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Short-term stimulus will just repeat errors of the past

From Saturday's Globe and Mail

What we need to know if the Bank of Canada is right ...Read the full article

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  1. Freddie Fender from Canada writes: There is a need to protect the truly vulnerable in our society when the economy falters, however, most of this so-called "stimulus" package appears to be paying off special interest groups. We can thank the so-called "coalition" of left wing Liberals, NDP and Marxist led BQ for the future debt to be inherited by our children.

    Contrary to the extreme fear mongers, this is not the Great Depression, and Canada is in relatively much more fortunate economic circumstances than the other G7 nations.

    Remind me again why we are bailing out the dinosaur auto industry in Ontario?
  2. Bob Dylan's Voice from Canada writes: I am so confused. Harper says that he doesn't believe major stimulus required because Canada doesn't have the same problems as other countries. The Liberals threaten a coalition coup. Harper under threat of government overthrow decides to provide the stimulus lobbied for by the Liberals and voila he is criticized for throwing stimulus into the economy that is not required. Liberals, please get your story straight
  3. Bobby Dy from Canada writes: We have a significant infrastructure deficit and a requirement to spend. Spending in a time of an economic downturn gets value for the money. Front-end loading that spending, then, only makes sense. There is also a need to strengthen EI and perhaps increase GST rebates to the poorest in order to help them deal with the inflation in food prices. There is a problem, however, in the timing of the spending. The government should have moved on this some time ago. Unfortunately, with this government, politics before policy always. So, I agree with Simpson's assessment. Much of this is likely to be wasted.
  4. Bobby Dy from Canada writes: Freddie Fender, Canada is in better shape than much of the rest of the world despite the ineptitude and attempts to undermine the fiscal position of the Canadian government by Harper and co. To be certain, Harper deserves absolutely zero credit for the position that Canada is in when entering this downturn. We would have been in much better shape if Harper hadn't mobilized all of the government resources for political purposes.
  5. Ed Long from Canada writes: Four comments and three are partisan. Nice.

    I will discount those and that leaves Freddie Fender leading it off.

    I have lived through two recessionary periods in my time on this planet with unemployment of 11% and 13%. I have been unable to qualify for a mortgage despite two well paying jobs. I have been laid off enumerable times in my attempts to eventually gain full time employment. I have returned to school, on my dollar, at mid-age to retool. I have taken a premature retirement and reduced benefits to establish myself with self-employed earnings until age 70.

    This is a tough time. But there have been much tougher in my lifetime. And the problem is we did not maintain the infra-structure and plan the safeguards for the inevitable downturn. Canada is still in pretty good shape.

    Simpson is correct in that any panic or short term spending or stimulus will be for naught.

    Let us ask why Canada, a major resource nation, does not have substantial sovereign wealth funds and why, whether it be infrastructure, green energy or transportation, we are not investing in the innovation and intellectual property that will be the currency for future generations.

    Whoops, I know the answer. Governments only last two years.
  6. greg stockton from toronto, Canada writes: Ed Long writes: Let us ask why Canada, a major resource nation, does not have substantial sovereign wealth funds and why, whether it be infrastructure, green energy or transportation, we are not investing in the innovation and intellectual property that will be the currency for future generations. Whoops, I know the answer. Governments only last two years. ----------------------------------------------------- Wasn't petro-canada or the energy policy under Trudeau, a sovereign wealth fund? These types of funds seem to work best in totalitarian regimes. The central government controls most of the money and is unaccountable for its use or effectiveness. Can you imagine this happening in Canada? Or maybe you can. It sounds right that we should invest in infrastructure and innovation. But then we come back to the same thing. Presumably the federal government decides who gets what based on who can whine the most effectively among the multiple special interest groups. Governments, especially the Harper govt, do not want to be perceived as unsympathetic. So funding is distributed based on media or interest group proxy. But this does not work either as demonstrated by the reaction to the current budget. Although it will never happen, government has to get out of the way and let the private sector do what it does best; innovate and build. At the very least more private/public partnerships are needed. The taxpayer provides some of the money and the private sector provides the rest, including a return on the investment.
  7. bruce greenwood from Canada writes: Projects that have advanced beyond initial planning, local permit and development stages should proceed now. There are many necessary public infrastructure projects, if built when private developers are waiting for better returns, will benefit taxpayers with huge savings.

    Less demand for labour, material and even lower real estate prices will return a lower debt. We must be careful how and where we spend; but keep the bigger picture in focus.
  8. Geoffrey May from Canada writes: Any deficit spending must be done to help those in neeed of help, and investing in the future . Harper's budget is likely to do the opposite, as Simpson suggests, offering help where it's not needed, and investing in the past ,ie inappropriate infrastructure projects .Investments in energy efficiency , renewable energy and efficient transportation systems, represent an investment in our future, saving future generations energy dollars, and promoting a livable planet.

