Toro

The US is not bankrupt. The US can simply change the terms of the social security and medicare and the liabilities disappear. As I've written before, the Iranian oil bourse traded in euros is propogated by people with no understanding of capital flows.

Of course Americans want our oil. That's why they're paying $77 a barrell for it.

But from your perspective, wouldn't Harper pouting and taking his toys and going home a good thing?

The funny thing about the Communist Party in Canda is that .... there's a Marxist-Lenninist Party too! Time to Unite the Far Left!

Groups defend their interests. This is an argument I find that comes from philosophers and the like, as opposed to people with any practical exeprience in business or journalism. As a shareholder, my interest is to make as much money as possible. In media, that means getting as many people as possible to watch/read my platform. The more people who buy my product, the more money I get because people are a.) buying my product, and b.) ad rates rise. Well, of course, the argument is then "the corporations won't advertise if their interests are threatened." But companies don't think that way. Companies want to sell product. They will go to where their demographic is highest. So media outlets want to pull in as many viewers as possible so they can charge as much as they can. And to do that, they must be relevant. Ad rates are set by the market and are influenced by demographics. Not only that, but corporations don't even act that way. What the proponents of this media-propoganda model seem to miss is that many if not most of the largest corporations play only a minor role in what and where they advertise. The largest buyers of advertising in the United States outsource most of their ad buying to ad buyers who do it for them. The companies will say "Okay, this is who we want to sell to and this is how many units we want to sell" and the ad buyers will then go and buy the ad based on the goals of the corporation. And the goals of Proctor and Gamble are to "sell as many Swiffers" as they can, not "maintain our socio-economic dominance." Corporations are not instructing their ad buyers to manipulate the media for political reasons. They just want to sell stuff. There is no nefarious cabal working to protect the interests of corporations in general along with the media because the two are often at cross purposes. It must baffle the proponents of this argument when Ken Lay gets up on the stand in a court of law for which he is accused of fraud and accuses the media of creating a run on his company leading to its collapse. Not only was Ken Lay the single biggest political donator to George W. Bush's career outside his family, but it was the Wall Street Journal - the media bastion of free enterprise capitalism - that broke the story of the off balance sheet accounts that eventually lead to the downfall of Enron. The Wall Street Journal is the newspaper that broke the story about the recent options expensing scandal that will send many executives to jail. Worldcom, Adelphia, Healthsouth, etc., etc., etc. are all companies that have been rocked by financial scandal and the Wall Street Journal has been at the forefront bringing the misdeeds of corporate America to the forefront. And its not just the WSJ. Its the likes of The Economist, Forbes, BusinessWeek, etc., too. And these weren't insignificant companies either. These were companies that were the poster children of the New Economy, the new American corporation that would lead America into the 21st century, much-admired, politically-connected corporations. The business media outlets - owned both by public shareholders and private owners - are the ones that brought these companies down. If its the media that protects the "interests" of corporations, you certainly would think they wouldn't be reporting items that would lead to the destruction of those companies. I'm going to get to the dual class structure issue in a minute, but this is a good time to segue into the roll of journalists. Ultimately, it was journalists that brought down these companies. The media-as-propoganda model doesn't seem to understand the role and motivations of journalists. Reporting on the financial misdeeds of corporations can make a jourmalists' career spectacularly. So financial and business journalists have great motivation to find nefarious actions of corporations because it can make the journalist rich and famous, or at least highly esteemed within the profession. Then the argument is that "Well, the journalists are working hard, but its the editors that kill the story." Hardly. Not only were the editors usually journalists, but try and imagine what would happen if a journalist went to an editor with a hot story and the editor killed it for political expediency - "so they could protect the interests of the wealthy." The journalist would quit and go work for someone else who would print it, even if it were out of country or a publication called Mother Jones. Then, the editor would have to tell her boss that they had the story - the story that would have sold more newspapers - but lost the story to a rival. The boss would then have to report to the shareholders - me - that they could have made more money and that they damaged the reputation of the media outlet (something even more worrisome) by deep-sixing the story. That makes me - the shareholder - very unhappy. Now tell me how this helps me again? Also, if corporations are willfully suppressing "the truth" for political expediency, tell me where are all the disgruntled journalists? Where are all the bitter journalists telling us about this? "Trying to protect their jobs," you'd answer. Okay, where are all the retired journalists then, the ones who have nothing to lose? Or the ones on their deathbeds? You don't think they want to get their stories out? They're journalists! Getting the story out is what motivates them! Finally, on the dual class structure, several media companies have issued dual classes of stock to retain control. But why? The media-as-propoganda model would tell you "to further their interests" No, not really. if you sit and talk with original founders or media companies that list dual class shares of stock, they will tell you that one of the reasons they did so - and sometimes the main reason - is to preserve the media outlet they are bringing public. Running a public company is very different than running a private company. Managers will tell you in private - and some in public - that the public markets are too focused on near term, quarterly results. That's debateable, but it is valid. The thinking is that focusing too much on the short term damages the long term value of the company. Companies will cut costs, for example, to meet this quarter's earnings estimate so the stock price doesn't get pummelled, but in the mean time, the area they cut is important to a segment of consumers that will drift away over time thus hurting the franchise of the outlet. Its not so much the private owners' reaction that contradicts the media-as-propoganda model but rather the public market's. The public market's focus feared by the private market doesn't give two hoots about any political model. It cares about right now. What are you doing for me now. Not five years from now, but this year. This quarter. The public market doesn't care about any grand socioeconomic structure. It wants immediate - or near immediate - results. But even here, its not that simple, because shareholders of public companies aren't really all that strong. Often times, its the management of media companies that is more powerful than the shareholders. And many in upper management came from, yup you guessed it, deep within the media companies. Not only that, but the role of the different classes of stock aren't particularly cut and dried. Public shareholders have rights that the courts will enforce when private shareholders are running roughshod over the interests of shareholders of subordinate classes of stock. So even the holders of the super-voting stock who would have the most to gain in "maintaining political control" when it comes to the media-propoganda model are at least partially subject to the pressures of the public markets. So any large shareholder would find the media-as-propoganda model to be one that doesn't apply in the real world.

