Entries from November 2008 ↓
November 27th, 2008 — Canadian Politics, Halton Riding Events
Later today the Harper Cons will end the funding for political parties. This will decimate political opposition, yet create no jobs or do anything to help Canadians struggling with a sick economy. But it will make Harper more powerful, as it weakens those who disagree with him. In that, it’s a Third World move which strikes at the heart of democracy. It moves Canada inexorably closer to one party rule.
It’s also completely consistent with Harper’s view only right-wing ideology can be allowed to survive, and actions taken to defeat and silence other views are justified. Canadians should be outraged at this, and yet are unlikely to be so, obsessed as they are now with jobs, finances and families.
Shame on the prime minister for this. It diminishes the man immensely.
A year ago I wrote this about Harper’s mentor, Tom Flanagan. We are about to see salt in our field.
Mr. Flanagan has been Stephen Harper’s friend for 16 years, worked for the Reform Party, became Mr. Harper’s top strategist, and ran his campaign for the Canadian Alliance leadership, along with the 2004 and 2006 elections. He taught, then recruited Mr. Harper’s chief of staff, Ian Brodie. Tom Flanagan’s an academic at the University of Calgary. He says of himself, boldly, “I had the privilege of helping to reinvent the forces of conservativism.”
Indeed he did. Stephen Harper is somewhat his creation. I have just read his tell-all book, Harper’s Team. It’s an account of how the two of them came to create a neo-Conservative Party, dominated by the former Reform movement, of which they were both architects, and which is poised, Mr. Flanagan says, to deliver its final assault.
And this brings us, the professor says, to Canada’s Punic Wars.
In case you forgot, Rome and Carthage were bitter rivals, and fought three deadly battles. In the first, Rome took Sicily from Carthage. In the second, Rome took control of North Africa, reducing Carthage to a minor power. In the third, Rome burned Carthage, then plowed salt into the fields to prevent anything from ever growing again. It was total death.
And what of this for Canada?
“The 2004 election,” Mr. Flanagan writes, “was our First Punic War, in which bringing the Liberals down to a minority government constituted modest progress. We fought our Second Punic War in 2005-6, got control of the government, and reduced the Liberals to opposition status, burdened with inadequate funding and seeking a new leader. But what of the coming Third Punic War? Should our slogan be, Liberales delendi sunt (he Liberals must be destroyed), even if that were in our power? Objectiviely, it would probably be more in our interest to beat the Liberals down to about 20% of the vote, where they could duel for year (sic) with the NDP.”
This is of some interest to me for two reasons. First, Mr. Flanagan, like Mr. Harper, sees a world divided into two orbs – “ right and left. They are at war, and the right must win. It is destined to win, because it has a more moral cause. Thus, the leader of the right can justly call down his opponents as sympathetic of terrorists, scornful of police, disdainful of traditional marriage, soft on criminals, unsupportive of the military, and obsessed with fringe causes like literacy, womens rights, first nations, poverty, the regions and climate change.
Second, the war is about ideology, not public service. Mr. Flanagan may speak with eloquence about Rome and Carthage, while being silent on Toronto and Vancouver.
I always thought this was about Canadians – voters, taxpayers and citizens. They, I assumed, wanted us to be politicians to represent them and serve their needs. Give them common sense laws. Manage the economy. Make public policy reflect public opinion, which today seems to demand an endgame to war, serious action on the environment and help for family finances.
But, today, I’d say the die is cast. Stephen Harper, Tom Flanagan, and Doug Finley want war. The goal is to destroy the political opposition, to “reinvent the forces of conservativism” and, in so doing, plow salt.
November 26th, 2008 — Canadian Politics
Tomorrow in Parliament the finance minister will deliver an economic statement and begin a process of trying to save the nation from financial ruin. If he repeats the statement he gave during a television interview this week, he will say:
“Eight weeks is a long time. When you look at what’s happened in the global economy in the last week eight weeks, it’s staggering. And the election was called in September. No one in September – no one – had ever suggested the Canadian economy might go into recession, and that is now a definite possibility.”
This, of course, is a lie. The Canadian election was called early – just days before MPs were to go back and debate the economy – because the government and its bureaucrats knew the crap storm which was coming. During that election we wasted precious weeks when Canada could have been preparing. Instead, we were told (a) Canada is not the US, (b) our economy is solid, (c) our banks are perfect and (d) there will never be a deficit.
