Post on CNN

Recent post on CNN responding to a Republican's positive take on a Biden run for office.

I'm Canadian, so my take is remote and perhaps somewhat uninformed. Nonetheless, here it is.

I find the commentary about socialism in the article to be a tad bizarre. From Social Security, which guarantees recipients what in Canada would be a lower middle class income, to tax deductions of mortgage interest, to Medicare which is almost as rich as the entire Canadian health care system, to the fact that most Americans don't even pay income tax, to the shocking level of support given to farmers, etc, I'd suggest that creeping socialism isn't the problem. America has become a nation of almost blindly aggressive rights-holders. Everyone has their rights! In short, whether it is the taxes that are not paid, or the public benefits that are being paid and received, or both, just about everyone has their hands in the cookie jar in America. The Tea Party is the most extreme example of the problem - dismantle government and cut our taxes, but don't touch our Social Security! Spare me.

The bill for the free lunch we have all been enjoying for most of two generations - and Canada is much like America in this regard - is coming due. American will need someone who can build cross-party support for some very difficult foreign and domestic policy decisions that will have to be made when the Great Recession rears its ugly head again, and it becomes obvious that America can no longer afford both its present standard of living, and to also be the policeman of the planet. Note - that Recession is not even halfway done, and the hard part is coming. The tax increases; cuts to domestic rights-based programs; as well as the retreat from post-WW2 international engagement will be difficult and perhaps humiliating, but they are inevitable.

Biden is the only person available who can do this. Clinton is likely the most divisive person in American politics today...and she seems to think divisiveness is an asset. She is also crazy. When your obsession with controlling the story and the historic record extends to installing your own personal government in your basement, you aren't innovative, you are completely nuts. I think she is actually dangerous. Trump, while "interesting", and more real than most people realize, is too used to being in charge to build bridges. Bush is a slave to money interests who have been running much of the public policy in the USA since at least half-way through Bill Clinton's time in office. More Bush = more Goldman Sachs doing God's work by manipulating government policy to enhance their own riches at the expense of everyone else. These people don't build bridges, they downsize them. Sanders is an anti-establishment candidate who would not be able to move policy forward if he won as he would need many in that same the establishment to help him do it....and, like it or not, the American Establishment isn't going anywhere.

So you are left with Joe - a man who I think can actually work government successfully from within. With a competent Vice President - not Clinton, but maybe Hagel which, given his Republican past, would signal the intent to bring Americans together - you could have the makings of a one-term executive office that could deal with looming crises and also set America on a better course for the next quarter-century and beyond. America is still the greatest country the world has ever seen by so many measures, but Red State v Blue State is killing your country, and it is hard for your many friends outside of America to watch. Even the Pope gets it....and, I suspect, so does Mr. Biden, who I think will announce his candidacy next week.

Oh...Go Jays Go!

The Bubbling Bubbles of Bubbling Bubbleheads

The US Fed just kept rates where they have been for seven years - at a miniscule 1%.  The reason had something to do with the need for foreign economic prospects to get better, and low inflation.

WTF?

The mandate of the US Fed is to keep inflation low, and employment high.  The stated reason for keeping rates low - they they want to make sure foreign economic turmoil does not negatively impact the US economy - is crazed.

Since when is the US Fed guided by FOREIGN economic prospects, short of a worldwide depression? Depression!?  What depression?  The IMF is predicting world growth at about 3.4% or better for 2015. How does this warrant a full stop on American monetary policy?  Does the US Fed know something we don't?  If yes, where is their much vaunted transparency now?

OK, they now look overseas for guidance on monetary policy.  Hmmm...how do they manage this new decision-making paradigm?  What, exactly, are the measures of foreign economic success that will convince the United Stated Federal Reserve Board to move on interest rates?  What countries are they looking at now and where will they be looking in the future?  How is this different from the last seven years, where one could argue that there have been economic basket cases all over the place?  Are they waiting for a Greek economic recovery?  How is this not a recipe for NEVER raising rates?

US unemployment is officially hovering near 5%.  The US Fed previously said it would raise rates when unemployment got below 6.5%.  That was a year and a half ago.  Even though the official inflation rate is low, the proper time to raise rates was at least that long ago.  By not raising rates they risk having no policy tools in their arsenal should we head into another recession.  In fact, it is probably too late.

