Canada's Debt Problem, All That Glisters, IT Economics, Green Tea, Canada's Workhouses, Letting Lehman Go, 210mn Unemployed

My mom very rarely cried.

The few times she did cry -- I can remember three times -- twice out of shock, once out of anger -- are seared into my brain.

One of those three times was one afternoon in 1980 when I had just come back from school. That morning she had co-signed a one year mortgage on our home at an 18% interest rate. The 10-year mortgage had come due and my family ran smack into the greatest inflation episode in modern Canadian economic history  http://canadabubble.com/charts/521-canada-inflation-rate-history.html.

We survived but I have had a chronic fear of debt ever since thankfully shared with my wife.

News then that Canadian households are among the most levered in the G7 cradled by rock bottom interest rates.

Tears may fall.

Understanding gold's run, the power of falling IT prices on the developing economies, the colour of tea in America, are Canada's child labour laws reminiscent of Dickens's 18th century Britain?, thoughts about the state and letting Lehman go, and how not to employ the 210 million that are unemployed.

Canadian households are levered second only to the United States among the G7. Come on people, lighten up!

Much has been said recently about how Canadian families are ringing up huge amounts of debt, and consumers have been warned repeatedly that they may be in over their heads as interest rates rise.  http://www.theglobeandmail.com/report-on-business/top-business-stories/canada-and-household-debt-almost-the-worst-among-g7/article1709705/

 

The price of gold has hit nominal highs ($1270 per once) in recent days. The Japanese government launched an aggressive attempt to decrease the value of the yen. The American government is pressuring China to increase the value of its currency.

All are linked because the world may be on the verge of an enormous dénouement in the 39 year experiment in true paper currencies that began when the Nixon Administration un-pegged the US dollar to a fixed price of gold. The trust that central banks will act to protect the value of the currencies they are responsible for has had no basis in fact.

Greenspan's gold.

The reality is that the real beneficiaries of un-pegged currencies were those that manifestly distrusted central banks, namely investors into gold, and countries that artificially weakened their currencies -- aka China.

Of all US asset classes since 2000 which has performed the best?

You probably ....  http://www.businessinsider.com/chart-of-the-day-10-year-returns-by-asset-class-2010-9?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock+Chart+Of+The+Day&utm_campaign=Clusterstock_COTD_091510

 

Jonathan Spall explains. Central banks have lost control and human beings are irrational.

Over the past 10 years gold has increased five-fold and recently hit an all-time nominal high above $1,270 per ounce. There are many commentators confidently predicting further gains before the end of the year as well as a new inflation adjusted all-time high (estimated to be $2,250 in today’s money) in the next few years.   http://www.ft.com/cms/s/0/568edbd4-c0e1-11df-99c4-00144feab49a.html?ftcamp=rss&ftcamp=crm/email/2010916/nbe/Comment/product

The attempt by a central bank to weaken its currency gives more incentive to those long gold.

THE Japanese have intervened today to drive down the yen, for the first time since 2004, and have had some initial success.  http://www.economist.com/blogs/buttonwood/2010/09/currencies_gold_and_international_competition&fsrc=nwl

Japan's attempt to weaken its currency may give China room to refuse to let theirs go higher. Trade protection through the front door.

Japan's first intervention in the foreign exchange market in almost six years may undermine calls for China to let its currency appreciate.  http://search.japantimes.co.jp/rss/nb20100916n2.html

 

It will be hard for Japan to get much traction on weakening its currency because every other country is trying to do the same thing.

Japan’s decision to intervene in currency markets to weaken the yen and shore up its export-driven economy could be only the first step in a long battle — one made more difficult because Japan, unable to find support among its trading partners, must go it alone.   http://www.nytimes.com/2010/09/16/business/global/16yen.html?_r=2&ref=global

Some of the smartest people in the world who also happen to be pretty good investors work at the world's largest bond fund PIMCO. News that they are going long inflation and betting that the Federal Reserve will keep devaluing the US dollar. Betting with Ben's helicopters http://www.youtube.com/watch?v=sx7XNb3Q9Ek

Thanks to David of Victoria for sending this in.

Bill Gross’s Pacific Investment Management Co. made an $8.1 billion wager that the U.S. won’t suffer a decade of deflation like the one that crippled Japan starting in the 1990s.    http://www.bloomberg.com/news/2010-09-15/pimco-makes-8-1-billion-bet-against-lost-decade-of-deflation.html

Oh, and for the precise, the expression is not, 'All that glitters...' but:

"All that glisters is not gold; / Often have you heard that told. / Many a man his life hath sold / But my outside to behold. / Gilded tombs do worms enfold."          The Merchant of Venice (II, vii)

Andy Xie on the power of inexpensive information technologies and their defining positive impact on the developing economies. For students of Canada's poor productivity performance virtual monopolies in information technologies pushes up prices and reduces national wealth.

As cloud computing, optical fiber lines and mobile devices combine to form a much more powerful and accessible IT network, information and communication costs are falling to as low as zero. Some analysts consider this a third wave for the IT revolution, following the IBM mainframe of the 1980s and the advent of personal computers alongside the Internet in the 1990s.   http://english.caing.com/2010-09-07/100177858.html

Mummy, why are most of the faces white?

Call out the National Guard! It's racial integration time in the Tea Party.   http://www.washingtonpost.com/wp-dyn/content/article/2010/09/14/AR2010091405457.html?wprss=rss_opinions

 

And the Economist even took a poll of Tea Party supporters just to be sure.

