European Union May Fail: Global Economy to suffer

Clueless in Canada starring the opposition political parties

It appears we are returning to more Global instability that will affect our economy, trade  is hitting the  Front pages again. The revised balance sheet in Greece and  Ireland's refusal in participating in the EU bailout plan. The fear  is other countries such as Portugal and Spain may require financial support if the markets lose confidence.

A simultaneous bail-out for both Ireland and Portugal might run to €200bn, depleting much of the EU rescue line. The European Financial Stability Facility (EFSF) can raise up to €440bn on the bond markets but only two thirds of this would be available. The IMF is expected to loan a further €3 for every €8 from the EU under the bail-out formula.

The great concern is that the crisis could spread to Spain, which has a far bigger economy that Greece, Portugal, and Ireland combined. Foreign banks have €850bn of exposure to Spanish debt.

David Schautz, credit strategist at Commerzbank, said the EU bail-out fund would come under "severe strain" if Spain needed a rescue. Yet this remains a serious risk since Spain must roll over or raise €175bn of debt next year.-The Telegraph

Deep cuts by some EU members spark protests.

Will the Government in Britain, Germany, France that are passing austerity budgets be able to convince their citizens on the merit of another bailout by the European Union for the basket cases that are unwilling to accept the same level of cuts in spending?

In Canada our federal political parties on the Hill spent Monday debating the short title of a Government Bill they felt was inappropriate. Clearly the opposition MP's are out of touch with the economic realities of the global economy and the interests of its own citizens. The Coalition to nowhere remains clueless and needs to be held accountable at the earliest election.

Related articles

• Greece's deficit revised to largest in EU (financialpost.com)
• "Europe Believes That Debt Crisis Is Ready To Spread" and related posts (patdollard.com)
• UPDATE 2-Greece faces worse budget gap, blames Germany (reuters.com)
• Irish Resist EU Push to Accept Bailout (online.wsj.com)

Proof We're #1

Global Recession: Recovery of Jobs

Canada has not outperformed the United States in the last three generations in creating an environment for positive employment conditions as noted in the graph. As a developed economy, member of the G7 Canada was the last to enter the Global Recession and exit first. Our largest trading partner has not been as successful.

The jobless rate has not fallen substantially this year, largely because employers have barely added enough workers to absorb the people just entering the labor force. And even if the economy suddenly expands and starts adding 208,000 jobs a month — as it did in its best year this decade — it would still take 12 years to close the gap between the growing number of American workers and the total available jobs, according to the Brookings Institution’s Hamilton Project.

Currency Valuation

The United States currency has been losing steam from 2002-2008 against the Canadian dollar.  The Euro has been relatively flat in comparison. The sovereign debt crisis in the European Union is pushing nations to end stimulus as negotiated at the Toronto G20 meetings. Canada has agreed to NOT extend the stimulus and will be able to tackle their deficit and national debt as the economic recovery continues. The decision by the United States to tackle the trade imbalance through dollar weakening is helping commodities rise because they are traded in American dollars. Canada has significant exposure in the export of commodities and will benefit from the American policy of QE2.

The Federal Government in Canada has permanently reduced personal and corporate taxes, eliminated tariffs for business to import equipment, increased the rate to 100% on capital cost allowance depreciation for business to upgrade their computers between  January 2009 to February 2011 which in turn that will help boost our productivity  as we exit the global recession.- Economic Action Plan

The Canadian Federal Government is in negotiations with the European Union on a Free Trade deal that is worth an estimated twelve billion on an annual basis to Canada. Trade with China and India have seen trade irritants be resolved with measurable improvements in the last few years in spite of the SPIN from the media and opposition parties.

Federal debt has grown rapidly during the past decade, in part because of the costs of two wars and a deep recession. In early 2002, the cap was roughly $6 trillion and it has more than doubled since then. In February, the House agreed to increase the ceiling by a 217-212 vote, with all Republicans and 37 Democrats voting against it. - American Debt WSJ

Economic Action Plan Premiers Two Year Plan

The Canadian Federal Government in cooperation with the Provincial governments in December 2008 negotiated the largest stimulus program in Canadian history. The same leaders have also decided to have the lowest corporate tax rates in order to spur foreign investment. 

The economy and jobs has been the highest priority and the messaging has been successful.

In contrast the American decision in quantitative easing last week will make those non American dollar investments increase in value and will our commodities. The auditor general has praised the efforts of our Federal Government and Civil Servants in executing the stimulus program. The United States did not find similar praise for their massive spending programs.

The Obama victory helped shine a light on Canada on his first foreign trip and our Prime Minister wasted no time in visiting the American media in the honeymoon phase of the Obama administration. Our PM shared our great story  on every stage on how we escaped the worst of the global recession and we were open for business and made it a priority to speak up against the buy American policy viewed by many as protectionism. 