    Harper's policies were damaging to the economy in good times , there is no reason to expect he can meet the current challenge, although we see Harper's supporters are already to excuse his incompotence by blaming the Liberals, NDP and Bloc.Flip Wilson got good laughs with ,"The Devil made me do it " .It 's become neocons mantra.
  9. Comments closed, censored, hidden, deleted, disappeared from Mini Bush-Obamatieff village, Canada writes: Excellent! --- The contradiction between what the Bank predicts and what the government is about to do, with its typical non-plan, is indeed startling... at least for anyone who can read and begins to understand. --- Imagine what those who consult international media conclude, re: our little political class.
  10. Haligon Nova Scotia from Canada writes: This is a good article, filled with necessary home truths. But it has two major flaws. The first is that the Prime Minister and the Finance Minister, both of whom are either wilfully blind or have tin ears (or both), will ignore this information. The other flaw is that it's too late. Mr. Simpson's clarion call to common sense would have been more useful several weeks ago, before the budget was locked in (as it surely is by now).
  11. R. Carriere from Maritimes, Canada writes:
    "To put matters another way, the old cliche "from crisis comes opportunity" could apply, but only if today's stimulus produces tomorrow's gains in competitiveness and sustainability. Otherwise, we'll wind up with the worst of all worlds: stimulus that won't make much difference in the short run but that acts as a drag on the future.
    --------
    Finally a journalist that is questioning this insanity! We are about to embark upon adding about 13% to our net federal debt over the next 2 years without proper consultation and debate!

    No one-no Party-almost no media (except the exceptions of JS and few others) are questioning this madness of spend-spend-spend for pure political short term gain and to hell with the future.

    While I will await the exact details, if dinosaur industry bailouts are the conclusion, with NO INNOVATION $$ plans concerning future global demand for products and services, we are headed down the wrong track.

    There were already huge summs of money budgeted for infrastructure that have not been released. WHY?
    .
  12. Thomas from Toronto from toronto, Canada writes: My complements to Ed Long from Canada. Well written response. I am not as old as Ed, but I do agree that this doesn't look as bad ast the Bob Rae recession. THe only difference is that the housing bubble was confined then, now the banks have spread the problem to wider economy. ( the Savings-n-Loan in the US, and I think TD got into trouble in Canada)

    Also, from my perspective, I am seeing an amazing run down in inventory in Q4. When the economy bottoms out, the first up-tick could be surprisingly strong due to low inventories.

    That being said, the economic landscape will be much different in '09-'10 than it was a year ago. The worry is that the stimulus will re-ignite bubbles.

    -Housing will be back on '00 levels, do we want them at'07 levels?
    -GM will have the same capacity and labour force as Toyota (30% of current workforce...), Do we force GM to keep the extra workers?
    -Banking will be much more supervised with smaller profits.
    -Hedge funds will be gone, do we keep unregulated players in the finance system?
    -Private equity will shrink due to hard to get credit. As credit eases, and will be very cheap with the stimulus package, do we allow these barracudas to buy good companies, load them with debt and bleed them dry? Look at that BCE fiasco.
  13. Gerald Saunders from Canada writes: And, why not do the sensible thing? Allow Dr. Simpson to write the budget, and Mr. Harper to read it. Perfect!
  14. Allan McElroy from Winnipeg, Canada writes: As mentioned by Ed Long (keep them comin' Ed!), there have been two serious recessions in the last 40 years. I lived through both, and so did all the others who were around then. As they say, "this too shall pass". I am seriously PO'd with the PM (for whom I voted) for his flip-flop on this matter. He was right in his fiscal update in December, and should have the guts to stick to his guns now. I wrote a letter to my MP (CPC) yesterday expressing my displeasure, and urge all to do the same. Our families are being indebted to the tune of $2000/person, and we'll have nothing to show for it but a debt.
  15. bill williams from Guelph from Canada writes: -

    There is one kind of stimulative spending that is being largely ignored and it is by far the most worthy and important. Universities have had their endowment funds devastated by the market crash and the oncoming recession has eliminated other sources of funding. Universities are a source of our intellectual capital. Universities can absorb huge amounts of funding right now, today and that money will flow directly into the economy. Money spent on universities will serve us well in the longer term.

    -
  16. Red Suspenders from I hope it's not always true that people get the government they deserve, writes: Bob Dylan's Voice from Canada writes: ... Harper under threat of government overthrow decides to provide the stimulus lobbied for by the Liberals and voila he is criticized for throwing stimulus into the economy that is not required. Liberals, please get your story straight ...

    ==================

    It sort of reminds me when CPC shills were all attacking Dion for supporting government legislation.

