Canada suffers from Dutch Disease

[madmax]

Its very clear that Mulcair is waaay out of touch with the rest of Canada.. from border to border..

"Canadian employers went on a hiring blitz for a second consecutive month in April for the best back-to-back job creation in over 30 years, adding almost six times more net new jobs than expected driven by a record increase in the goods-producing sector"

Sound like Dutch Disease?? No, Mulcair simply wants to divide the country from east to west.. What is it they say about "divide and conquor"? This guy is simply out to get power... The FACTS alone point directly to that..

Mulcair was not available for comment when the Jobs figures came out.. NOR has he commented on them to date.. Wonder why

not that your 2 month comment isn't noted.. but..

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/weak-growth-likely-to-nudge-unemployment-rate-higher/article2429629/

Economy Lab

Weak growth likely to nudge unemployment rate higher

Statistics Canada releases its labour force survey on Friday. Economists polled by Bloomberg expect 10,000 new jobs were created last month, not enough to prevent the unemployment rate from rising a notch to 7.3 per cent.

-------

So yes you are correct and not its not a bad thing. But its not like you make it out either.

We are not a basket case like other countries nor are we out of the woods.

I have seen positive numbers before only to see them crumble a few months later.

What you want to see is when the line is not longer bumpy, but steady.

I don't by your line about East/West, that is a political power play.

Of course this is a political forum so its the nature of the beast.

[CPCFTW]

How about we let companies deduct employee payroll tax deductions from their taxes payable? Also raise the basic personal limits. Should create some decent payying jobs.

[punked]

How about we let companies deduct employee payroll tax deductions from their taxes payable? Also raise the basic personal limits. Should create some decent payying jobs.

Want to explain why?

[madmax]

The reality is there are many Canadian companies that are active in foreign countries and their success depends on them being treated fairly by foreign governments.

How can we expect our companies to be treated fairly if we don't treat foreign companies fairly?

we have no disagreement.

Please get your facts straight. The subsidy was for electromotive customers. The IP owned by the the company was developed by its American branch. It was the workers who drove the company out.

Interesting as the Harper Government has recently changed its approach specifically because of the Electromotive Debacle. Electromotive was purchased by Catepillar for $820Million dollars and relocated in under 2 years.

And yes I am aware that electromotive split the $5million between itself and its customers. That is an incentive. That incentive helped directly in Electromotive Sales and they got to keep a portion of it.

You may blame the employees if you wish, Electromotive still got $5million in Subsidies to sell their product and left.

So the government brought in tax measures to encourage the development of the oil sands when no one thought they would be economic. The Harper government phases them out because they are no longer necessary. Seems to be that the decision to provide the tax credits was right at the time as is the decision to phase them out.

We agree.

Canada exports $50 billion worth of oil every year. 1.4 billion is a drop in the bucket. I say eliminate them if there is not a good reason for them. The trouble is there are many times when there are good reasons for the 'subsidy'

50Billion is small compared to the total export market and therefore if Oil is causing a spike in the dollar it is disproportionate to its overall percentage of GDP.

People have made their choice with their wallet. How exactly would you stop this?

We have always made choices and will continue to do so.

The fact that you and I can have this discussion proves to me there is nothing scarey. Certainly not anything you have said is out of the ordinary. You have even suggest options for the Mortgage activities of the US.

Therefore, what I suggest is an open mind and not a closed door.

Its a discussion and the facts will sort themselves out in the debate.

I see no reason not to look at the studies of the oil sector upon manufacturing. I see no reason to not engage and understand monetary policy and the effects of the dollar especially when one looks to the future.

And then a plan.

One can look at all the other factors too as I have seen mentioned in this thread. It seems that many are quick to throw stones.

There are things that are of National Interest.

So going back to your IPhone, it could well be used by Chinese Services to spy on your company which is why the US won't let them in.

We make choices we have discussions.

I had no knowledge of the Chinese security breaches with telecoms until the US brought it up.

If the oil sector is valid in their statements they will survive the scrutiny.

If not.... then perhaps the dollar is inflated and we are affecting a larger sector of the economy for not net benefit.

[CPCFTW]

Want to explain why?

Companies will get a tax deduction for creating jobs. Ie. If they hire 100 people making 50k and paying 10k taxes each, they will get a $1 million deduction from taxes payable. Creating 250 jobs of people making 20k each will result in a smaller deduction since people making 20k barely pay any taxes.

We already give tax deductions for investing in capital, why not for investing in employment (and therefore lowering unemployment and related social expenses)?

