Archive for September, 2008

The Dark Bailout

George W Bush or the Joker.

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After this response I’m definitely with Obama

When you are so horribly uninformed and vacuous that Saturday Night Live can use your exact words in a parody you have no business being anywhere near the White House.

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Well, two out of three ain’t bad

Tories made good on half of election promises.  Partially fulfilled about 20%.

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The US is stuck between a rock and a very hard place

The United States has two main options.  Let the financial system seize up as the market correctly revalues billions of dollars of assets or create money of out of thin air to buy up all these dubious assets massively devaluing the US dollar.  Fun Fun I say!

I’ve tried to acquire a cursory understanding of this economic tumult in the US.  Near as I can tell there are a number of different kinds of economists out there.  Some, like Keynes who seemed really smart when espoused his theories but lost his shine when his ideas were actually implemented.  Keynes believed the government should engage in deficit spending to jump start a stalled economy.  It was his ideas, much more than Trudeau or Mulroney that put Canada in the debt situation we are in.

One the more notable players in the US scene is Ron Paul.  He isn’t an economist, he was a republican candidate for the presidency.  He follows the Austrian school of economics.  The Austrian school places a lot of faith in the market and has a very dim view of government intervention and regulation.  Mr. Paul believes that the US Central Bank, the Federal Reserve, created this crisis by making credit too easy to get.  When credit is cheap and easy to get people buy more stuff driving up prices and businesses engage in projects that wouldn’t otherwise be profitable.  If interest rates are low more people can borrow more money to buy homes and they are willing to spend more to get one.  When all this credit dries up then it is harder for people to borrow money.  Less money means they can’t afford to spend as much.  Prices come back down as lots of things people bought with all that credit isn’t worth as much anymore like houses and stocks.  When stocks and houses become over-valued because of a credit expansion it is like a big bubble that eventually bursts.  When it does the over-confidence people had in their investments suddenly reverts to fear and panic.  Eventually the market reaches bottom and all these assets are valued appropriately.  This is normally called a recession and they are a normal and necessary part of the economic cycle.

The other prominent side on this is issue is Ben Bernanke and the monetarist school.  He would argue that the great depression was caused by a significant drop in the money supply.  The United States was on the Gold Standard which meant all the money in circulation was connected to how much gold was held in the vault.  More gold meant more money.  After the stock market crash people began to lose confidence in the economy.  Just like today banks started to fail.  Depositors started withdrawing their money and hiding the cash in their homes.  The Federal Reserve did not intervene to save teetering banks or put more money back in to the system.  This caused deflation as the prices for goods and services dropped along with wages.  This was particularly hard on the huge amount of people who bought radios, cars and stocks on credit in the 20s.  Those who had a $100 a month mortgage payment suddenly found themselves making $600 a month rather than $800.  Those who had an income spent most of it on their loan payments which meant they weren’t buying cars and radios.  Everything went in to a tail spin.

Who is right?  I really don’t know but the troublesome reality is if Ron Paul is right and the 700 billion dollar bailout goes through a severe recession will become a depression.  If Ben Bernanke is right and the bailout doesn’t go through then we will have a depression. 

The danger with the bailout is that it could pull out the legs from the US currency.  The US government doesn’t have 700 billion dollars and China isn’t going to lend it to them.  The federal reserve, which is no longer tied to a gold standard, will have to “print” the money.  The media gives off the impression that the bail out is about tax payers bailing out investment banks.  In reality it is every one who holds a US dollar that bails them out because the value of that currency will drop.  What happens next depends on how much confidence foreign holders of American debt have in the US dollar.  If they lose confidence they will use their dollar reserves to buy up every hard asset they can then dump the rest.  Japan, China and South Korea will no longer bankroll America’s free spending ways.  The value of the dollar will finally plummet and all these fine manufactured goods that America imports will become much more expensive.  The world will start selling oil and other commodities in other currencies and t he US dollar will lose its favoured status as the world reserve currency.  A country with exported manufacturing base and desperate addiction to foreign oil will not deal well with massive currency devaluation. 

The choices are between deflation and inflation.  Neither is particularly fun.  The best economic minds in the world are making their best guesses about what to do.  Most of them were wrong in 1929. 

