Gloomy predictions for the economic future

Scotty · May 28, 2011

I could cite any number of commentators of late, but Black is a knowledgeable writer whose prose is acerbic and to the point. Basically, there seems little likelihood the US or Europeans are going to reign in their spending any time soon. Europe lacks the political will while the US political will is too fractured. Half of Americans still think they deserve another big tax cut, so big tax increases are unlikely to be proposed in the near future.

None of this is going to be good for Canada, because regardless of what we do with our own deficit if European nations start defaulting like dominoes and the Americans follow suit we're probably headed for something akin to a great depression. Someone assure me I'm wrong.

Unless the United States has the most spectacular cognitive awakening since Brunhilda, if not Lazarus, the laws of arithmetic are going to assert themselves in Zeus-like terms. Meanwhile, the European Union is a water-logged vessel in a tempest, frantically bailing

Conrad Black

Edited May 28, 2011 by Scotty

Smallc · May 28, 2011

I certainly can't assure you you're wrong. I agree with Black. On our own, our future looks bright, but in context with the rest of the Western World.....the US, I would like to correct, has no political will to reign in spending. Europe actually has some when it comes to places like the UK and Germany and Scandinavia and most of Northern Europe has very little debt. Southern Europe on the other hand, is in terrible shape, and will probably only get worse. That's why Canada has been feverishly working to increase trade with places like China (the place that saves Australia and New Zealand from most of this mess), Northern Europe (well, all of Europe) and South America.

Pliny · May 28, 2011

Someone assure me I'm wrong.

I believe western Governments will do their best to maintain a state of stagflation similar to how Japan's economy has been run for the past decade.

Listening to Bill Clinton's address to a graduating class he stated that, "Focusing entirely on making money hurts America." He should have put the word "Government" at the beginning of that sentence.

bush_cheney2004 · May 28, 2011

....Listening to Bill Clinton's address to a graduating class he stated that, "Focusing entirely on making money hurts America." He should have put the word "Government" at the beginning of that sentence.

Further, anyone who bemoans a pending "great depression" that is not "Canada's fault" doesn't recognize that the present level of economic activity and standard of living is owed in no small part to the very actions and policies of government in unison with the private sector...and that includes benefits to Canada. One can't credibly complain about the loss of such largess while also criticizing how it came to be in the first place.

Edited May 28, 2011 by bush_cheney2004

Pliny · May 28, 2011

Further, anyone who bemoans a pending "great depression" that is not "Canada's fault" doesn't recognize that the present level of economic activity and standard of living is owed in no small part to the very actions and policies of government in unison with the private sector...and that includes benefits to Canada.

Ummm...I think I understand what you are saying. But but you know me, I would have said..."the present level of economic activity and standard of living is owed in no small part to the very actions of the private sector despite the policies of government...and those include the benefits to Canada".

One can't credibly complain about the loss of such largess while also criticizing how it came to be in the first place.

Agreed!

Scotty · May 29, 2011

Further, anyone who bemoans a pending "great depression" that is not "Canada's fault" doesn't recognize that the present level of economic activity and standard of living is owed in no small part to the very actions and policies of government in unison with the private sector...and that includes benefits to Canada. One can't credibly complain about the loss of such largess while also criticizing how it came to be in the first place.

I don't see it that way. Prior to 1970 the US and Europe did not run these huge, consistent deficits. The deficit spending started in the seventies, really (ignoring the brief spikes of the two world wars). In what way are we so much better off economically now than we were in 1970? Where did all that money go? From what I understand, the only people who have been raking in the cash over the past quarter century are the super rich -- not the rich, not even the wealthy, but mostly, the super rich, less than 1% of the population.

Scotty · May 29, 2011

I certainly can't assure you you're wrong. I agree with Black. On our own, our future looks bright, but in context with the rest of the Western World.....the US, I would like to correct, has no political will to reign in spending. Europe actually has some when it comes to places like the UK and Germany and Scandinavia and most of Northern Europe has very little debt. Southern Europe on the other hand, is in terrible shape, and will probably only get worse. That's why Canada has been feverishly working to increase trade with places like China (the place that saves Australia and New Zealand from most of this mess), Northern Europe (well, all of Europe) and South America.

I don't think the US government as presently constituted is up to facing their impending budgetary crisis. The Republicans are too in hock to the big special interest groups and corporations which profit so much (the agricultural corporations, the mining corporations, the pharmaceutical and health care corporations, etc.) and frantically pushing away at hot button issues of no real importance, like abortion, gun control and gay marriage. Oh, and of course, promising to cut taxes(!?). The American people are bitching and moaning about gas prices which are half what everyone else pays, and extremely unlikely to support anyone who proposes raising taxes by, for example, slapping a tax on gasoline. The Democrats won't allow cuts in personal entitlements and the Republicans won't consider cuts in corporate entitlements and subsidies. And with an election every sixteen seconds, it seems, nobody has the balls to tell the American people bad news. If a guy like Winston Churchill showed up today and said "I have nothing to promise you but sweat, blood and toil" the voters would rush over to the guy singing and dancing and promising them tax cuts.