The appeal to farm subsidies are 1.) Security of food supply. 2.) A way of life 3.) Everyone else has subsidies so to survive, we must have subsidies too.

And what are the motivations of owners of dual class shares structures versus shareholders of companies without dual class shares? Control is part of it. But there is another reason. (Just for reference, of the big media companies, Viacom and News Corp have dual class shares while Time Warner and Disney do not.) Also, what are the motivations of journalists and editors?

This is bang on. I'm always amazed that the people who believe in the media-propoganda model seem to have almost no understanding of the motivations and rolls of journalists, editors and shareholders. The propoganda model makes these grand assumptions and proclimations from 20,000 feet without explaining why people behave the way they do. And before I sign off, I'd ask the people who disagree with me to first answer this question; Why do media companies issue dual classes of stock and how does this dual shareholder structure effect the motivations of media company shareholders relative to companies that do not have dual classes of stocks?

It was the rural world of France and the United States. This was expected so probably not.

BTW, one nation uniting all Muslims is called the caliphate. It is the ultimate goal of al-Qaeda.

I don't know about Quebec, but Canada's position in the Middle East will not matter one iota when it comes time to vote in English Canada.

If I own a refiner and then I sell it, I have converted my physical capital into financial capital. I will sell it, receive currency, then invest that currency in paper assets such as bank deposits, bonds, stocks, etc. If I then want to buy an oil sands project in Alberta, I transfer my financial capital into Alberta, convert into Canadian currency, then exchange the currency for my physical plant in Alberta. The role of currency, or "money", is to facilitate the exchange. Financial capital is physical and intellectual capital transfered to paper (or electrons.) The supply of money will effect the value of financial assets.