    Of course we should note that Harpo's incompetent or dishonest government had, only days before, sung proudly from the stimulus song-sheet at the G20, only to flip flop their way to the fallacious and malicious 'fiscal update'.
  17. Red Suspenders from I hope it's not always true that people get the government they deserve, writes: My feeling is that this situation is not a normal recession/depression in the sense of their being a real-economy reason for a slow-down.

    No change in the real economy has occurred that ought to seriously interupt the super-cycle driven by third-world development.

    I think what happened is that a sector-rotation exposed an extreme financial markets fantasy/fraud.

    The paralysis in that market caused a disruption for participants in the real economy rather than changing the fundamentals of the real economy.

    Accordingly, I think government intervention directly in the lending market would have been the correct response. I think broad and extended stimulus is not needed as a response to the crisis.

    That said, however, a more measured and fully funded agenda of infrastructure replacement and new-economy development ARE needed.
  18. C. W. James Butler from Calgary, Canada writes: Greg Stockton writes. "Wasn't petro-canada or the energy policy under Trudeau, a sovereign wealth fund? These types of funds seem to work best in totalitarian regimes."

    Well if you are thinking of Alberta's Heritage Fund I would agree with you. It has been an opportunity squandered by mismanagement of people who are driven more by ideology than common sense. On the other hand Norway has been incredibly successful with its sovereign wealth fund. Now Alberta's Finance Minister is off to Norway looking for advice. The real irony here is that the Norwegians modelled their fund on the original Lougheed concept.
  19. Freddie Fender from Canada writes: S Rankin from Chatham, Ontario, Canada writes: "Our current fix in Canada is similar to the USA pre-Obama....it is a party built on the blind and narrow pursuit of power....an apt description of Harper and his blind conReformbots. Harper=Bush=$ 4 special interests=economic slavery 4 Canadians."

    Your characterization equally applies to all federal parties at the moment. The so-called "coalition" was just another attempt at pursuing power for its own sake. Ignatieff, though he may become a plausible alternative to Harper at some date (plausible compared to Dion or Rae), is no Obama by any stretch of the imagination. Both Layton and "Senator" May have lost any credibility with their involvement in the sordid "coalition" affair.

    The big losers are ordinary Canadians who foot the bills.
  20. Ed Case from Kelowna, Canada writes: Ed Long: your comments are spot on as is Simpson's article. The biggest sense of entitlement we have in this country is the 35 - 55 year old cohort who embody the "Me, me, me" generation with it's rallying cry of, "I want it all and I want it now". This from a group of people who largely fell into their wealth in terms of high real estate prices, over-paid/under achieving jobs and/or inherited wealth. This group does not understand the real meaning of productive work and innovation but they are the group that politicians need to pander to to get elected; the notorious '905' cohort in Ontario for example.

    Knowing this our fearless leaders are focused on anything that has a large sum of money attached with many good photo-ops; hence the 'shovel-ready' mantra.

    A wise Indian chief once said, "We do not inherit the Earth from our parents, we borrow it from our grandchildren." A whole generation have dismissed this noble idea and we are going to leave one heck of a mess for our grandchildren to clean up, physically and financially!
  21. garlick toast from Canada writes: I've lived through a couple of recessions and my experience and reading tell me that these are early innings for this one.Grandiose schemes aimed at vote buying won't do anything in the longer run.Aim for sustainability and an economy not based on consumption.
  22. Vic Hotte from Kettleby, Canada writes: Good example: "Take the city of Ottawa, often a leader in bad government. Two weeks ago, city council published a list of "shovel ready" projects. Most of the big-ticket items were road enlargements and paving projects in the suburbs - exactly the wrong kind for an urban area that needs to intensify growth in the inner city and build even one rapid transit system." Our too-many levels of government have been repeating this recipe to produce the next 'bubble' for decades. It creates larger problems down the road every time. Short-term gain for long-term pain. Ontario has paved and built out the lands from Lake Ontario to Lake Simcoe, and here we are again with more 'shovel ready' projects. No thinking involved. Herman Daly, former senior economist at the World Bank from 1988 to 1994, insists we must strive for a steady state economy: he wrote, "The most important change on Earth in recent times has been the enormous growth of the economy, which has taken over an ever greater share of the planet's resources. In my lifetime, world population has tripled, while the numbers of livestock, cars, houses and refrigerators have increased by vastly more. In fact, our economy is now reaching the point where it is outstripping Earth's ability to sustain it. Resources are running out and waste sinks are becoming full. The remaining natural world can no longer support the existing economy, much less one that continues to expand." He said the economy should behave like a hovering helicopter, not a soaring rocket, adding "The idea of moving to a steady-state economy will appear radical to many, perhaps politically impossible. But the alternative, a macro-economy that is structurally required to grow in scale beyond the biophysical limits of the Earth, is an absurdity, and heading for the ultimate crash. Before we reach that radical physical limit, we are already encountering the economic limit at which benefits of extra growth are increasingly outweighed by the costs."
  23. Allan Simonson from Canada writes: Jeffrey Simpson for PM!