Last week at APEC our prime minister alluded to 1929 and said this is about as bad as it gets. The OECD (and every economist) says we’re in recession. The banks are issuing new shares in a falling market to raise money. Ottawa bailed out Bay Street with $75,000,000,000 in tax money. The deficit could be $14 billion within a year, says the Parliamentary Budget Officer.
Is the finance minister an idiot? Or does he think we are?
For the record, Mr. Flaherty, below are words published here at least eight weeks ago. You know, because you and your boss read them.
September 15 (nine weeks ago)…
The full implications of this can’t be clearly seen by anyone at the moment, but I’d say this is what Canadians can expect:
* The stock market will be hammered, eroding the value of every investor’s portfolio, RRSP and pension. This brings household wealth down, drops confidence and is nothing but negative news for real estate as liquidity is drained away in financial losses.
* Credit is going to be a lot harder to find. Banks on both sides of the border have already pulled their horns in a little, and that can only accelerate. Look for far tighter restrictions on loans and mortgages to new borrowers, to builders, for renovation and lines of credit.
* An inevitable result is a sharp acceleration in the decline of the Canadian market. Without a steady flow of new investors and buckets of borrowed money, there is no alternative, especially in real estate markets where prices are unsustainable…
Those Canadians who thought we could end up with a five-month adjustment, after the Americans have been through a three-year Armageddon, had better think again. This is just the beginning, pushed along by big events like those unfolding on Wall Street and in Washington this week.
Circle these days. You’ll want to recall when the lights started failing.
September 17 (nine weeks ago)…
We’re in the early days of a credit freeze which will affect almost everybody in North America, and most voters in all Canadian ridings now being contested. What’s happening on Wall Street, on Bay Street, on financial markets globally, will not stop there. Already the contagion has wiped billions off the worth of the American middle class, and the next phase could hobble that country itself. To think we’re immune is delusional.
North American stock markets have plunged. More than 20% of all the wealth represented by the Toronto market has been erased in the last 90 days. Three of the biggest investment banks in America have failed. The largest US mortgage companies were taken over by the government. The biggest insurance company is a basket case. At least a hundred more US banks could fail. Liquidity in the world’s largest capitalist country has evaporated. America’s triple-A credit rating is being called into question.
Here’s what this means to Canadians.
Soon – two or four or six months from now – getting a bank loan, mortgage or line of credit will be tougher. First-time homebuyers, people needed refinancings to pay debts, retirees, entrepreneurs and small business owners could be SOL. Banks will simply recoil from risk.
The residential real estate market could be choked off in the process. With mortgages tight, the economy slowing and unemployment rising, the ranks of buyers will be thinner. Desperate sellers will cut prices in a spiral which has already started. For the past nine months I’ve forecast a decline of between 15% and 40%, depending on the housing market. I may have been too optimistic.
Commodity prices, especially oil, could tumble as a serious and multi-year recession dramatically quenches America’s thirst for energy. This has already begun, as crude gyrates wildly, rising and falling more than $100 a barrel this year alone.
Oil might actually go right back to $50, making the oil sands marginal. Combined with a deep freeze on bank credit, well, so much for the Western miracle.
Overall, expect a sharp economic slowdown, the erasing of billions of dollars in real estate equity and retirement savings, and a new normal of falling consumer prices – and incomes – which could last several years.
Now, to the politics of the matter….
Putting Mr. Harper back in office will guarantee the picture I’ve painted will come to pass. In this election he hasn’t said his reckless spending will stop, that he’s got a jobs plan or understands the real estate market. His government has no money left, and even spent the contingency reserve. When the economy sputters later this year and into the Spring, revenues will fall and deficits result.
This is the greatest threat the Canadian middle class has faced in a generation. Just the housing woes alone will be painful. Look south for a preview.
October 1st (eight weeks ago)…
This much, we know. The US economy is in recession and the times will get worse for months and months to come. The mess, as feared, has slopped over onto everyone. Canada, Europe, China – all will be impacted. Commodity prices will keep going down for a while, along with real estate. Billions more will be lost. This is the start, not the end.
Banks will fail, but not here. Ours will just stop lending money to lots of people and businesses. Condo developments will go bust. Marginal companies won’t make it. Car sales will fade with car loans. Inflation will become deflation. And you can stop worrying about high gas prices.
Debts will become unrepayable for many people, so I hope you have few. Interest rates will be going down as central bankers try everything to stop bad from becoming worse. Albertans, and the oil sands, will not be so envied soon. Prices for just about everything will fall, as will the value of your home.