Scotty · May 29, 2011

So when all this hits the fan is the bottom going to drop out of the market? What should investors be doing to protect themselves? Bonds could be problematic with the likelihood of interest rate heights...

bush_cheney2004 · May 29, 2011

I don't see it that way. Prior to 1970 the US and Europe did not run these huge, consistent deficits. The deficit spending started in the seventies, really (ignoring the brief spikes of the two world wars).

But you can't "ignore" war spending, as it was essential in the face of perceived threats. And I don't know how you can exclude Canada above, seeing as it was one of the first nations to stare at the fiscal abyss as late as the 1990's.

In what way are we so much better off economically now than we were in 1970? Where did all that money go?

Standard of living is up across the board. All that money went to defense, health care, education, infrastructure, social security, etc. It was (and still is) considered a fair trade for government debt.

From what I understand, the only people who have been raking in the cash over the past quarter century are the super rich -- not the rich, not even the wealthy, but mostly, the super rich, less than 1% of the population.

This is simply not true. Income disparity is higher, but there has been increasing consumer spending of disposable income since the 1980's in the USA, and I suspect Canada as well. Consumer debt has tracked along with this trend.

In short, we have become so accustomed to a consumer driven economy that any decrease or departure from norms is presented as "gloom and doom". Those of us who are older know what the actual baseline for such concern should be.

bush_cheney2004 · May 29, 2011

So when all this hits the fan is the bottom going to drop out of the market? What should investors be doing to protect themselves? Bonds could be problematic with the likelihood of interest rate heights...

I sure hope so, because that is just another huge opportunity as in 2008 - 2009. I got out early and jumped back in close to the bottom. Not much more upside right now, so we're back on the sidelines waiting for that opportunity. Basic market timing.

Pliny · May 29, 2011

I don't see it that way. Prior to 1970 the US and Europe did not run these huge, consistent deficits. The deficit spending started in the seventies, really (ignoring the brief spikes of the two world wars). In what way are we so much better off economically now than we were in 1970? Where did all that money go? From what I understand, the only people who have been raking in the cash over the past quarter century are the super rich -- not the rich, not even the wealthy, but mostly, the super rich, less than 1% of the population.

They couldn't run those kinds of deficits before 1971. The gold window had to close first.

Pliny · May 29, 2011

... it seems, nobody has the balls to tell the American people bad news. If a guy like Winston Churchill showed up today and said "I have nothing to promise you but sweat, blood and toil" the voters would rush over to the guy singing and dancing and promising them tax cuts.

There is nothing to the tea party movement then? Ron Paul? I think the search is on for that guy - the Wionstion Churchill of today. He certainly won't come from the ranks of the Democrats.

Smallc · May 29, 2011

He certainly won't come from the ranks of the Democrats.

I'm sure you would have said the same thing about the Liberals in the 1980s.

bush_cheney2004 · May 29, 2011

There is nothing to the tea party movement then? Ron Paul? I think the search is on for that guy - the Wionstion Churchill of today. He certainly won't come from the ranks of the Democrats.

Many years before that there was also Ross Perot, who managed to get 18% of the vote with a tough love fiscal message....far better than Ron Paul. Before that it was Walter Mondale. There were plenty of others as well, but they don't win elections when entitlements are up for grabs.

bush_cheney2004 · May 29, 2011

They couldn't run those kinds of deficits before 1971. The gold window had to close first.

Technically they could....just need to sell more war bonds and keep price controls in place to combat inflation.

Scotty · May 30, 2011

There is nothing to the tea party movement then? Ron Paul? I think the search is on for that guy - the Wionstion Churchill of today. He certainly won't come from the ranks of the Democrats.

The Tea Party is all about less government, but without any specific idea how to bring that about. But it's also about less taxes. Anyone ever hear ANYONE in the tea party movement suggest raising taxes to combat the deficit?

Scotty · May 30, 2011

I sure hope so, because that is just another huge opportunity as in 2008 - 2009. I got out early and jumped back in close to the bottom. Not much more upside right now, so we're back on the sidelines waiting for that opportunity. Basic market timing.

Well, I am not a sidelines kind of guy normally, and I think we have some time before the excrement hits the rotary blades. I'm buying into staples, like food products, ie, High Liner, for example, and Premium Brands. People gotta eat, no matter what.

Pliny · May 30, 2011

The Tea Party is all about less government, but without any specific idea how to bring that about. But it's also about less taxes. Anyone ever hear ANYONE in the tea party movement suggest raising taxes to combat the deficit?