    I am truly saddened by how many people think government can "fix things". It is up to us folks. Cut the pork in our lives, and advance our careers as much as possible.

    The only "vulnerable" out there are the completely disabled, and children. Those are already protected by social programs. Everyone else has the energy to either move, advance their career, etc.. If you're not taking advantage of every opportunity in your life there's nobody to blame but yourself.

    It's not the economy's fault, it's not Harper's fault, it's you.
  24. Edward Bender from Calgary, Canada writes: One of my fears is that the governments are going to create a boom in infrastructure construction projects and we will continue to pay through the nose for these. I think when it comes to infrastructure, we should proceed with worthy projects, and get them done while the private sector is restraining investment. Not just go after every shovel-ready thing that comes along (I hate that term already). Oddly, to show how "stimulus" is becoming a bandwagon, we are talking of stimulus spending in Calgary. Calgary is just coming down to earth and returning to something approaching normal. I do not support stimulus spending on green innovation, that is the domain of the private sector - we should not be making up things to invest i. If it is truly profitable and worth while, it will get done by investors.
  25. Allan Simonson from Canada writes: An economy not based on consumption Garlick Toast?

    What do you think drives demand, and capitalism for that matter? Demand creates value for goods and services. Without demand, we have no economy.
  26. Angus Elliott from Cambridge, Canada writes: An enormous part of the cost of an infrastructure project is the cost of getting it "shovel ready".

    If we make a decision to build a high speed rail link to link Montreal and Toronto for example that act employs hundreds of engineers, economists, planners etc.

    Just doing the feasability studies on all the things on the wishlist would be a tremendous stimulus.
  27. garlick toast from Canada writes: Allan Simonson from Canada writes: An economy not based on consumption Garlick Toast?

    -------------------------------------------

    Sorry, i meant domestic consumption. It's not for nothing that we have been labeled '' hewers of wood and haulers of water'', we are a resource based economy.Our domestic consumption tends to be of goods produced elsewhere. That's why I see widespread tax cuts as a way of exporting our most precious commodity, money.
  28. Allan Simonson from Canada writes: That's a good point Garlick. I too would like to see a shift to a service based economy, especially serving foreign interests.
  29. Ed Long from Canada writes: Thank you to people that agree with me.

    I honestly believe that this "recession" was necessary to bring the markets, from real estate to stocks, and the massive amount of borrowed money back in line with traditional methods of valuation and qualification.

    We lost control of financial systems and the economy. I am sorry for people who think the last fifteen years were "normal". They were a perversion of every aspect of responsible finance.

    When this is all over, more people will be able to purchase homes at reasonable prices and make life plans without leveraging themselves to the max.

    We will have jobs based upon a real economy if government does not subsidize yesterday's dreams but acknowledges a new world will evolve and Canada must be part of it.

    Greg Stockton ... Do a Wiki on "sovereign wealth funds" and scroll down to the list of the largest funds and note the commodity based funds: Abu Dhabi, Norway, Kuwait, Qatar, Alaska, Libya, Russia, Brunei, Kazakhstan, Alberta, Iran, Dubai.

    We all know Canada has relied upon a commodity based economy and an Auto Pact dependent upon another country's innovation. Resources are in the ground and most are non-renewable. It just makes sense, for future generations, to have sovereign wealth funds derived from resource exploitation.

    Alaska's Permanent Fund, takes 25% of state resource revenues that after various tax credits nets out at 11%. They have paid a dividend to Alaska residents every year since 1982. The original investment was $734,000 in 1977. Today the Fund is worth approximately $40 Billion.

    I suggest Governor Palin, and her predecessors, would not be described as a "totalitarian regime".
  30. David Gibson from Canada writes: The US recession of 2002 barely affected Canada. The average US recession lasts 13 months. This one had barely begun before the press, politicians and experts - all ignorance a month earlier - were trumpeting its severity and length. Fortunately, consumers are largely ignoring it in my market, cutting back on holidays and luxuries as a caution, but not on necessities. The current gross over-reaction in Canada is mainly driven by the talking heads, who can't seem to make up their minds if the government is heartless for not spending enough, or foolish for spending too much. A pox on politics, the media, and voters.
  31. greg stockton from toronto, Canada writes: Ed wrote: I suggest Governor Palin, and her predecessors, would not be described as a "totalitarian regime". ---------------------------------------------------------------------------------------- I did say it may work best under totalitarian regimes. Without arguing over the definition of totalitarian(unaccountable at the least), I think more than 80% of the countries on your list would qualify for this dubious distinction.You forgot China, although their fund has has been classified as non-commodity. I guess my definition differs. I know that the Chinese govt, through its SWF, has tried to buy commodity based assets in Canada. Therefore I think it is appropriate to look at the objectives of a fund before we put them all under the same umbrella definition. For example, the main objective of the Norwegian SWF is to provide a pension safety net. And from from the publication Foreign Policy December 2007: 'In democracies, the politics work differently. The only democratic country with a large sovereign wealth fund is Norway. Since the Norwegian fund was established in 1990, every incumbent government has lost elections because the opposition has promised all kinds of popular expenditures from the abundant fund. Democratically, it is difficult to defend an excessive public reserve fund"
  32. Ed Long from Canada writes: Thanks Greg.