Regardless of whether or not the $700 billion financial bailout passes the Senate tonight or Congress on Thursday, global confidence has been dealt a major blow. With less confidence, there is less credit. And without free flowing credit, economic expansion stalls. This is what terrorized stock markets on Monday, and will continue to do so.
I suppose it is possible the United States could slump into a quasi-depression, taking us with it. But that’s unlikely. A protracted recession – a year or two of negative growth – is quite possible. Investment portfolios could lose a third to a half of their value. Home equity will fade by, perhaps by as much in certain markets. The value of your mortgage will not fall, even though your wages might. This is deflation – when cash grows in value because every other asset is declining.
Although Stephen Harper did not know the events of today would take place, he knew the danger of imminent financial chaos. So did I. And if you’ve read this blog, so did you. I have spelled out the reasons for real estate deflation, falling family net worth, a protracted US downturn and the considerable impacts on Canada. I told you how the Harper government policies of 0/40 mortgages and of cutting the GST instead of income taxes would make us more vulnerable. And I have detailed why massive higher government spending and a blowing of our surplus would make such a time as this more difficult.
Harper knew the danger, as did the finance department, the head of the Bank of Canada, the PMO strategists, and you and I. That’s why he alone triggered the election, not chancing to wait for Parliament during the very dangerous month of September, when he’d have to answer to the people daily.
November 24th, 2008 — Canadian Politics
News: Canada to lose 15,000 auto jobs in 2009
Those seeking jobless benefits in Oshawa jump 96%
Remember this chart.
It shows Canadian housing prices layered over a graph of US housing prices, advanced by two years. This simply confirms (thanks to the Globe and Mail) what I said here two years ago – that the Canadian middle class had better get ready for a rerun of what happened to our American neighbours. Now it’s coming true. And anyone who thinks we’re not in for the same slide obviously can’t read a graph. Or, economic indicators.
The tragedy is, this need not have happened. There was no cause for us to retrace the misery of others by repeating their mistakes. We watched the damage from subprime mortgages – giving money to people were not creditworthy – and then we did just the same thing. Zero down payments and 40-year amortizations helped turn a robust market into a bubble destined to burst. When you let people without money buy houses, it never turns out well.
Ottawa not only blew that, it cut the wrong taxes. Jim Flaherty is still blowing that his team brought in fiscal stimulus early, and other countries are now catching up. That is wrong. There is no fiscal stimulus in cutting sales taxes when people are reducing consumer spending. Meanwhile, by actually raising income taxes in their first budget, the Harper Conservatives caused serious damage to family incomes.
Now, of course, in a desperate bid to cover their mistakes, the same gang has bought $75,000,000,000 worth of high-ratio mortgages from the banks with public funds, and will soon spend billions more building things. The odds of that doing anything other than increaseing the deficit and the debt, is ziltch.
Don’t know about you, but I thought Conservatives would lower income taxes instead of lowering mortgage borrowing standards. I thought they’d learn from clear mistakes, not repeat them. I thought they’d be responsible with government spending, bot increase it to historic levels. I thought Conservatives would not so gleefully embrace deficits and erase the progress they made on debt reduction.
But then, these are not conservatives.
Remember this chart. And prepare.
Federal deficit could hit $28 billion think tank says
OTTAWA _ The federal government must use its sound fiscal position to ramp up spending next year even if it pushes the deficit sky-high, the Canadian Centre for Policy Alternatives says. The left-wing think tank is unveiling its annual “alternative federal budget” Tuesday with a series of outlooks that could see the deficit rise to $28 billion next year, double the worst-case scenario outlined by the independent Parliamentary budget officer last week.
The inflated figure is the estimate of what would happen if the Canadian economy fell into a deep recession next year, something some economists say is no longer the long shot it appeared even a few weeks ago. But even if that should happen, the group said the worst thing Finance Minister Jim Flaherty could do is be overly timid.
The centre recommends Ottawa launch a “bold stimulus package” of green infrastructure spending for such projects as urban transit, which it argues is more efficient than tax cuts in getting money in the hands of working people who will spend it. That prescription is in line with current government thinking and is being urged by many private-sector economists. The think tank also recommends improving employment insurance benefits, raising the ceiling for maximum benefits to $600 a week from $435.
Ottawa should also move to prevent defaults and foreclosures in the housing market by having Canada Mortgage and Housing Corp. offer refinancing for homeowners having difficulty making their payments.
Under the centre’s scenarios for the deficit next year, Ottawa could table a small $7 billion deficit if the economy barely manages to stay out of recession, or experience of $28 billion shortfall if a deep recession occurs.
