is simply too self-destructive to accept as a viable option.

Making Sense Of The US Auto Industry TARP Bailout

H/t Kate

The More Right You Are, The Harder The Idiots Will Laugh At You

Peter Schiff understood the American economy. He predicted the burst of the real estate bubble almost two years before it happened. He extended his prediction to include credit when everybody was calling it a "minor blip" for the economy. And while he was warning America, America was laughing at him.



A little information on the man for those who don't know him:

Peter D. Schiff (born 1964) is the president of Euro Pacific Capital Inc., a brokerage firm based in Darien, Connecticut. Schiff adheres to the principles of the Austrian School of Economics and the Ludwig von Mises Institute. Schiff frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is quoted in major financial publications.

Schiff points to the low savings rates of the United States as its worst malady, citing the transformation from being the world's largest creditor nation in the '70s to the largest debtor nation at the turn of 2000. His extremely bearish views on the U.S. Dollar, the United States stock market, bond market, and the United States economy have earned him the nickname "Dr. Doom."

H/t Paul Hsieh

A Scary Liberal With A Hidden Agenda

Finally:

[In a recent speech] Harper reiterated Conservative criticisms that the Liberal plan would simply shift tax dollars out of Canadians' pockets back into federal government coffers, boosting the cost of just about everything.

"It will stop the economic progress of the Canadian middle class dead in its tracks and it will make the cost of living unbearable for fixed income seniors and low-income seniors."

Harper said the Liberal plan doesn't even set a target for emissions reductions.

"Why? Because Dion's carbon tax is not an environmental policy. It is just a wealth redistribution program disguised as an environmental policy."

These are the right buttons to be pushing for the election, as I opined in a recent post. Making noise to appease the Greens will produce zero benefits for the Tories in the next election while pressing the economic implications of the so-called "Green Shift" may even convince a few skeptical environmentalists that the path to protecting the environment has nothing to do with a sharp increase in governmental control over the economy.

Dion's carbon tax plan is simply another Liberal program bent on redistributing money from the middle and upper classes into the black hole that is the Canadian welfare state. If Harper keeps attacking the Green Shift from this angle he won't be leaving 24 Sussex when the dust settles after the next election.

McCain vs. Obama: Either Way, Capitalism Loses

"[O]ur individual salvation depends on our collective salvation. [Don't] take your diploma, walk off this stage, and chase only after the big house and the nice suits and all the other things that our money culture says you should buy."
-- Barack Obama, 2008

"I led . . . out of patriotism, not for profit."
-- John McCain, 2008

We've come an awfully long way since the 1980s, haven't we? Do you think back fondly of the days when the influence of Thatcherism was producing massive privatization in Britain while Reagan valiantly battled the steady encroachment of socialism in the United States? Even a casual Capitalist can't help but read about Britain's 2008 decision to nationalize the private bank Northern Rock and blink in bewilderment. What happened?

Well, for starters, even in the 1980s Capitalism was no more than an uncomfortable ally for conservatives. Although Reagan and Thatcher were for the most part genuinely committed to economic freedom, the vast majority of their supporters were very definitely not. In both Britain and America, the political right defended Capitalism with one hand as the only legitimate economic system for a free and democratic society while, with the other hand, condemning the profit motive as selfish. These conservatives demanded, as they continue to demand today, that we sacrifice our rational self-interest for the higher good of altruism. With friends like these, Capitalism didn't need any enemies.

And it doesn't seem to have any philosophical enemies left anyway. Have you noticed that the Democrats have abandoned all efforts towards a substantive criticism of free enterprise? Why would they bother engaging in a debate about ethics and economics when there are so few real Capitalists left to oppose them? Instead, pseudo-socialistic organizations like the Obama campaign interest themselves with the "social consequences" of Capitalism as they investigate the "fundamental human aspect" of their economic system, thus deftly side-stepping any awkward questions regarding the economic reality of their country. Even Hillary Clinton would have the good sense to blush at this obvious evasion of a real discussion of the issue.

The upcoming American election is as true an example of a Sophie's Choice as I've ever witnessed. Barack Obama turns up his nose at big business to the cheers of Democrats everywhere while repudiating Americans for playing into the "money culture" that has made them the wealthiest country in the world. John McCain sneers at Mitt Romney and big business for daring to pursue the profit motive while claiming that his own motives are pure since they aren't tarnished by self-interest.

And so the question of who will win in November becomes economically irrelevant. True, if Obama wins he will roll back the Bush tax cuts, install a universal health care scheme, and impose unsustainable environmental restrictions on big business the likes of which the US economy has never seen before. A victory for McCain, however, would amount to the same thing in the long run. The Republican nominee has been committed to the anthropogenic global warming movement for years now and his voting record should be enough to convince any businessperson of his lukewarm commitment to a free economy.

As a John McCain presidency would swiftly demonstrate, there is no surer way to undermine an idea than to argue for it poorly. As the leader of the so-called "Party of Capitalism," McCain would destroy Capitalism in America just as thoroughly as would his Democratic opponent.

It all adds up to a demoralizingly clear conclusion: McCain? Obama? Who cares? Either way, Capitalism loses.

Fraser Institute: Time For A Flat Tax In Canada

I just read a great Press Release from the Fraser Institute arguing for a flat tax in Canada. Very persuasive.

Sign me up.