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Bob Green Innes,
curmudgeon

Hamiltonian by birth & occupation!  

.... seeking to restore values, traditions, institutions, laws and protections Canadians used to enjoy
      .....lost by apathy ..... but stolen nonetheless


curmudgeon




Blog - day 2. Detour

Were you looking for something related to my recent bid for trustee? Click here for post mortem, links, thoughts, even some updates. . There's no such thing as a finished topic or a last thought in politics.

Oct 28. Today I detour into economic matters

I had intended to delve into my computer shenanigans but my morning readings took over leading to a need to expand or explain further my polemic on the ongoing economic train wreck. I want to post some great info and my thoughts on how to interpret the various pundits cheerleading for various sides. My hope is to help folks avoid the worst of the nightmare that lies ahead.

One of the blogs I follow mentioned an article in the Globe and Mail by John Reynolds describing how the financial situation in the US is far worse than we are being told. True, but one has to be a little careful since Reynolds, for all his good research, is somewhat of a neo-con. Please have a look.

I wont argue that the situation is not grim, just that the numbers he mentions point you in one direction (cut entitlements) without giving you any idea that there are other choices you as a citizen should contemplate before you decide which you prefer.

Have you figured out what those choices are and what Reynolds did to make it appear as case-closed? One of the reasons I prefer blogs over newspapers is that one can understand the weakness of an argument much more quickly. Have a look at the comments. The Globe helps by putting good comments first - your wise shepherds. You can see that there are many nuances to be thought about before you make up your mind. Reynolds used the certainty of an accounting phrase "unfunded liabilities" to rope us in. We should realize from Enron how um, 'creative' accounting can be. Unfunded liabilities are future payments on present services such as welfare, health care, etc. There is nothing certain about future promises. The monstrous debt he mentions assumes that the liabilities cannot change with the implication that taxes must double. He did not differentiate between cutting other services such as the US military or cutting spending (without cutting services), and he did not go into other options such as devaluation, currency manipulation, default, etc. The consequences vary so we do have choices. Do not confuse spending and services - the difference is one crucial word - wages. Now that is a sacred cow, eh?

Recap:

So do you want to see your fixed spending power evaporate via inflation or would you prefer to maintain your spending power at the cost of everyone around you being thrown out of work as in the Depression? Cuts don't sound so bad eh? Boomers might be a tad worried about their pensions which rest on the economy and share prices and for CPP, on government viability per the above. Cutting wages sounds like the best bet but oooo, who is ready for a massive strike action, French style??? I hope that is a no-brainer.

There is more to this crisis than bloated gummerment budgets. That is just the easiest, most basic thing to fix. There are two other immediate problems: overhang of derivatives and a financial system that lost its moorings placed after the great Depression.

I'm no expert on derivatives but briefly, they are something like insurance policies, except instead of insuring your house, they insure financial products, transactions based on other financial conditions. Hedging, and products that guarantee your capital back are all derivatives. The sky is the limit, only imagination and writers I follow opine that the sums of derivatives written is orders of magnitude bigger than the entire world economy! Buffett called them financial weapons of mass destruction. Then he bought some! So much for honesty. The problem is that derivatives are like a house of cards - let one crucial card fall down and the whole thing collapses. Part of the problem too is these things were unregulated so nobody really knows how much there is - or how to manage it. Think of your house - you probably have title insurance (another hot topic I will blog about). This is supposed to proctect you against problems and theft of title. But how big is the company that guarantees you can sleep at night? What if some entity orchestrates a massive theft job on all of a company's customers? The company goes down, no one is protected. This is farfetched? What is your peace of mind worth? I'll leave it at that.

With regard to fixing the financial system, the economist mentioned, Laurence Kotlikoff, appears to be pushing (besides his new book!) an idea he calls Limited Purpose Banking. This sounds to me like a regurgitation of the old Glass Steagal Act passed in the 30s to separate lending retail banks that we use from investment banks such as the dreaded Goldman Sachs. Beware anyone contaminated by Goldman Sachs. They teach particualarly evil forms of anticipatory manipulation based on their deep understanding that our money is their plaything, not our utility. There is no sacred trust with the peole, who gave banks their priveledges. Well, if Kotlikoff can make a buck, that's ok, especially if he gains some traction in pushing back against the banks.

My own sense is to ask why not just bring back the law that FDR passed to corral the banks in the first place? The Glass Steagall act that was gutted by presidents of both persuasions. That's what I want to know. Why reinvent the wheel? I listened to FDR the other day - he was viciously anti-bankster, nothing like Obama, who bows to Arabs and banksters alike. Or was that Bush? Well, no matter, those two are the same - despite what many believe. So will idiot Republicans roar ahead in Nov 2? Or will idiot Democrats hold the line? A pox on both their houses. America will not be fixed until a new party emerges to change the rules, i hope, probably in vain. Rigid thinking will ruin America.

All this applies to Canada with the caveat mentioned above. Divide the numbers by 10. Replace FDR who chained the banks with Mackenzie-King who made banks subservient to his new invention, the Bank of Canada. Change Nixon, who abolished the gold standard, to Trudeau who gave the people's BOC to the G7 in return for a nice title - chair, Club of Rome. Maybe, I'll get into that another day. Thanks Pierre. Enjoy your undeserved reputation - it won't last much longer.


As a result of reading Reynold's article and comments, I added a peak oil link and an economist link to my bookmarks. Hooray for online. I do wonder how traditional news media will ever survive but I'm going on the proposition that advertizing pays writers' wages and distribution is almost free.

PS. Wow, those beans & kohlrabi were delicious yesterday. So fresh. I'm still working on the forms code to allow comments. Well, not so much working as just downloading and changing a few filenames, etc.

Stay tuned.

Coming up - something on LRT, streetcars and buses. The view from the moon.

Bob Green I


Pet Peeves





    * retired Professional Engineer, married, father of 2 including one still in the system.

    * pursuing many interests - partial list below

    * small-c conservative (but not a Harper PC - that's the party of big business!)

    * investigating causes of economic problems, finding troubling trends and possibilities

    * Former candidate, Hamilton East Stoney Creek, FCP, Public System Trustee, Ward 4



Past Blogs