Canada hosted the Winter Olympics and won the most Gold medal in Olympic history. Our PM hosted the G8-G20 meetings in Canada and publicized our unique story at every international meeting.

Just a few reasons why the business community and experts may have decided to push the United States to the number four spot and advance us to number one.
What do you think?


US Unemployment Rate  Source http://www.bls.gov/cps/prev_yrs.htm

Related articles

• US Unemployment Rate  Source: http://www.bls.gov/cps/prev_yrs.html
• Canada Unemployment Rate Source: http://www4.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=16
• Monthly and Annual Exchange Rate Average 1997-2009 Source: http://www.bankofcanada.ca/en/rates/exchange_avg_pdf.html
• Broader U-6 Rate at 17%: The Long-Term Unemployed and the Dark Side of Jobs Report (blogs.wsj.com)
• Harper, G20 leaders meet to head off currency war (thestar.com)
• Europe's Debt Worries Return (online.wsj.com)
• Harper wants G20 focus on deficits, trade (cbc.ca)
• "Bernanke Delivers QE2 Last Rites for Dollar as Worlds Reserve Currency" and related posts (marketoracle.co.uk)
• Canadian dollar closes higher, closes near parity (ctv.ca)

Union Leadership & Liberals Strange Bedfellows

Over $ 500,000 in legal fees and a decade later?

Why do Public Unions still show up and provide support for the Federal Liberals after Bill C-78 passed in 2000

Do they have amnesia?

On September 14, 1999, Parliament passed the Public Sector Pension Investment Board Act (Bill C-78), which introduced amendments to the laws covering the three pension plans, allowing the federal government to grab the $30.2-billion surplus. The federal government is exempted from the Pension Benefits Standards Act, which limits employer access to any surplus in federally registered pension plans. -Pension Surplus Grab

 

Federal union leaders are embarked upon an increasingly quixotic battle to recover $28 billion the federal government took from the public service, military and RCMP pension plans a decade ago to pay down the deficit.

The Ontario Court of Appeal dealt 18 unions and pensioners groups another blow when it recently upheld a trial judge's 2007 decision that public servants aren't entitled to any of the surplus they have long claimed was "stolen" from their pension plans.- Liberal Track Record on Pension leaves little doubt who they target to balance the books

Why do Pension groups like ex-Nortel employees trust anything the Federal Liberals state on Pensions when the current leadership brag how the Chretien-Martin Liberal surplus?

When the Liberals made those compassionate decisions to fix the pensions was Canada in some global recession?

Jean Chretien is to blame for the fall of the Liberals and the election of one of the most right-wing prime ministers Canada has ever seen.

Statement by the Honourable Paul Martin, Minister of Finance of Canada, to the Interim Committee of the International Monetary Fund, Washington, September 26, 1999 Economic Performance and Prospects in the Constituency

(a) Canada

Developments in the Canadian economy have also been more favourable than many expected a year ago. In large measure, this reflects the government's commitment to sound economic and financial policies—low and stable inflation and balanced budgets or better.

Overall economic growth in Canada moderated to 3.1 per cent in 1998, down from 4.0 per cent in 1997. Growth in Canada slowed significantly in the middle of 1998, owing in part to the global financial uncertainty and turmoil of the time. As the effects of this turmoil have passed, growth has strengthened, averaging an annual rate of 4.0 per cent over the last three quarters.

Growth in production has meant growth in jobs. More than 450,000 jobs were created in 1998, the strongest growth during any year since 1987. So far in 1999, a further 110,000 jobs have been created. The strong growth in employment has brought the unemployment rate down from near 10 per cent at the end of 1996 to 7.8 per cent in August 1999, near a 10-year low.

At the same time, inflation in Canada has remained subdued. Despite the depreciation of the Canadian dollar in 1998, consumer price inflation averaged 0.9 per cent in 1998, down from 1.6 per cent in 1997. Despite recent increases in oil prices, headline inflation in August was 2.1 per cent and core inflation was 1.6 per cent, well within the inflation control targets of 1 to 3 per cent.

Low inflation and the improvement in Canada's fiscal situation have provided the basis for low interest rates in Canada. Apart from the period of instability in international financial markets last fall, short- and long-term rates in Canada have been below corresponding rates in the United States for most of the last three years.

In the survey of private sector forecasts used in the February 1999 budget, private sector forecasters expected growth to average 2.0 per cent in 1999 and 2.5 per cent in 2000. The most recent consensus of private sector forecasters has real gross domestic product growth upgraded to 3.5 per cent in 1999 and 2.6 per cent in 2000. The most recent International Monetary Fund (IMF) Staff projections are consistent with the private sector consensus. 

