Tuesday, November 18, 2008
Predicting recessions
This is a funny video posted today by Jason Kirby of Macleans.
It shows a variety of panel interviews over the last couple of years with some wall street loud mouths, really exposing how completely vacuous is the advice most of them give. Of the talking heads, only Peter Schiff had any real understanding that the American economy was in serious crisis. It's worth a watch.
When Schiff speaks of paper wealth versus real wealth and productive capacity, it reminds me a lot of Jim Stanford's argument in his very interesting book Paper Boom.
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I love the line, "I'll bet Peter a penny he's wrong".
Now that's confidence.
"Start Producing and start saving again."
Our national savings rate is zero in Canada and in the United States they actually spend 6% more than they earn. The problem with these rate cuts and bailouts to loosen credit is that the government is just making the problem worse. Now if only we can get some more people listening to what Ron Paul has been saying......
Notice Peter Schiff said governments should cut back. Hear that Doer and Harper ?
I'm not sure Schiff's cutback advice would necessarily apply to Canada.
He's talking from a US standpoint, where the national debt now exceeds $10.6 trillion. That's about $37,000 per capita and about 37% of GDP. And, because the US budget isn't balanced, about $410 billion will be added to that debt in each of 2008 and 2009.
We seem to be a little more prudent here. Our provincial and federal budgets are balanced with the debt shrinking as a percentage of GDP each year. In Manitoba, our net debt to GDP ratio has fallen consistently to about 21% now. Among provinces, only Alberta, BC and Saskatchewan is lower.
Besides, cutting right now would only make our economic slowdown more severe. Many consumers and businesses are seeing their incomes/revenues shrink. Let's not beat them while they're down.
Canada needs to spend wisely. Not spending cuts and certainly not more tax cuts (backing off on a few tax cuts would be a good idea in fact). We need to invest in ourselves. There are plenty of infrastructure projects that are sorely needed that would employ a lot of people, lubricate the economy, and fix a lot of problems. Repair highways, bridges, invest in public transit and improve the railway system, for starters. Invest in green energy and eco-refits for another.
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