What you are describing is Alberta's terms of trade. When demand rises more for an entity's exports relative to an entity's imports, the terms of trade for that entity improves, and the entity is in a relatively better position, i.e. the relative wealth of the entity has improved. In this case, the terms of trade for Alberta has improved because demand for oil relative to cars. Alberta's wealth is rising. Economic wealth is the accumulated total of measureable, transferable utility over time. Wealth is a function of production, and production is a function of technological advancement. Capital is the embodiment of wealth, since production and technological advancement is embodied in capital. Capital can be physical capital such as a lathe machine or a blade server or your house, or it can be intellectual capital such as understanding accounting law or genomics. Financial capital is representation of this physical or intellectual capital into easily portable and tradeable units. Financial capital is necessary to store value and facilitate exchange. When an entity's terms of trade improves, capital will flow into the jurisdiction because relative returns improve, be it the returns to capital or the returns to labour. When Alberta's terms of trade improves from 1000 bbls/car to 300, capital flows into Alberta. Financial capital comes into Alberta to invest. Intellectual capital comes into Alberta to work. When that happens, the demand for everything in Alberta rises, especially for fixed goods that are inelastic in the short-run such as housing. You have a boom. This process continues until the relative returns to capital and labour between the jurisidictions eventually equals. Thus, high levels of investment capital flows into Alberta until the marginal return on that capital is equal to the global return on capital. Labour capital stops coming into Alberta when labour is no better off in Alberta than it is elsewhere, either because wages have stopped growing or the cost of living is too high. At that point, capital flowing into Alberta is equal to capital flowing out of Alberta. In the example you give of Alberta's improving terms of trade for oil relative to cars, capital flows into Alberta both causes the improvement in the terms of trade as incremental capital is expended for oil and thus transfered to Albertans, and responds to the improvement in the terms of trade as capital flows into the province to exploit the differential in returns. This what I am refering to when I say "capital flows". Capital is flowing into Alberta because the terms of trade have improved, which is causing a boom, and causing the price of goods such as housing and the price of labour to skyrocket. The government can alleviate this boom by removing capital from the jurisdiction. It can do so through equalization and/or taxation. (Whether or not that's desireable from a political standpoint is another question.) Notice how I haven't said anything about "money" yet. I have referred to "capital" and "wealth". Capital, and thus wealth, are different from the supply of money, though both are effected by it. "Money" is representative but not equal to "wealth". At any given point of time, the stock of wealth is fixed. In a closed economy, the stock of wealth does not change if the static quantity of money is at X or 2X, though in an open economy, the relative wealth of an economy can change when the supply of money is changing from X to 2X. The supply of money is effected by the rate of interest. The rate of interest is effected (but not controlled) by the policies of the central bank. If the BoC were to increase the rate from 3% to, say, 10%, it would slow the economy down in Alberta because it would slow borrowing. The cost of credit would rise, and the demand for housing, cars and other goods would all fall. Thus economic activity would slow, if not contract. However, it wouldn't stop the flows of capital from other parts of the world into Alberta because oil is set in the global market, or at least it wouldn't until the clearing price of oil in the local currency began curtailing demand. What it would do is slow investment in the tar sands because the value of the Canadian dollar would skyrocket, and make returns in the country less atractive than in other parts of the world. Oil would continue to flow out of Alberta but the returns on assets in Alberta would fall because the returns in Canadian dollars would fall since the price of oil is set globally. However, if the BoC raised the rate to 10%, it would crush the economy everywhere else because many parts of Canada do not benefit or are hurt by the rising price of oil, and thus they would become even more uncompetitive because not only would their cost of borrowing rise but their products have become uncompetitive on world markets. That's why raising interest rates solely to alleviate the boom in Alberta is a bad policy because it would hurt the rest of Canada, but the governments could effect the boom by pulling capital out of Alberta through equalization and spreading it elsewhere. Higher taxes in Edmonton would also have the same effect if the capital was invested outside of Alberta.