This was obviously the time to raise rates.  They either know it, or they are truly stupid, or they have been bought...or all of the above.

Incredible!

Buzz Words

1. Buzz Words:  The real meaning of popular public sector management buzz words.

"Value for Money" - hiding massive wasted expenditures in a cavalcade of positive sounding expense and audit reports that no one reads.

"Off Balance Sheet" - a written record of a senior manager's yelling, screaming and utterly irrational behaviour toward junior staff.

"Free Balance" - retired people slowly regaining their mental health.

"Zero Balance" - death.

"Innovation" - implementation of information technology and management standard operating procedures that have been current in the private sector for up to two decades, while pretending that what you are doing is not only new, but you invented it (e.g. see Al Gore and the Internet.)

"Change Management" - paying someone to tell you that you should do what you already planned to do, specifically to make what you plan to do look intelligent, so as to avoid the "change management" that you really fear...a.k.a. you get canned.

"Change" - the status quo expressed in different language so as to sound like something completely different and better.

"Transformational Change" - the change that actually changes.

"New Public Management" - paying private contractors 300% more than you pay civil servants to do half the work, badly, where the private contractors in question are all former civil servants.

"Conflict of Interest" - not pulling the trigger on an investment opportunity that you learn about as part of your work...at least until you are convinced that you can really make a killing.

"Speaking Truth To Power" - staying quiet, or outright lying to senior officials in order to preserve your career prospects.

2. The Future:  New words that may soon become standard government management lingo.

"Strategic Blamework" - planning in advance to find fault with others while escaping blame yourself for a job you know will be done badly.

"Cleverage" - getting leverage with one's boss by wearing low cut, or especially revealing attire.

"Surgifiller" - being assigned to fill a position as part of the implementation of a surge capacity strategy, as in "Hey honey, I am now surgifiller and I now have to work massive overtime!"

"Incentimuddle" - paying people extra for performing at a mediocre level.

"Mystcounting" - making up budget numbers.

"Sinergies" - exploring opportunities for illicit encounters with work mates.

"Browned Table" - opportunity at the end of every normal meeting for the sycophants to suck up to the boss.

Finally, to be heard at the end of one of a million, mandatory team-building exercises in any bureaucracy in the English-speaking world...

"There is no 'i' in 'team'...but there is a 'you' in 'fu^& you'!"

Yes, I had a bad day.

Housing Pause

Canada's house prices are up by 5.39%, year over year.   In Toronto, prices are up 8.75% in 12 months.  In Vancouver they are up 9.66% in the same period.  The reported inflation rate in Canada over the last year was about 1%. 

Canadians are now carrying about 165% of their income in debt.  Most of this is mortgage and/or student and /or new car debt, and because of this, many commentators have noted that this is "good debt", in the sense that it is backed by tangible assets like an education that can generate a stream of income, or a house or a car.  In the long run this makes sense.  In the short run, this is a potentially catastrophic situation.   

Canada is officially in recession.  The recession has so far been mild, but with the general collapse in commodity prices worldwide, this risks become a serious recession quite quickly.  A higher unemployment rate would significantly strain the ability of average Canadians to finance their debt.

More than that, many neutral experts, such as The Economist magazine, which have been predicting that Canada has a significant real estate bubble for years.  The recent reductions in Canada central bank rate have likely contributed to the most recent spike in house prices and consumer credit - if the bubble initially formed during the six years when money was virtually free, presumably it got bigger when money became even freer.

In the long run, all will be well.  In the last serious housing bubble, however, prices in Toronto dropped every year for six years, from 1990 - 1996, for a total drop of about 30%.  If Canadians experience a recession like the early 1990's recession again, it is highly likely that their creditors will not wait for the long run to get paid.  Falling employment will stretch the ability of many people to carry debt, and falling asset prices will destroy their ability to just liquidate and set themselves free. They will sell anyway, and prices will fall in a once in a generation fire sale.

If you own a house, you should consider selling, grabbing ll that nice equity, and renting for a few years before buying again. It is never a bad idea to take your gains, and sit tight while you plan your next move.

Market Movements

A summary of upward and downward movements in various stock markets in the last 30 days...

DOW (USA, USA, USA!!!) - 17,615, down to 15,666, up to 16,654, down to 16,058, up to 16,374, down to 16,102, and ending today at 16,330.  This was movement of almost 9% from top to bottom in 30 days.