[punked]

Companies will get a tax deduction for creating jobs. Ie. If they hire 100 people making 50k and paying 10k taxes each, they will get a $1 million deduction from taxes payable. Creating 250 jobs of people making 20k each will result in a smaller deduction since people making 20k barely pay any taxes.

We already give tax deductions for investing in capital, why not for investing in employment (and therefore lowering unemployment and related social expenses)?

I am all for incentives for job creation in Canada. Although I wold have to look more into what you are suggesting.

[dre]

I reject your premise that deregulation is the cause of the current problems. If anything, free markets have made the slump less than what it would be otherwise.

If you want to make the case that deregulation is the problem the state specifically what you would like to see changed and we can discuss the inevitable consequences of such regulations. In almost all cases people assume that we can restrict our market while maintaining free access to other country's markets. This is a false assumption very few arguments for regulation can stand up once you assume that others will respond with similar regulations.

Actually there is a lot to fear because Muclair does not care about facts. He only cares about demagoguery. So he will likely impose punitive taxes on the oil industry and the oil industry will respond by reducing investment. In the worst case, we could see another crash like in the 80s.

Then state specifically what you call a subsidy and the amount of dollars involved. If you cannot point to some specific program with a dollar value then cannot claim that oil is subsidized.

Deregulation creates opportunities for exporters and cheaper costs to Canadian consumers. For example: which would you rather buy: an iPhone for $400 that is made in China or a Canadian made version that costs $800+? The fact is the gains made by doing production in the country will more than wiped out by the increased costs.

You are taking a complex problem and blaming in one factor. The reality is the meltdown could have been avoided (or at least made much less of the problem) by any one of the following policy changes:

1) End political pressure on banks to make loans based on racial profiles;

2) End No recourse mortgages which encourage people to walk away from a house;

3) Mortgage interest tax deduction which discourages people from paying back debt;

4) Severely restrict the creation of securitized mortgages;

You cannot have a reasonable discussion unless you consider all factors.

What you are missing is EVERYONE wants a lower currency: from China to US to Japan to India and Canada is a drop in the bucket compared to the big players. It is naive to assume that we can do anything about the currency other than committing economic suicide like Greece.

BTW: I am an exporter: my CAN$ sales have dropped by 50% in ten years. So I would benefit from a lower dollar. I am only arguing because I think the country will be harmed much more by policies designed to somehow control the dollar than the dollar itself.

iPhone for $400 that is made in China or a Canadian made version that costs $800+? The fact is the gains made by doing production in the country will more than wiped out by the increased costs.

Actually theres less than 20 dollars labor total in an Iphone. The difference in price would be less than 20 dollars. Not 300.

And you arent actually "saving" money when you buy stuff from China, you are just borrowing the difference, and youll pay the rest of the price later plus interest.

[madmax]

Companies will get a tax deduction for creating jobs. Ie. If they hire 100 people making 50k and paying 10k taxes each, they will get a $1 million deduction from taxes payable. Creating 250 jobs of people making 20k each will result in a smaller deduction since people making 20k barely pay any taxes.

We already give tax deductions for investing in capital, why not for investing in employment (and therefore lowering unemployment and related social expenses)?

I like your proposal so far.

It is twice the amount the NDP proposed IIRC with their tax incentive for job creation.

[madmax]

Actually theres less than 20 dollars labor total in an Iphone. The difference in price would be less than 20 dollars. Not 300.

I am not sure where you get this figure from, but yes, labour costs would not be + $300 difference in the hypothetical price given as an example.

And you arent actually "saving" money when you buy stuff from China, you are just borrowing the difference, and youll pay the rest of the price later plus interest.

Pricing will always reflect the market demand and ability to pay. So yes, if you are suggesting their is a .. (there is a name for it that has slipped my typing lol) rent with interest.. it is possible.

The market could well correct itself in 100 years

[TimG]

50Billion is small compared to the total export market and therefore if Oil is causing a spike in the dollar it is disproportionate to its overall percentage of GDP.

I just looked at some numbers and I don't see how anyone can say that oil is affecting the currency.

Here are Canada's exports in 2011 (in billion):

http://publications.gc.ca/collections/collection_2012/statcan/65-208-x/65-208-x2011000-eng.pdf

Agricultural and fishing: 41.0

Energy products 111.4 (includes hydro, natural gas and oil)

Forestry products 22.4

Industrial goods and materials 117.0

Machinery and equipment 80.6

Automotive products 59.3

Other consumer goods 16.4

We export more machinery and equipment than oil.

How can any numerically literate economist claim that oil alone is responsible for the run up in the dollar?