That's not the point, August. The point was to demonstrate the effects of such a policy. It has the same effect. You said taking money out of the economy wouldn't slow it. It would. No. The boom is the result of real resources flowing into the Albertan economy. Wages in Alberta are rising to attract people to work. The real estate boom is the result of many people moving into the province to offer their labour services. Albertans are moving about the province and are working longer hours. There is alot of physical capital also moving into and about the province to build the houses and provide the plant and equipment. Wages rising, real estate booming, people working longer hours, physical capital coming into the province are all occurring because capital is coming into Alberta because of oil. All of these are function of capital flows arising from the demand for what Alberta has - energy. If oil was $20 a barrel, money wouldn't be flowing into province to a.) invest in the tar sands, and b.) to buy the stuff, and you wouldn't have rising wages, real estate, etc.

By defacto, it is the only position from which negotiations will start. I'm not sure if English is your first language, but the idiom "screw you" connotates hostility and is a derogatory, disrespectful term. It is usually used after an event occurs. Its what one would expect Quebec would say after acrimonious negotiations broke down, not as an attitude Quebec would begin negotiations with, since if they did, then all bets are off. Of course one would expect Quebec's initial bargaining position would be to take zero debt - they have no choice because its prevelant in the discourse. To not begin with this initial position would be seen as a loss of face. Yes. I will show you how. The day after Quebec separates, the debt will not be divided. Negotiations will start and it will all be with Canada. The next day, all of the debt will be with Canada. The day after that, all of the debt will be with Canada. Until negotiations are finally over, the debt will still be with Canada. Throw all of the scare tactics you want. That is what is going to happen. The day after Quebec separates, Canada will still collect taxes in Quebec to service the debt. Negotiations will start and Canada will continue to do so. The next day, Canada will still collect taxes in Quebec. The day after that, Canada will still collect taxes in Quebec. Until negotiations are finally over, Canada will continue to collect taxes in Quebec. Deny all you want. That is what is going to happen.

No, August, that's not what I'm saying Riverwind is correct. Currency in circulation is a fraction of the total currency outstanding - most transactions occur electronically. However, monetary velocity is still at least partially a function of currency in circulation, and GDP is a function of monetary velocity. Thus, draining physical money out of Quebec is bad for the Quebec economy. But you seem to miss the whole point. The point is not that Canada would not be damaged. The point is not that this would be wise. The point is not that I suggest this is the course Canada should take. The point is to dispell this myth that Quebec is in a stronger position at the bargaining table than Canada. That is flat out wrong, and Quebecers must know this. That doesn't mean Quebec couldn't cut a mutually beneficial deal, but Quebecers are deluding themselves if they believe that Quebec has the least to lose.

Look, August, I'll go slow for you. It was put forth by Charles Anthony that Quebec has the upper hand because they could walk away from Canada's debt. That's nonsense. Quebec saying "screw you" to the rest of Canada and saying they won't take a dollar worth of debt is an extreme position. This, according to Mr. Anthony, is what Quebec could do fairly easily apparently. It is an argument put forth by the separatists to assuage a population that separation would be painless. But in Canada, it would be considered an extreme act. Thus to dismiss any chance of an extreme reaction by Canada in response to an extreme action by Quebec is delusional. Sure, if Quebec didn't take any extreme positions such as walking away from its portion of the debt, then negotiations over the splitting of assets would probably not be particularly acrimonious. But your premise is wrong. You're the one who has always argued (incorrectly IMHO) that countries cannot go bankrupt, which implies that sovereigns have the ultimate power over debtholders. Well, that applies here too. It will be governments who ultimately will dictate the terms, not the debtholders. And I'm always amused by Quebecers who assume that there would be no chance Canadians would have an emotional response to the destruction of their country. Would Canada turn into a Yugoslavia? Its unlikely. Is it impossible? No. Besides, I've been arguing Quebec is viable as an independent country. And I do think that ultimately a separation would be fairly uneventful. But what I'm saying is that assuming without doubt it would be uneventful is wrong.