    I believe the best analogy is the Alaska Permanent Fund, established in 1976, because resource revenues flow to the provinces. Therefore the direct analogies are the Alaska Fund and Alberta Heritage Fund.

    The Alaska Fund pays yearly dividends and the principle has grown significantly. Alaska has been aggressive in resource extraction and getting its product to market including the recent approval of the Alaska natural gas pipeline. The Fund is arm's length although Gov. Palin did request it divest itself of any investments with interests in Sudan or Somalia.

    The only political aspect that I see is that the resource provinces, Newfoundland, Alberta, Saskatchewan and B.C. would therefore bank a portion of their revenue which will rebalance the comparative wealth of provinces.

    Your comments are full of generalities including the alleged breakdown of totalitarian vs. democratic countries, with a curious fixation on China, and you failed to note non-commodity based funds in Australia, Malaysia, South Korea and Taiwan.

    I quite frankly do not understand the point of your post since you seem only to be providing negatives on the basis of archaic ideology. You advocate P3 yet say government must get out of the way. Can you give an example of a P3 where gov't does not account for input, including its share of costs, and report to citizens.

    Please go to the Vancouver Sun, today, for a two page analysis of nine P3 projects in this province of approx. $7.7 Billion with problems due to the global credit crunch.
  33. Lucien Ngenda from Toronto, writes: I have always wonder, how many patent protection certificates that Canadian businesses have filed for the past 15 years? I remember just few months ego when everybody in this country was saying that Canada is in a relative good shape compared to USA(national obsession). Then after it became clear that USA was heading into a slowdown(they did not even dare to call it a recession), the talking heads started to talk about how the world was about to decouple from USA. Remember? The rest of the world (BRIC) was supposed to pick up the demand for our resources and sustain these bubbles. Expect, USA constitutes 25% of world consumption at least. How can any thinking soul believes such lazy thinking? We keep electing people that only qualify to be Ministers of oil in Alberta to govern us and expect them to have a vision. I don't believe that the guy running the bank of Canada is wright because he was wrong in the first place and could not see this coming. Besides, this is a guy who was running, a long with Paulson, Goldman Sacks. Look where they put the USA's banking system: Generalized insolvency.