[madmax]

We export more machinery and equipment than oil.

How can any numerically literate economist claim that oil alone is responsible for the run up in the dollar?

there are two facts we need to keep in mind:

1.Since oil is an internationally traded commodity and since Canada is so small relative to the United States and the EU, price changes in oil are caused by international factors outside of Canada.

2.Since the demand for both oil and gas are quite inelastic in the short run, a rise in oil prices causes the dollar value of the oil sold to rise. (That is, while the quantity sold will reduce, the higher price will cause the total revenue to rise, not fall).

Canada exports around 2 million barrels of oil a day to the United States. If the price of a barrel of oil is $50 U.S., that is $100 million (U.S.) in purchases that occur every day. Because of the magnitude of sales involved, any changes to the price of oil has an impact on currency market.

Higher oil prices drive up the Canadian dollars through one of two mechanisms, which have the same end impact. The difference is on whether or not the oil is priced in Canadian or American dollars, but the final impact is identical.

The Oil is Priced in U.S. Dollars

This is the most likely of the two stories. If this is the case then when the price of oil goes up, Canadian oil companies receive more U.S. dollars. Since they pay their employees (and taxes and many other expenses) in Canadian dollars, they need to exchange U.S. dollars for Canadian ones on foreign exchange markets. So when they have more U.S. dollars, they supply more U.S. dollars and demand more Canadian dollars. Thus, as shown in A Beginner's Guide to Exchange Rates and the Foreign Exchange Market, the increase in supply of the U.S. dollar drives the price of the U.S. dollar down. Similarly, the increase in demand for the Canadian dollar drives the price of the Canadian dollar up.

The Oil is Priced in Canadian Dollars

This is a less likely scenario, but easier to explain. If oil is priced in Canadian dollars, and the Canadian dollar rises in value, then American companies need to buy more Canadian dollars on foreign exchange markets. So the demand for Canadian dollars rises along with the supply of U.S. dollars. This causes the price of Canadian dollars to rise and the supply of U.S. dollars to fall.

http://economics.about.com/od/pricesexchangerates/a/oil_and_dollars.htm

Edited May 23, 2012 by madmax

[TimG]

1.Since oil is an internationally traded commodity and since Canada is so small relative to the United States and the EU, price changes in oil are caused by international factors outside of Canada.

So? The price rises for and Canadians exports increase. This increases the demand for the Canadian dollar but oil is a small fraction of Canadian exports and therefore cannot be entirely blamed for the run up in the Canadian. There are other factors such as the monetary policy in the US and the relative fiscal health which are driving this.

[punked]

So? The price rises for and Canadians exports increase. This increases the demand for the Canadian dollar but oil is a small fraction of Canadian exports and therefore cannot be entirely blamed for the run up in the Canadian. There are other factors such as the monetary policy in the US and the relative fiscal health which are driving this.

But not really. The added value of a huge resource boom is over inflating the dollar.

[madmax]

So? The price rises for and Canadians exports increase. This increases the demand for the Canadian dollar but oil is a small fraction of Canadian exports and therefore cannot be entirely blamed for the run up in the Canadian. There are other factors such as the monetary policy in the US and the relative fiscal health which are driving this.

Not as I understand it, but I am open to clarification. My Take is that the Oil Export drives up the price of the dollar as oil prices rise. Canadian exports in raw or natural resources may increase, but the higher the dollar, takes away significant profits from within the manufacturing sector making it less attractive to manufacture a good for local consumption or export.

Yes there are other factors, and always will be, and they should be looked into as well. No one is suggesting not looking at the other factors.

But oils effect on the dolar where oil is 4% of the economy can affect negatively 35% of the manufacturing base.

So no one is saying you are wrong. Its those who suggest Oils effect shouldn't be addressed is not fiscally wise.

No one has concluded anything.

Edited May 23, 2012 by madmax

[dre]

I am not sure where you get this figure from, but yes, labour costs would not be + $300 difference in the hypothetical price given as an example.

Pricing will always reflect the market demand and ability to pay. So yes, if you are suggesting their is a .. (there is a name for it that has slipped my typing lol) rent with interest.. it is possible.

The market could well correct itself in 100 years

I am not sure where you get this figure from, but yes, labour costs would not be + $300 difference in the hypothetical price given as an example.

Labor costs are between 2% and 5%. Well under 20 dollars. Apple actually only saves about $7 per phone by making them in China VS Canada or the US.

Pricing will always reflect the market demand and ability to pay. So yes, if you are suggesting their is a .. (there is a name for it that has slipped my typing lol) rent with interest.. it is possible.