And here is an example of August apparently confusing capital flows with fiat money. Capital flows are what is causing the boom as capital is flowing into Alberta to exploit the large deposits of energy. Transfering billions of dollars out of Alberta that has flowed into the province because of the oil wealth has the same effect as not allowing companies to take oil out of the ground. A simplistic illustration Example 1: There is an oil deposit worth $100 million in a region. $100 million of capital flows into the region to exploit the resource. The government then charges a tax of $100 million to transfer out of the region. Net gain to region, $0. There is no boom. Example 2: There is an oil deposit worth $100 million in a region. It sits in the ground, unexploited. Net gain to the region, $0. There is no boom. (In fact, there would be a net gain in example 1 because of the multiplier effect, but the government could tax that away too, leaving the region with little gain.) Of course taking money - capital - out of Alberta and giving it to every other province would be a net loss to Alberta and a gain everywhere else. It has nothing to do with changing interest rates. Why do you think Alberta was so upset over the NEP and why there's talk about limiting equalization?

The government of Alberta had/has a Heritage fund. That is an example of a government not spending all the tax money. But a large bond issuance is also raising funds. The problem with such a strategy is that it takes money out of the rest of Canada whereas your problem is to take money solely out of Alberta. Thus, you would have even more capital flow into Alberta, which is not what you need. The Bank of Canada is not going to flatten the rest of the economy to cool down 10% of it. The rest of the country should not have to deal with what is essentially a global phenomenon. Thus, if Alberta wants to slow, the best way is to raise taxes and not spend it. Or, the government of Canada could increase equalization payments from Alberta to the rest of the country. That would pull capital out of Alberta, decreasing growth there, while increasing growth in the rest of the country, which would mean less people coming into Alberta. Besides, if Alberta is going to massively reap the benefits of the tar sands, then it should also deal with the disloactions as well, i.e. $400,000 house prices.

Bump

No. If Quebec refuses both 18% and 22% then it is the same as Quebec saying "Screw you." because the negotiations are at a stalemate. What can Canada do? The only thing is trade barriers and warfare. That is what I said. Yes, and you also said that Quebec would have the "trump card." So let's see. On Canada's side, there is - the army - the currency - questions about Quebec's borders - large English minority in Quebec who will have voted +90% against Quebec independence - a native population that may not want to be a part of an independent Quebec - Quebec has a greater dependence on trade with Canada than vice-versa - Quebec has higher debt per capita and pays a higher interest rate - Quebec's economy is less diversified - Quebec is smaller And on Quebec's side, there is - the national debt Yes, Quebec would certainly have the upper hand. Yes, Canada would also lose in a trade war. But Quebec would lose more. Of course Canada will negotiate. But Canada will be in a stronger position than Quebec. Quebec has much more to lose. Oh, Quebec could certainly continue to use the Canadian dollar. But if the government of Canada decided to stop supplying money into Quebec, then what can Quebec do? Nothing. Remember, you're an independent country now and have no say over the central bank. Plus, you would have already played your one "trump card" you could to hit the Canadian dollar. A dollar bill lasts about 18 months before it has to be replaced. If the bank says its not going to supply currency into Quebec, then velocity must pick up to maintain the level transactions and thus GDP. But that would be unlikely to happen as people begin to hoard the money they have. Of course, the actual amount of money in circulation is a fraction of the total volume of money. And even if Canada did cut off money, there would be more than a few clever Quebecers who'd find a way to bring loonies back into Quebec. But there would be a slow but sure decrease in the quantity of money in Quebec over time. This is important: From an operational standpoint, Quebec needs the co-operation of the Canadian government to continue to use Canada's currency. However, the biggest effect would be in the financial markets. If Canada were to make such a statement, Quebec's bonds would be crushed as investors dump the bonds of of a fledgling, unproven sovereign entity engaged in a crisis that investors know whom is in the weaker position. [Hint, its not Quebec.] Interest rates would skyrocket on Quebec's bonds as capital flees the province. Of course, Canada would not benefit either, but Quebec would be hurt more. That's why this idea that Quebec is in the stronger bargaining position is ridiculous.