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It is not easy being Green

I’m not sure if I ever came out and said this but I joined the Green Party some time ago.  My flirtation with Dion was a short lived one.  I feel for the guy because I think he is sincere, honest, and intelligent.  Unfortunately he is also running a campaign that would make John Turner wince.  I would rather see him as prime minister than Harper, but I’m afraid that I’m exactly the kind of person that might keep that from happening.  The polls have the Greens at 8-12% and while the Greens pull support for all parties most green supporters would shift to the Liberals.  I am part of the fractured center-left.  Am I splitting the vote to give Harper the victory?

I believe in a Carbon Tax but not much else about the Liberal plan excites me.  The Liberals have done such a poor job of explaining the carbon tax I find myself wondering how different things would be if Rae or Ignatieff were leading the Liberal charge?  Mind you if they were in charge there probably wouldn’t be a carbon tax so I’d still probably be Green.

There are things about the Green plan I wonder about.  I’m not anti-Nato or Nafta.  I’m not really comfortable with the legalization of the sweet herb as a friend likes to call it.  They care about what I care about and I really like the local green party people. 

I’m in a riding where the two main choices are the Conservatives and the NDP.  Idealogically I’m closer to the Cons than the Dips but I’ve really grown to dislike Harper.  Not that smiling Jack is high on my list either.  I can vote NDP in what is likely to be an ill-fated attempt to stop the Conservative candidate.  Voting strategically sucks just on principle, but it really sucks if my last choice candidate wins anyway. 

Do I vote with my heart or my head?

This just in…the Conservatives are Cylons (with no boomer or six).  I really like the part “some are programmed to think they are human.”

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Olaf of the Prairie Wrangler is back

One of my favourite political blogs is back at a new location.

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Strategic voting goes high tech

Check out this website.  I find their reasoning very compelling.

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The picture that defined an era

image

I wonder what picture will define ours.

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Gutter politics is destroying democracy

Check out the following video about McCain’s attacks ads.

In Canada things are no different.  Harper is deliberately misleading Canada on the issue of the carbon tax.  All of his statements about its impact on the economy assumes that one half of the plan, the income tax cut, will never happen.  The Harperized version of the two purposed Carbon tax plans is a deliberate lie, a fabrication. 

[update] Rex Murphy shares similar sentiment.

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Joe Clark on the Green Party and the debates

We’re not talking about the Rhinoceros Party. In the 2006 general election, the Greens won 665,940 votes, nearly 5 per cent of the total. Polls published this month by Segma, Ekos and Environics indicate that support for the Greens runs between 7 per cent and 10 per cent, even though the party has never been allowed to make its case in a national leaders debate. In nine provinces and three territories, the Greens have much more support than the Bloc Québécois, which is not only invited to the debates but has the power to veto other participants.

No law forbids Ms. May from joining the other leaders in a televised debate, just as no law forbade Mr. Obama or Mr. McCain from launching their improbable campaigns for a presidential nomination. Instead, the rules that keep her out are determined, in effect, by the political parties that are already in. Technically, the decision is taken by a consortium of the broadcasters who would carry the program; but, in announcing the decision to shut out Ms. May, that consortium has made it clear that the real veto is exercised by the other political parties.

So, it’s a club, whose members set their own rules.

Jason MacDonald, a spokesman for the network consortium, is quoted as saying that three parties – those led by Stephen Harper, Jack Layton and Gilles Duceppe – all opposed the participation of Ms. May in the so-called leaders debate, “and it became clear that if the Green Party were included, there would be no leaders debates.”

That’s blackmail. If these three men want to boycott a genuine debate, let them have the courage to do so openly. Let them also explain why, in a year when U.S. party establishments could not shut out an Obama or a McCain, it is appropriate for the Canadian party establishments to muzzle a significant voice for change.

I am not a supporter of any of the existing federal parties, including the Greens. But I am alarmed, and surprised, by how tightly the government now controls Parliament, how easily parties put their own interest ahead of the public interest, and how mean our public debate has become. We have to break that pattern, and one way to begin would be with a more inclusive leaders debate. I urge more Canadians to press these three leaders, and the broadcasting consortium they hide behind, to reconsider their exclusionary decision.

For Canadians concerned about democracy, the question is not why the Green Party should be let in. The question is: Why should the Greens be kept out?

Read the full article at theGlobeAndMail.com.

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