TSE (Canadian, eh!) - 14,466 down to 13,052, up to 13,865, down to 13,481, up to 13,596, down to 13,478, ending at 13,570.  This was movement of about 10% from top to bottom in 30 days.

FTSE 100 (Stiff upper lip...nothing to see here...move along...) - 6,736, down to 5,898, up to 6,081, up to 5,979, up to 6,247, down to 6,058, up to 6,194, down to 6,042, ending at 6,155 today.  This was movement of about 12.5% from top to bottom in 30 days.

Nikkei 225 (Tora, Tora, Tora!!) - 20,808, down to 20,392, up to 20,595, down to 17,806, up to 19,136, down to 17,427, up to 18,770, ending at 18,299.  This was movement of about 16% from top to bottom in 30 days.

DAX - (It's a Ballroom Blitz!) - 11,604, down to 10,924, up to 11,014, down to 9,648, up to 10,128, down to 9,997, up to 10,315, down to 10,015, up to 10,317, down to 10,038, ending at 10,210. This was movement of about 17% from top to bottom in 30 days.

And then.....

CSI 300 (It is GLORIOUS to get rich!) - 4,084, down to 3,825, up to 3,886, down to 3,025, up to 3,342, down to 3,250, ending at 3,357.  This was movement of 26% from top to bottom in 30 days.

This range of movement represents a tug of war between Fear and Greed.  Fear always wins in this scenario.

The pending decision of the US Fed on interest rates is weighing on all markets.

If they raise rates, markets will fall as debt-driven Greed takes a backseat to "the free lunch is over" Fear.

If they stand pat, Greed will win the day for a while, until the reality that they can't raise rates even 0.25% without risking a calamity takes hold, and with it the slow realization that the recovery is a fraud.

These are the last days of disco.

Fear versus Compassion

What to do about Syria's refugees?

Great things:

Accepting masses of Irish immigrants escaping the Irish Famine in the late 1840's and early 1850s, and allowing orphans who landed in Quebec to keep their names.

Thousands of Hungarians escaped Communism, and were welcomed into Canada.

50,000 boat people from Vietnam were allowed to immigrate in the 1970s.

50,000 Poles escaping crushing of Solidarity were allowed to immigrate in the 1980s.

Shameful things:

Head Tax on Chinese immigrants...then barring entry into the country until 1947.

Komagata Maru incident, keeping people from India out of Canada, in spite of the fact that they were also British subjects.

Turning back Jews fleeing Naxis before WW2..."none is to many".

It is perhaps a tad unfair judging yesterday's actions by the standards of today.  But today, there are about 2 million Syrian refugees trying to flee horrors that equal anything that has occurred anywhere since WW2.

As of the start of 2015, Canada had accepted about 1,000 of these people.  It has recently undertaken to accept 10,000 more Syrian immigrants over the next three years.

No country that puts its fear before its compassion will ever do great things.

Technically Speaking

Canada experienced a technical recession in the first two quarters of 2015.  Conservative prognosticators and other shameless hacks are twisting themselves into unprecedented contortions explaining how this recession is not really a recession...even though it is.

One AM radio show where the writer lives (Ottawa) has asked listeners to call in and discuss what they see about them that would constitute proof of a recession.  Here is what one can see by driving down Merivale Road in Ottawa, going North to South.

On the left...a closed Coras restaurant, which became a Nates deli, which also just closed.

Across the street, an XS Cargo retail outlet that closed.

On the right again, a former Zellers that went under and became a Target that went under.

On the right, further South, the closed Future Shop...right beside the still open Best Buy.

Across from that on the left, the Merivale Mall that was about 50% closed.   Marshall's will open there soon.

If you proceed down the road and turn right on Hunt Club, you will find a Don Cherry's, that was a Twisted Lizard, that was a Kensey's...all in two years.

Go right, and you find...

A new Cora's, Lone Star, and Jack Astors, and at least 20 other lesser "big box" food outlets, all built in the last three years.

The early 1980's recession killed Ponderosa.  The early 1990's recession killed Frank Vetere's.  This next recession will be preceded by 6 years of almost free money, encouraging massive overbuilding in the restaurant sector.  If a restaurant is in a good location, it will be fine.  If it is an "impulse buy" type of big box establishment, it will go through some very difficult times.  Will one chain close this time, or maybe up to three?