Its a conundrum. But the source of the boom in Alberta is the global price of oil. Even if the BoC jacked up interest rates, it wouldn't stop the demand for oil elsewhere. The effect would be to slow demand somewhat in Alberta while obliterating the manufacturing base down east. That's hardly a desirable outcome. If Alberta wanted to slow its economy, it could increase taxes. And as much as I sympathize with the argument about the government debasing the currency over time, the gold standard is impractical in a modern economy.

Why? The power will be turned off after separation? The lights will go out? Who in their right mind would stop doing business in Quebec and with Quebec simply because Canada/Quebec debt negotiations were in a stalemate? What formidable business in an independent Quebec requires the burden of a foreign government in Ottawa? Canadians will not go to war. They will negotiate because Canada will not be able to unload its debt on any other country. Its not about going to war. Its dispelling this idea that Quebec - which does not have a currency, which does not have an army, which will have nearly half of its citizens not wanting to become a separate state including most of a very large linguistic minority - is somehow in a stronger position than Canada at the negotiating table. The only thing that Quebec has going for it is that Canada would want to offload Quebec's portion of its debt. But even that is overblown since Canada's net debt is around 20% of GDP, according to the OECD link I supplied earlier. If under a scenario where Quebec said they weren't taking any debt - which means that Quebec wouldn't get any federal assets either - Canada's net debt would rise to 25%. Considering that was the level a few years ago, that's hardly a huge back-breaker for the Canadian population. There's a difference between haggling over whether Quebec will take 18% or 22% of the debt and what you said Saying "screw you" is tantamount to a trade war. (And of course, its naively presumptious to believe that if Quebec ever did take such a posture, a trade war would not result.) Its not about turning the lights out. Its about a beligerent Quebec saying "screw you" and Canada putting pressure on Quebec to negotiate a fair deal. All the government of Canada would have to do is make a statement that says this; "From today on, the Bank of Canada will cease supplying currency to Quebec." People would start hoarding Canadian dollars and monetary velocity would plummet. This means less economic activity. Capital would begin fleeing Quebec immediately as investors dump Quebec bonds, which would force up interest rates in Quebec, not only costing the government of Quebec more money in interest payments on the debt and deficit it must re-finance, but would have the effect of a monetary tightening and slow if not contract the economy. Hopefully, it wouldn't come to that. But this idea that Quebec somehow has the upper hand is simply wrong.

And if Canada did decide to keep the funny money, Quebec's economy would plummet because monetary velocity surely tank and capital would flee. That would probably require a lending facility from the IMF to stabilize the Quebec economy. Quite the way to start out as a new nation. There are vast amounts of assets owned by the Canadian government that would be transfered to a sovereign Quebec assuming negotiations took place. Those would not, of course, be transfered to Quebec if Quebec were dumb enough to say "screw you". The smaller, economically weaker, more debt-laden, less-diversified nation that does not have its own currency and whose borders are up for debate does not have the upper hand. Quebec would be a viable, albeit less wealthy nation on its own. But the sovereigntists peddle illusions to the population - such as this one above - to make the people of Quebec believe that separation would be painless. Maybe it would be, but maybe not. If Quebec votes for independence, everything is on the table, including borders, James Bay contracts, etc.

No. Japan has yet to show it is willing to engage the world fully. It is a reluctant participant at best. Thus, it does not deserve a permanent seat.