Precisely.

Less taxes are a start in the direction of smaller government. The thing to do now is to convince the bureaucrats that if the resources aren't there they can't just keep on borrowing and spending at ever increasing levels on into the future. Entitlements, that is, future liabilities, are large part of the problem. This hard won largesse from the public purse is not easily relinquished or even modified.

Scotty · May 30, 2011

Precisely.

Less taxes are a start in the direction of smaller government. The thing to do now is to convince the bureaucrats that if the resources aren't there they can't just keep on borrowing and spending at ever increasing levels on into the future. Entitlements, that is, future liabilities, are large part of the problem. This hard won largesse from the public purse is not easily relinquished or even modified.

You don't cut taxes with a massive deficit. You do cut spending, but you also often need to raise taxes as well.

People talk about cutting budgets with little real idea of what money is spent on, and how much of it simply cannot be cut because it's for pensions, for debt servicing, for medicare etc. And I have yet to see anyone calling for cuts to entitlements they personally like or benefit from. Few Republicans will touch the $20 billion annual subsidies for agriculture, for example, even though they'e not really needed. And you won't get them asking for a reduction in the $100 billion worth of subsidies to business. As for taxing the rich -- We can't do that! That would be unfair!

bush_cheney2004 · May 30, 2011

You don't cut taxes with a massive deficit. You do cut spending, but you also often need to raise taxes as well.

Then raise them at all levels. The "Bush tax cuts" were for all marginal rates, not just the rich.

Scotty · May 31, 2011

Then raise them at all levels. The "Bush tax cuts" were for all marginal rates, not just the rich.

But Obama tried to raise them for those earning over 300,000. The Republicans said no.

Pliny · May 31, 2011

You don't cut taxes with a massive deficit.

That would be a more correct action than increasing taxes. A massive deficit is indicative of runaway spending. If one's child spends his allowance at the candy store should his allowance be increased?

I can understand you would think it more responsible of him to spend it on clothing but if, like the economy, there was a downturn in your income, wouldn't it be better if you yourself made the decisions on where your money should go?

You do cut spending, but you also often need to raise taxes as well.

Raising taxes is no guarantee of revenues. If there is no growth in the economy where will those new taxes come from. Turn over every rock until you find where the money is, right? There is always rich people around to suck it out of, right? Well, no there isn't.

People talk about cutting budgets with little real idea of what money is spent on, and how much of it simply cannot be cut because it's for pensions, for debt servicing, for medicare etc. And I have yet to see anyone calling for cuts to entitlements they personally like or benefit from.

These kinds of Ponzi schemes need to be exposed for what they are - Ponzi schemes. They need to be phased out and the sooner the better. As you say though no one is calling for their "entitlements" to be cut. Of course, those who will be receiving these benefits paid into them and feel they deserve them.

They contributed to a Ponzi scheme that eventually collapses. They either tailor their investments with some cuts or lose them all together. Economics will eventually dictate they lose them under harsher circumstances than if they work to cut their losses now.

Few Republicans will touch the $20 billion annual subsidies for agriculture, for example, even though they'e not really needed. And you won't get them asking for a reduction in the $100 billion worth of subsidies to business.

Few Republicans and no Democrats.

As for taxing the rich -- We can't do that! That would be unfair!

Yes. It would be unfair. For justice to exist all must be treated equally under the law.

Do you also wonder why there seems to be a lack of justice today? Gaps in Social and economic justice seem to be widening. Is that apparent to you? Perhaps because the State has the ability to write new tax laws, including subsidies and bailouts, whenever it sees an opportunity for a revenue source - only when the people give their assent, of course? We do live in a democracy, after all.

Pliny · May 31, 2011

But Obama tried to raise them for those earning over 300,000.

Wasn't it $250,000? Or was $300,000 kind of a negotiating number that Obama ever so reluctantly agreed to?

The Republicans said no.

Most of them did, to their credit. A few surpisingly didn't. Did any Democrats vote against eliminating the tax cuts for the rich? That would be crazy, right?

bush_cheney2004 · May 31, 2011

But Obama tried to raise them for those earning over 300,000. The Republicans said no.

The Bush tax cuts were across the board, not just for the "rich".

dre · May 31, 2011

The Bush tax cuts were across the board, not just for the "rich".

It seems to me the reason behind giving the wealthy big tax cuts was that they would spend that money on things that would strenthen the economy like hiring new workers, etc. I think theres some logic behind that, but the problem is that when you cut their taxes you raise the defecit based on nothing but "hoping" thats what they will do with the money.

Why not structure those tax cuts as a rebate? So that the wealthy who get the tax cuts really ARE the ones building businesses, hiring new workers, etc. Then you dont have to take wild guesses anymore...