    Here is what I think can work and sustain itself: Religiously spend into education and child care. This is the base for future innovations. Young Canadian couples cannot even think of having kids and continue to have a descent life. By the way, have I mention that this would create good and sustainable jobs? Can you see all the spending that comes with a child (Day care, early child education, ect....)? This should be the Government business. And please stop fooling yourself with P3. It will not work. Have you ever had a co-worker who just got a baby? Talk to her/him. Believe me, you don't need to have a PHD to figure out that something is not right in this country.
    We know that we live in pyramid shaped social/economical system. We still need to have lower paying jobs. Where do we expect those doing such jobs to live? Affordable housing is the answer.
  34. Gary Keen from Canada writes: When Richard Nixon took the US$ off the gold standard in 1971, he said "we are all Keynesians now". How right he was. Keynes was a proponent - not only of going off the gold standard - but also of government spending to stimulate the economy. Now everyone seems to assume that this is what we must do, but has it ever worked? Since the government really has no money of its own - just that which it borrows or taxes (either legitimately or through monetary inflation) - it has to take money from the taxpayer in order to provide a "stimulus". By robbing Peter to pay Paul, what the government is doing is taking capital that could have been used to invest in productive, profitable ventures and using those funds to invest based (usually) on political, not economic - read unprofitable - criteria. These money losing ventures then cause a drag on the economy and slow down the recovery. Free market economists posit that the "Great Depression" should have amounted to a recession of only one or two years, but with the best of intentions, Hoover and then Roosevelt managed to extend it for a decade through diversion of capital from the private sector. Today the assumption is that Roosevelt's mistake was not enough stimulus! What proof? Besides, why are we trying to "correct" a correction? House prices, stock prices, and soon, bond prices, are trying to go down because they were too high. Why do we want normal, everyday houses to cost $1 million? Who can afford that? What sense is there to price earnings ratios for equities to be above 12? Bonds are so pricey now the yields are approaching zero! Prices are too high! They need to drop and those companies/individuals that bet that prices will rise forever need to learn that life does not work that way. I, for one, do not want a penny of my money used to bail them out, or to be "invested" in some make work project thank you very much!
  35. Gardiner Westbound from Canada writes: .
    No government has successfully spent a country out of a rescession. WWII ended the Great Depression, not FDR's New Deal.
  36. greg stockton from toronto, Canada writes: "The Alaska Fund pays yearly dividends and the principle has grown significantly. Alaska has been aggressive in resource extraction and getting its product to market including the recent approval of the Alaska natural gas pipeline. The Fund is arm's length although Gov. Palin did request it divest itself of any investments with interests in Sudan or Somalia" ---------------------------------------------------------------------------------- With all due respect, your original comment on SWF left me with impression that it would be nation state controlled. I do not have as much problem with accepting a US state or province fund because their ambitions are limited by their very nature. ------------------------------------------------ "Your comments are full of generalities including the alleged breakdown of totalitarian vs. democratic countries, with a curious fixation on China, and you failed to note non-commodity based funds in Australia, Malaysia, South Korea and Taiwan" --------------------------------------------------------- I stuck with commenting on commodity based funds only because that is what you proposed in your original post. My so-called fixation on China, which you accidently overlooked on your list, stems from their apparent pan-national objectives. ----------------------------------------------------- "I quite frankly do not understand the point of your post since you seem only to be providing negatives on the basis of archaic ideology. " ----------------------------------------------------- I presume that your views represent the modern ideology. By its very purpose a P3 requires public accountability and objectives. But all construction and operations should be performed by the private sector with a view to making a profit. Thanks for your comments. Out of characters.
  37. Donalda Williams Clogg from Hudson, Canada writes: I wonder if Mr.Harper can ever see beyond the quest for votes and the desire to cling to power. To forget partisan interests and think of the truly vulnerable in such a serious economic downturn. When Mr.Harper, in a television interview, during this financial crisis glibly suggested that it was a good time to invest i the stock market, as if every Canadian in the country had a portfolio just like his mother. Let us hope that the Bank of Canada is right in its prognosis.
  38. Mervin Hollingsworth from Saskatoon, Sk, Canada writes: Perhaps Mr. Simpson should ask his friends in the Liberal and other opposition parties why we are spending billions to get us out of recession when in fact all that spending will do no such thing. Only the U.S. coming out of recession will start the road to recovery. With 85% of our exports going to the States it is their economy which is sick and needs to recover.

    However, given we have three left wing opposition parties yelling for a stimulus package and not a small one the Harper government has no choice if it wants to stay in power. Harper could take the high road and not provide the stimulus they are demanding but the Liberals would probably win the next election after promising mana from heaven. They would suck Canadians in and then spend like there is no tomorrow to show Canadians they "care". To hell with the impact on the debt load of the country. Or on the other hand the Libs could simply say there is nothing they can do to stop the recession. Exactly what Harper probably feels is the right course of action.
  39. Brian Jones from Canada writes: The particent crap that appears on here is too much. If you have nothing to say or add that is constructive, shut up.
  40. Tor Hill Sask. from Canada writes: Now who would expect that the Harper Conservatives might be the ones to break this paradigm of ineffective stimulus spending?

    As Mr. Simpson notes, we need stimulus spending that: ''produces tomorrow's gains in competitiveness and sustainability. Otherwise, we'll wind up with the worst of all worlds: stimulus that won't make much difference in the short run but that acts as a drag on the future.''

    Don't expect the Harper Conservatives to make any effort to break the pattern of the past. 'Tomorrow's gains in competitiveness and sustainability'- nothing on that front from this unimaginative minority government.
  41. C Oslie from Canada writes: Gardiner Westbound from Canada writes: .
    "No government has successfully spent a country out of a rescession. WWII ended the Great Depression, not FDR's New Deal. "