The market could well correct itself in 100 years

Well the reality is people in western countries that run huge trade deficits against countries like China are really only paying part of the cost when they buy chinese goods. The rest becomes debt, once that trade deficit hits the balance sheet.

And it will correct itself a lot sooner than that. The only reason this has been able to go on as long as it has is because takes all the money it makes selling stuff to westerners and lends it back to them so that they can buy more stuff. The more they buy the more debt they accumulate.

[TimG]

But oils effect on the dolar where oil is 4% of the economy can affect negatively 35% of the manufacturing base.

We have oil to sell. We are not going to leave in sitting in the ground. So when oil prices rise oil will become a bigger share of our exports. So? But when you look at the cash flows you find that additional oil revenue is small compared to the rest of the economy so its effect must be relatively small.

Carney agrees with me:

https://www.butlermortgage.ca/news-details/loonie-is-more-than-just-a--petro-dollar-carney-says/

It is far too simplistic to talk about the Canadian dollar as a commodity currency, let alone a currency that moves consistent with one commodity,” he said. “This is a much more diverse, complex economy than that, and this is one manifestation of it.

On one level, Mr. Carney was just stating reality. Several factors support the loonie, including the fact that investors are drawn to Canada’s stocks, bonds and the currency as perceived “safe haven” securities in a world of turmoil.

The more I look into the more I think Muclair is full of crap.

Edited May 23, 2012 by TimG

[dre]

Not as I understand it, but I am open to clarification. My Take is that the Oil Export drives up the price of the dollar as oil prices rise. Canadian exports in raw or natural resources may increase, but the higher the dollar, takes away significant profits from within the manufacturing sector making it less attractive to manufacture a good for local consumption or export.

Yes there are other factors, and always will be, and they should be looked into as well. No one is suggesting not looking at the other factors.

But oils effect on the dolar where oil is 4% of the economy can affect negatively 35% of the manufacturing base.

So no one is saying you are wrong. Its those who suggest Oils effect shouldn't be addressed is not fiscally wise.

No one has concluded anything.

I question the idea theres a "run up" of the Canadian dollar at all. The Euro and US dollar are losing a lot of value because of all the easing, bailouts, etc. So we are gaining value relative to those other currencies. But our dollar is in fact constantly losing purchasing power.

[bush_cheney2004]

I recall one US firm was described as moving a hightech Canadian firm back into the 1970s and pen and paper. It was something to see, but that was how the US firm ran its operations and the superior Canadian firm, instead of being emulated, was dismantled and gutted.

This is a recurring theme in this thread....the actions of US companies and other multinationals. Where is the domestic capital and investment? Where are/were the "superior" Canadian firms all this time? EMD was never a Canadian company.

Interesting perspective of people who work for a living. I can't see $10.25 to $14 as being all that much money in Ontario, for general manufacturing and assembly. But yes the Engineers wages are dropping but it is difficult to believe they can compete with $600/month Engineers. US and Canadian Engineers just sign off anymore.

Engineering is just as portable as assembly labor. I do not understand the continuing nostalgia for what use to be in the face of globalization and stark economic reality. Those jobs are not "coming back".

Yes Even Ford had to overcome what others said about him paying good wages to his employees.

That was then...this is now.

Seems the Liberal Freemarket Economic Movement has done everything in its power to undermine the Ford Vision and the middle class.

The middle class is alive and well...but it has been scaled up to global size. No longer will just a few nations reap the benefits of mixed market economies.

[madmax]

We have oil to sell. We are not going to leave in sitting in the ground. So when oil prices rise oil will become a bigger share of our exports. So? But when you look at the cash flows you find that additional oil revenue is small compared to the rest of the economy so its effect must be relatively small.

Carney agrees with me:

https://www.butlermortgage.ca/news-details/loonie-is-more-than-just-a--petro-dollar-carney-says/

The more I look into the more I think Muclair is full of crap.

I highly doubt that Mr. Carney is suggesting that the dollar is not affected by Oil.

I don't believe there is a discussion about Not selling oil.

The discussion is about the selling of oil.

[madmax]

This is a recurring theme in this thread....the actions of US companies and other multinationals. Where is the domestic capital and investment? Where are/were the "superior" Canadian firms all this time? EMD was never a Canadian company.

Many Canadian Companies in both manufacturing and more importantly resource have been aquired by larger capital over the decades. You know as well as anyone that many of these companies are not even based on manufacturing but are financial speculation companies, just as happy to liquidate if it can make a quick buck and is easier then running a manufacturing corp.