Ignatieff praises Jean and Paul for surplus.

If we had low inflation, good growth projections, improving job numbers (7.8%) and a balanced budget why did the Liberal majority government enact and pass Bill C-78, was it mean-spirited or just ideological?

 

Related articles

• Worried Canadians want improved CPP: poll (canada.com)
• Ottawa signals slowdown in provincial payouts (theglobeandmail.com)
• Liberals and NDP enabled Bloc popularity (bluelikeyou.com)

Inflation in Emerging vs Advanced Economies

Image by YoTuT via Flickr

The Tale of Two Economies:

We have two different stories regarding inflation in the emerging vs advanced economies. The emerging economies don't share the same pressures that the advanced economies and as a result may have a different agenda for domestic consumption.

Some countries in the advanced economies have deflation as a real threat while the emerging economies they are continuing to experience over five per cent on an annual basis.

Prices of many commodities fell during the financial market shocks in May and early June, reflecting in part expectations for weakened global demand. Prices recovered some ground more recently, as concern about the real spillovers of the financial turbulence has eased. At the same time, waning appetite for risk prompted gold prices to settle higher. In line with futures market developments, the IMF’s baseline petroleum price projection has been revised down to $75.3 a barrel for 2010 and $77.5 a barrel for 2011 (from $80 and $83, respectively, in the April 2010 WEO). Projections for the non fuel commodity price index have remained broadly unchanged, partly reflecting stronger-than-expected market conditions through April. - World Economic Outlook Activity

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Several in the G8 or G20 did not experience the same level destruction of economic activity in the global recession.  Each country will act in their own self interest in maximize their own economy. Canada is well positioned to take advantage of the vast natural resources, democratic institutions and a determination to build on the global economic trade with China and Europe.

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• Oil prices rise on signs of improving economy (seattletimes.nwsource.com)
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Government of Canada Priorities: Jobs, Recovery

Estimates of potential GDP are crucial for monetary and fiscal policymakers who require estimates of the economy’s capacity to gauge inflationary pressures and to assess the budgetary position over the business cycle. Unfortunately, an economy’s potential GDP and output gap are not directly observable and therefore must be estimated. Fortunately the Department of Finance and the Bank of Canada construct estimates of potential GDP which are used in their respective policy analyses and deliberations.

However, given the absence of published estimates over the forecast horizon 2008-2013, it is necessary to construct them.

Future potential growth is assumed at 2.4% annually and an upper bound of 2.7% and lower bound of 2.1% are also considered. This range is consistent with estimates of potential growth provided by private sector forecasters and the Bank of Canada. -The Budgetary Balance and the Economic Cycle December 18, 2008

March 6, 2009 - Global fiscal stimulus is essential now to support aggregate demand and restore economic growth. The International Monetary Fund has called for fiscal stimulus in as many countries as possible, including emerging market and advanced economies. This paper uses simulations with a multi-country structural model to show that worldwide expansionary fiscal policy combined with accommodative monetary policy can have significant multiplier effects on the world economy.-INTERNATIONAL MONETARY FUND

July 6, 2009 - Given the revised economic outlook, updated assumptions, and announced post-budget measures, PBO is now projecting cumulative budgetary deficits of $155.9 billion over the 5-year projection period 2009-10 to 2013-14. The budget deficit is expected to peak at $48.6 billion (3.2 per cent of GDP) in 2009-10, improving to $16.7 billion (0.9 per cent of GDP) by 2013-14. Economic and Fiscal Assessment

November 2009 - Reflecting the better-than-expected employment performance since May and upward revisions to real GDP growth, private sector forecasters have revised down their outlook for the unemployment rate in the near term (Table 1-4). Based on the September 2009 PBO survey, forecasters expect the unemployment rate to average 8.4 per cent in 2009 and 8.9 per cent in 2010 – lower than the 8.7 per cent and 9.4 per cent, respectively, expected in the June survey. Economic Fiscal Update

April 9, 2010 -  March’s employment increase brings total gains to 176,000 (+1.1%) since July 2009. Employment edged up by 18,000 in March, continuing an upward trend that began in July 2009. The unemployment rate remained unchanged at 8.2%.- Labour Force Survey

April 08, 2010 - This isn't a news story about some staffer writing a letter to the editor supporting her boss, again, dredged up by some tragic hope that it will distract Canadians from the growing obvious - that the country is in good hands, and that the Liberal party has nothing new to offer. -Searching For Liberty

April 10, 2010 - Where the Helena Guergis media frenzy is most beneficial to Liberals is that it is distracting attention away from our sensational economic recovery. - The Iceman This story should be shouted from the rooftops because it affects every Canadian unlike other stories that the Lame Stream Media's been focused on lately. - Chasing Apple Pie

Priorities can be a problem for some political parties.
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