On 22 September, Canada’s opposition parties banded together to defeat the Conservative Party “private member’s” bill to scrap this ineffective registry. It’s fifteen years old, disgracefully over spent, with no empirical evidence it prevents crime. Still, apart from four members, opposition politicians, like school children, yielded to their masters and voted in unison to keep this registry: 153 yeses to 151 no’s.
In its May 14 Fiscal Monitor, titled Navigating The Fiscal Challenges Ahead, The International Monetary Fund (IMF) paints a grim, yet realistic picture. The report states, “even as the global economy improves, fiscal balances in advanced countries, are worsening.” One significant concern is the “exceptionally high” government financing needs of many advanced economies. US Government debt, average maturity of 4.4 years, is about 100% of GDP and projected to rise. This year, the US will need to raise debt equivalent to 32% of GDP to rollover maturing debt (21% of GDP) and for new deficits (11% of GDP)–a significant exposure to interest rate hikes that will siphon funds from basic needs!
Discussion and debate in the USA about financial regulation omit two key causes of the recent financial crisis. First, the economic system encouraged irresponsible consumer spending and irresponsible financial institution lending. Second, and flowing out of the first, a lack of integrity permeated the sector. “Liars loans” were common: Borrowers lied about income, and lenders knowingly accepted this information and processed documents. As well, financial institutions developed and sold exotic financial instruments, whose values they knew were questionable. These activities were common knowledge, the economy boomed, Governments bragged about their strong economies.
On July 1, in Ontario and British Columbia, two consumption taxes will merge: Provincial Sales Tax (PST) will merge with Federal Goods and Services Tax (GST) to become the Federal Harmonized Sales Taxes (HST). Many folks in each Province are outraged because the HST will apply to some items that’s currently taxed by the GST but not the PST. Governments say this tax rearrangement will be neutral to them–they will not collect more taxes by the combination. Still, these folks are trying to get Governments to reverse the decision, which they claim will burden them more than before.
I believe global stock markets will be jittery for at least the next 18 months. Using borrowed funds, individuals and Governments over extended themselves for years prior to the recession. During the recession, Governments stimulated —a euphemism for waste, and pork— their economies, using debt. Meanwhile, consumers borrowed to spend and Governments bragged about economic growth.
There is good news and bad news about the household debt trap. The good news is, it is accepted generally by policy makers that Canadians are carrying too much debt. The bad news is Canadians aren’t heeding warnings. Also, we do not hear much about the need for Canadians to start lifestyle changes to lower debt. Here are a few suggestions.
Individual Canadians and Canadian Governments took on more debt during the recession. Interest rates have been at historic lows, and can only go up. Will individuals be able to service debt at higher interest rates?
During the global financial crisis in 2008, as he battled to “keep the system afloat,” I listened carefully to former USA Treasury Secretary Hank Paulson’s frequent pronouncements. I was convinced he was too close to investment banks, and he exacerbated the crisis by his reactions: fear, panic, and myopia. After reading his book, I am more convinced.
Kudos to Stephen Harper’s conservative Government for standing up to the G-20 finance ministers and warding off their absurd, crazy, ill-conceived global bank tax. If the G-20 folks explained to grade 10 students, the greed and dishonesty which brought down the global financial system, I believe the students would agree with Canada’s position!
The leader of the Federal Liberals, Michael Ignatieff, says, two years after they are elected, they will reduce the Federal deficit to one percent of GDP. Based on today’s deficit, that’s about $40 billion reduction. But I haven’t heard mention of his plans to do this. Isn’t it great to be in opposition? Promise anything; many people will believe, and millions will vote for you! Perhaps Michael Ignatieff knows he will sit in opposition for a while and the deficit will be around his target when (if) he is elected.