Canadas history has been long term, British and then US capital. You think you can keep US capital out of the oil fields? And if the oil fields could be relocated with the purchase it would be done lol. That said, the raw can be sent to foreign processing.

Don't get too smug..

Harper has just played the China card, and while your American Companies will be cashing in on the profits, the "Ethical Oil" is going to be sent to the commies, and you guys might just be stuck with the Unethical Oil or Freeze in the dark

[bush_cheney2004]

Many Canadian Companies in both manufacturing and more importantly resource have been aquired by larger capital over the decades. You know as well as anyone that many of these companies are not even based on manufacturing but are financial speculation companies, just as happy to liquidate if it can make a quick buck and is easier then running a manufacturing corp.

Yes...as has Canadian capital captured foreign firms. This is not an excuse for the USA, and it is not an excuse for Canada.

Canadas history has been long term, British and then US capital. You think you can keep US capital out of the oil fields? And if the oil fields could be relocated with the purchase it would be done lol. That said, the raw can be sent to foreign processing.

US capital has been all over Canadian petroleum development, but it doesn't stop there. Large US refining capacity and markets completed the hat trick.

Don't get too smug..

OK, but I'm not the one whining about the loss of manufacturing jobs. I left manufacturing over 15 years ago....it was a good gig while it lasted.

Harper has just played the China card, and while your American Companies will be cashing in on the profits, the "Ethical Oil" is going to be sent to the commies, and you guys might just be stuck with the Unethical Oil or Freeze in the dark

I doubt that...we have more natural gas than we know what to do with. Besides, we know which nation really freezes.

[madmax]

Carney agrees with me:

https://www.butlermortgage.ca/news-details/loonie-is-more-than-just-a--petro-dollar-carney-says/

He also said this 13 days prior to the statement you have presented..He hasn`t contradicted himself, infact he has clarified his position, but this does signify the effect oil has on the dollar. It is NOT mutually exclusive.

Canada Gas Prices: Mark Carney Says Run-Up In Oil A Double Loss For Canadians

OTTAWA -- The recent run-up of oil prices is not bringing the usual benefits for the economy and an enduring or pronounced spike will hurt consumers, Bank of Canada governor Mark Carney told The Canadian Press.

Carney said the current escalation in oil prices means consumers in the East are paying more for fuel and energy producers in the West are earning less than would be expected.

And he is increasingly concerned about the possible impact of the increase on the economy even though Canada exports crude and producers realize greater profits from higher prices.

That takes money out of consumer pockets, leaving less disposable income for activities such as travel or purchases that help spur economic growth, said Carney.

The corollary is that Canadian producers in the West are also not realizing as much as would be expected because Canada imports more expensive North Sea oil while selling at the lower-priced West Texas Intermediate (WTI) rate and often below.

WTI was hovering at just over US$101 on Thursday. Brent crude from the North Sea is over US$122. In March, the average differential between the two was almost US$25.

Refineries in Canada on average use about equal proportions of WTI and Brent, a former Bank of Canada study showed, and that mix is reflected in the price of gas at the pump.

Carney said bank economists are crunching the numbers and will issue a calculation of the net impact of global oil on the Canadian economy in the next quarterly monetary policy report later this month.

It's unclear at what point the net benefit to Canada as an oil exporter flips into a net loss due to the drag of prices on consumer spending and business input costs. As well, the Canadian dollar gets a boost from strong oil, making exports to the U.S. and other countries less competitive.

Those are Carneys words not mine... nor Mulcairs for that matter.

Edited May 23, 2012 by madmax

[madmax]

I doubt that...we have more natural gas than we know what to do with. Besides, we know which nation really freezes.

Frackin Awesome.

[CPCFTW]

I am all for incentives for job creation in Canada. Although I wold have to look more into what you are suggesting.

Look into it. From what I understand, you are quite involved in the NDP party. Some business-oriented policies would go a long way towards bridging the gap between cpc and ndp voters. And if anyone can sell the public on a corporate tax break, it would be the ndp.

Edited May 23, 2012 by CPCFTW

[wyly]

We have oil to sell. We are not going to leave in sitting in the ground. So when oil prices rise oil will become a bigger share of our exports. So? But when you look at the cash flows you find that additional oil revenue is small compared to the rest of the economy so its effect must be relatively small.

Carney agrees with me:

https://www.butlermortgage.ca/news-details/loonie-is-more-than-just-a--petro-dollar-carney-says/

The more I look into the more I think Muclair is full of crap.

meanwhile a CPC funded study confirms it, Muclair is only stating what the government found to be true but now like you disavows when it's inconvenient...

My link