    WWII -was- spending the country(ies) out of a recession. Not why it was fought, of course, but it was one of the effects.
  42. Dale Brown from Victoria, Canada writes: I agree wholeheartedly with Simpson's basic premise. The stimulus package will be devoid of long-term considerations, the most important of which is the need to free transportation from its nearly 100% dependency on oil. All infrastructure expenditure must be guided by the need to restructure our sources of energy. This restructuring will be highly expensive - we can not afford to accumulate another one hundred billion dollars in deficit without a tangible product. The required infrastructure projects are not "shovel ready" by their nature. Rapid transit systems, nuclear plants, windmills, solar energy projects, hydroelectric projects, electrification of the railways, all require enormous planning. There may not be another hundred billion available second time around. The fundamental problem is that the leaders in the Western World still take most of their advice from economists. Economists do not fundamentally accept that resources are finite. In the economist's world the hidden hand solves all problems. Their only concern is the need to restimulate demand; once that is done all is well again. Economists, of course, wear blinkers which do not allow them to see further back than about 300 years of human history nor, I would suggest, forward more than about a decade. So we will end up burning through sixty billion or so on every two bit mayor's silly pet project.
  43. Paul Thompson from Canada writes: Gardiner Westbound, your comment makes no sense. Did the governments of the day wait until the economy had improved before rearming to fight WW2? You say the war ended the Great Depression, was it not government spending that financed both it and the beneficial social programs that emerged in the post-war era such as the USA's GI Bill?
  44. Eileen Dover from Canada writes: Bob Dylan's Voice from Canada writes: "I am so confused. Harper says that he doesn't believe major stimulus required because Canada doesn't have the same problems as other countries. The Liberals threaten a coalition coup. Harper under threat of government overthrow decides to provide the stimulus lobbied for by the Liberals and voila he is criticized for throwing stimulus into the economy that is not required. Liberals, please get your story straight"

    Don't be confused Bob. The obvious answer is for PM Harper to stick to his principles and ignore the opposition pleas, so why isn't he doing this? Oh yeah, it's all about clinging to power even if it goes against one's principles.
  45. Auroran Bear from Montreal, Canada writes: Same mistakes as the past?

    "The bank is remarkably upbeat about 2010. Growth, it forecasts, will be almost 4 per cent in 2010, with smooth sailing thereafter. In other words, the current economic downdraft will be nasty but short."

    Sure Mr. Simpson, we should believe the same BoC that didn't see the mess coming in the first place.

    And as for your "repeating the same mistakes", please tell me the last time all industrialized nations we either in recession or one quarter's GDP away from being there when this type of global stimulus package was tried?

    Don't tell me the 1930's because this type of Keynesian stimulus has never been tried on such a global level.
  46. peter clarke from Toronto, Canada writes: Infrastructure spending is not production of capital, nor does it produce goods or services that will have any long term effect on the economy. Since the great depression in 1929, money is the only true wealth as today far too many people and governments live on borrowed money that they can not afford to pay in their lifetimes. Banks were not formed to lend money, but rather for the protection of money their depositors make from time to time. We now have the real result from banks that have been aggressively lending depositors hard earned savings. When banks lend money, then they also must be regulated to set aside the actual same dollar amount into a non-usable reserve fund, until such time as the loaned money has been repaid to the bank in full. This ensures that our banking system has a true banking reserve system in place. Further the regulations for banks should clearly stipulate that at any given time, their lending abilities should not exceed 50% of the total amount of dollars on deposit by their customers. Money by its very value is the only commodity that can be exchanged for real products and services. Our dollar, by government non intervention, has been allowed to depreciate in value by over 25% against other world currencies that have no natural resources when compared to those of Canada. The Canadian dollar is presently undervalued by .30 to .40 cents if one uses the usa dollar as a basis. What is urgently needed and has been for the past 75 years, is for governments to live within the amounts of revenues earned annually and not borrow or spend any more than the annual revenues they receive and collect through taxes. Keep smiling....
  47. Kid Dingo from Canada writes:
    The Canadian economy is going through an economic restructuring, that is, it is shifting its vital resources away from uneconomic & uncompetitve manufacturing to more valuable services and primary resources. It is a much needed shift to bring Canada back into a competitive position for international tarde, and I don't mean just with America. Canada MUST expand its trade with other countries outside North America. It can only do that by restructuring, and thank God, it finally seems to be happening.
    For too long Canada has relied virtually entirely on its foreign income from the US, an economy that has been a house of cards for at least a decade.
    Economic stimulus of the shotgun approach that Harper will likely propose will only to prop up uneconomic, uncompetitive, wasteful industries like the auto sector.
    Time to bite the bullet, let them go, and retrain and restructure.
  48. michael powell from toronto, Canada writes: The BOC notion that the current recession will bottom out in the second half of 2009 and that there will be even modest growth in 2010 is just more Ottawa nonsense. From where comes this increased demand for our goods and services ? The idea that Mr.Carney or Mr.Harper and/or any of their henchmen have any insight on the future demand expectations of any of our largest trading partners is a fantasy. Most of the recent estimates of the demand side of the economic equation of our largest trading partner are extremely soft and are looking years out for recovery. This unfortunately puts matters into the hands of leaders within our own border. The fact that they are not experienced in this regard is obvious.The question remains:Not whether a stimulus package is necessary,but rather is the package large enough to have any effect ?
  49. David Browne from Toronto, Canada writes: Any stimulus package must be made up of infrastructure repairs, upgrades and expansions that are by definition necessary for future development. There is an abundance of these infrastructure works to be done. Much of it has been put off by previous federal and provincial governments. Paul Martin's surpluses were simply money withheld from these infrastructure needs. What we spend now on these projects will be money saved later on. As far as deficits are concerned they could be in part offset by tax increases. This is especially true with the GST and corporate tax cuts already in the works that can be cancelled or reinstated. It is interesting that in the U.S., that as long as there are ever increasing tax cuts, the neo-cons. don't question the ever increasing deficits. Deficits are only questioned when it results from social and physical infrastructure spending. In Britain in the early 80's the government did increase taxes during that recession and it was to the benefit of the country.
  50. truth betold from Canada writes: Yah, stop the "particent" crap, people.
  51. Misty Morning from Canada writes: Before we agree to a $64 billion "stimulus" package could the Bank of Canada, or someone/anyone, tell us what our Deficit for the 2008-2009 fiscal year is going to be? Mr. Simpson, do you know? I know what the state of my deficit is going to be, like $0.00. Maybe someone should hire a Domestic Engineer as a Finance Minister! I am available for the job.
  52. matt mcnaughton from Edmonton, Canada writes: Drop federal taxes and spending and let the provinces raise their own taxes and spending for infrastructure projects, if they really need them. The more centralized Canadian taxation and spending becomes, the worse off we are. Why don't the provinces run their own deficits to stimulate their own economies? Why is it always the federal governments job? Because they're chicken, that's why. It's easier to blame the PM, whoever he is, for everything. Sic transit gloria Canuckii.
  53. David Gibson from Hamilton, Canada writes: When the US poop hit the fan in September, and the Tories then got another minority, they were soon called on the mat by the opposition and the press, and slapped soundly on the cheeks for not getting it, being too optimistic, blind, heartless, not understanding, etc. etc. etc.. "Steady as she goes is not on" the press and politicos screamed, "It is panic time, and billions are needed." It was, as per the usual in Canadian politics, a public discussion in terms simplistic and moronic, at volumes terrific. The people with all the mouth are going to get what they wished for: an expensive, 5-year solution to a 1 year problem. Collectively, we are a nation of nincompoops.
  54. David Gibson from Hamilton, Canada writes: ......nation of nincompoops. And you know what's the worst thing about it? There ain't damn thing can be done about it. The combination of a structurally malignant political system and a woefully deficient media class render Canada politically retarded.
  55. Sylvia Wilson from Canada writes: Why aren't there any tax increases to the top earners helping to offset stimulus spending?