ON SEPTEMBER 14th tea-party conservatives struck another blow to the Republican establishment when Christine O'Donnell defied expectations to win the Republican Delaware Senate primary, beating Mike Castle, a nine-term Republican congressman.  http://www.economist.com/node/17035460?story_id=17035460&fsrc=nwl

 

I am sure that the Canadian Labour Congress does good work. 

But comparing Canada's child labour laws to Afghanistan and North Korea undermines their credibility.

This Statement is intended to guide the actions of individuals and affiliate organizations who have pledged to take part in a national campaign to raise awareness about Canada’s inadequate minimum age laws and to advocate for Canada to ratify the International Labour Organization (ILO) Convention 138 (C138).   http://www.canadianlabour.ca/news-room/statements/statement-minimum-age-campaign

Related.

Last week, thousands of young Canadians traded in their supermarket smocks, dusty brooms, and store greeter vests as they headed back into the classroom.   http://www.themarknews.com/articles/2348-canada-s-lagging-child-labour-laws

A thorough summary -- in other words real research -- on the current state of Canada's labour laws. Provisions for children as young as twelve is made in Alberta one assumes for farming families and small retail businesses.

In Canada, labour laws dealing with the employment of children and young persons have been enacted over many decades.  Pdf below.

The anniversary of Lehman's collapse has triggered some interesting articles.

Should they have let it go?

In Hank Paulson’s book on the 2008 financial crisis, the former US Treasury secretary recounts how Dick Fuld, former chief executive of Lehman Brothers, enthused to him about Ken Lewis, former head of Bank of America. “We have a lot in common – we’re both guys with a chip on our shoulder,” he said.  http://www.ft.com/cms/s/0/33bc0ea2-c0fe-11df-99c4-00144feab49a.html?ftcamp=rss

Of course because that is the essence of capitalism. You know, some win some lose, and when you lose you lose your money not other people's.

Once upon a time, capitalism was a very unforgiving system.  http://www.guardian.co.uk/commentisfree/2010/sep/16/getting-capitalism-right-lehman-brothers-collapse

But the revulsion for the banks has morphed into a new narrative, the nasty nanny state.

When Lehman collapsed, I never guessed that so many would end up almost as hostile to the state as to the banks themselves.   http://www.guardian.co.uk/commentisfree/2010/sep/15/lehman-financial-crisis-anti-statism

In Canada too. We just need police and our borders protected please. Thanks to David in Ottawa for sending this in.

In France, the legal retirement age is 60. President Sarkozy, who like every other European leader is desperate to balance the books, proposes to raise this to 62. Hence the scene, as strikers work at bringing the country to a halt, and fill the streets in the time-honoured, Parisian fashion. 
 http://www.ottawacitizen.com/news/Resisting+voracious+state/3492205/story.html
 
Finally, when will European bureaucratics remind themselves that it is mostly small companies that are responsible for jobs and not the state. 
 
They spoke of the 210 million people currently out of work worldwide—the highest level of official unemployment in history. They spoke of the human impact in terms of persistent loss of earnings, reduced life expectancy, and lower educational achievement for the children of the unemployed. And they spoke of a potentially “lost generation” of young people whose unemployment rates are much higher than for older groups.   http://blog-imfdirect.imf.org/2010/09/14/saving-the-lost-generation/
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Twin Virtues: Inequality of Outcomes & Equality of Opportunity©

Twin Virtues

Ultimately, the most successful societies find the balance between the twin virtues of inequality of outcomes and equality of opportunity.

The new politics must marry the twin virtues of unequal outcomes and equality of opportunity.

When too few get too much everybody loses.

Feminism is about women living their lives on their own terms, marshalling the resources of the society to make that possible, and men embracing this as vital to a successful society and their own liberation.

Can it be that striving for equality of opportunity however imperfect the process not only benefits the individual but also creates benefits for the society that are unintended but wonderful?

Economics must be a 'moral enterprise' as much as politics claims to be. Economic outcomes need to be framed in terms of right and wrong not just efficiency if only because these often align in surprising ways that are good for society and the economy.

My vision of Canada is that any Canadian child from a family of limited circumstance can expect to have a chance at lifetime of unlimited opportunities.

Free trade is a wonderful thing. Time and time again economists have proven that free trade creates enormous wealth for each country 'on the whole'. Historians have shown that free trade is usually associated with rising political, social and cultural liberty. The perennial problem is that free trade always creates tremendous disruption for thousands even millions of individuals often concentrated in one geography, and where the state is idle, not investing in best in class instruments of social justice, free trade can be a permanent ticket out of the middle class, down, not up.

Tax policy should be founded on the principle of generating steady tax revenues sufficient to maximise environmentally sustainable economic growth in order to fund fair government.

Public policy should be designed to decrease inequality before the law and increase equality of opportunity.

Capitalism is not the problem; the problem is what we do with capitalism.

Content is always more difficult to argue than conspiracy.

Let the state regulate and the market operate (most things).

Welfare strategies are best designed as a hand up, not as a hand out.

Political debate should not be fact free fighting.

Explanation lasts longer than eloquence.

Always favour empowerment over dependency.

The most enduring public figures are embraced for the causes they fought for and not the concept of themselves they hoped others would remember them by.

Find your voice and don't be the echo of somebody else.

It is possible to operate on two different levels: the practical, cautious and conservative; and the realm of ideas, open, free, and radical.