    Seems like governments always lower taxes for the rich and not help middle and lower income earners which erodes future numbers of middle and income earners. Yes, Canada could afford to lose 'some' higher wage earners in the short term because sooner or later everyone pays for stimulus debt!

    Come to think of it...all stimulus spending undoubtedly leads to future higher taxes. :-) So wouldn't the most practical route be limiting both!

  56. Sylvia Wilson from Canada writes: David Gibson from Hamilton,

    May I add, "Over and under taxed nation of nincompoops?" :-)
  57. Andrew j from Toronto, Canada writes: Simpson is bang on. The world economy is fundamentally changing and in the future only those who use less energy and create less pollution will be competitive. That means less Suburbia, more old-style cities & towns based on walking, public transit and intermodal freight transport.

    The ground is shifting under our feet whether we like it or not. We Canadians need to fundamentally change the way we do things and the only way to start is to set our goals for the future and work towards them - starting now.
  58. Robert Mackidd from Winnipeg, Canada writes: Mr. Simpson has it only partly right.

    First in downturns the governmnet must be the "spender of last resort, and the lender of last resort." There is no one else willing to step up to the plate, so for better or worse the task falls on governmnets shoulders.

    Mr. Simpson does have some good ideas but, they are long term. People on the other hand that are out of a job or will be, tend to think short term. It's the "here and now" for them.

    Its all fine and dandy to have a long term approach, but remember people can ill afford to take this road.

    If we lived and could work for 100 or so years, 5 or 6 years in a resession would not be a great burden. The simple fact is that we have 40 years of productive life. During that period people must pay a mortgage, buy cars, put the kids throught school, save for retirement etc. etc. So 5 or 6 years is a long time.

    As Booker T amd the Memphis Group's song title goes "Time is Tight"
  59. Cdn Expat from Washington, D.C., United States writes: I like very much the sentiment of Mr. Simpson in what he writes here. I lived through the 1970s in Canada and all the nonsense budgets of the Liberal governments and, to a lesser extent, the Mulroney governments. But I have a hard time believing the BoC's forecast. The situation is far, far worse than that. It is incumbent on all economies to pursue expansionary policies on all fronts. We are all in grave danger.

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