Quotulatiousness

August 11, 2011

Canada’s debt crisis happened at a fortunate time

Filed under: Cancon, Economics, History — Tags: , , , — Nicholas @ 12:03

Father Raymond J. de Souza explains why Canada’s financial success story can’t be easily replicated by Europe or the United States:

The slaying of the deficit by Paul Martin saved Canada from the sovereign debt turmoil now afflicting Europe and America. While full credit is due to Mr. Martin, and it is gratifying to see other countries look to our experience, the turnaround in fiscal policy that Canada achieved in the 1990s is simply impossible to achieve in Europe or the United States in the near term. When we had our debt crisis, sparked by downgrades of the federal government’s credit rating between 1993 and 1995, we could make tough choices with the prospect of almost immediate results. No country has that option today.

That is only partly due to politics. Many have observed that the Liberal majority government of the day had the power to take dramatic action. That understates the case. Not only did the Grits have a majority, they had the near-certainty of another majority in 1997, given the disarray among the four opposition parties. The Chrétien government of 1995 was the most electorally secure government in Canadian history. No other country — not even Canada — has that circumstance today.

[. . .]

Europe and America face weak economic growth, rising debt service costs and no tax reforms to provide robust new streams of revenue. Even if granted the vast powers of the Chrétien government — not for nothing was it called the “friendly dictatorship” — neither Europe nor America have a path to slaying their deficits, aside from ever more brutal spending cuts. And indeed, if serious spending cuts add to unemployment and, in the short term, restrain economic growth, then the deficit may not shrink as welfare costs rise and revenues shrink.

Canada did well to respond to our crisis in the 1990s. We were lucky to have had it when we did.

August 8, 2011

“Canada has become the snotty kid at the front of the class that gets every answer right”

Filed under: Cancon, Economics, Government, USA — Tags: , — Nicholas @ 15:39

Kelly McParland reads the fine print:

Near the bottom of the Standard & Poor’s report that downgraded U.S. debt last week is a tribute to the Canadian economy that could contribute to what’s becoming a serious case of swollen-headedness.

In comparing the U.S. situation to “relevant peers”, i.e. other western economies, it notes that Canada has become the snotty kid at the front of the class that gets every answer right. Of five countries — Canada, the U.S., Germany, France and Britain — Canada has the lowest government debt burden (net debt to gross domestic product), at 34%.

It adds: “By 2015, we project that … net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%.”

And while the other four are all expected to see their debt declining, in the U.S. it could still be on the rise. So nya-nya to you, rest of western world.

August 7, 2011

Mitchell: Obama bears only 15% of the blame for the downgrade

Filed under: Economics, Government, History, USA — Tags: , , , , , , , — Nicholas @ 17:57

In a blog post guaranteed to tick off members of both parties, Daniel Mitchell tries a first approximation of where the blame should be assigned:

Well, it turns out that Social Security is a relatively minor part of the problem, so even though President Roosevelt’s policies exacerbated and extended the Great Depression, the program he created is only responsible for a small share of the fiscal crisis. To give the illusion of scientific exactitude, let’s assign FDR 13.2 percent of the blame.

The health care numbers are much harder to disentangle because it’s not apparent how much of the increase is due to Medicare, Medicaid, Bush’s prescription drug entitlement, and Obamacare. A healthcare policy wonk may know these numbers, but the CBO long-run forecast didn’t provide much detail.

So with a big caveat that these are just wild estimations, I feel reasonably comfortable in saying that both Bush and Obama made matters worse with their reckless entitlement expansions, but that they merely deepened a fiscal hole that was created when President Johnson imposed Medicare and Medicaid.

Trawling a virtual economy to support a non-viable “real” economy

Filed under: Asia, Economics, Gaming, Technology — Tags: , — Nicholas @ 14:47

Give North Korea some credit for finding a viable source of revenue:

What’s a dictator to do when his third-world economy is wheezing along on its last legs? Hack some video games, of course! According to a report in the New York Times, North Korea’s Kim Jong-il unleashed an army of young computer crackers on popular South Korean online gaming portals to find ways to make quick cash.

South Korean authorities claim that a squad of approximately 30 hackers operated from a base in China and were given the mission of breaching online gaming servers (including those of the immensely popular Lineage) to set up bot factories and automated farming collectives. The digital booty was then sold to gamers for a reported $6 million over two years.

Addressing traffic congestion (in any city)

Filed under: Economics, Technology, USA — Tags: , , — Nicholas @ 14:03

Everyone knows that gridlock leads to wasted time and increased stress, but the effects of degraded mobility are worse than most people realize. Traffic congestion deprives job-seekers of opportunities, robs businesses of customers, and hastens the exodus of residents from the central city to the suburbs.

And although mounting gridlock may seem like the unavoidable result of increased population and strained budgets, the experience of nations from France to Australia proves otherwise. Reason Foundation draws on what’s worked worldwide and recommends a three-part plan:

1. Expand roads with underground tunnels and elevated structures.
2. Use pricing to keep traffic flowing.
3. Pay for new projects with private-sector financing instead of taxes.

That plan can help Chicago or any other city bust congestion and boost economic growth.

August 6, 2011

Oh, good: I didn’t miss much while I was away

Filed under: Economics, Humour, Politics, USA — Tags: , , , — Nicholas @ 16:24


Obama: Debt Ceiling Deal A Prime Example Of Democrats And Democrats Sacrificing For The Greater Good

July 31, 2011

Another book to add to the “to be read” pile

Filed under: Books, Economics, History, Media — Tags: , — Nicholas @ 18:00

From the current issue of Reason, a review of a pair of new books on the concept of “empire”:

The Rule of Empires, by the Washington University historian Timothy Parsons, explores the fundamental contradictions of imperial rule, making the case that empires have become increasingly difficult to maintain as potential subjects’ identities have become less fluid and more nationalistic. In Merchant Kings: When Companies Ruled the World, 1600–1900, the independent historian Stephen Bown takes a less systematic approach to the study of imperial power, but his book supplements Parsons’ by filling in the biographical details of the men who built Europe’s modern commercial empires. Both books demonstrate that while empire may seem a quick route to power and wealth, in the long run the idea is a military and financial loser.

[. . .]

Empires throughout history have claimed “to rule for the good of their subjects,” Parsons maintains, but this “was and always will be a cynical and hypocritical canard. Empire has never been more than naked self-interest masquerading as virtue.” To keep resources flowing from subjects to rulers, empires must walk a tightrope between subjugation and assimilation. If the state imposes draconian laws and taxes, it will face rebellion, so the rulers must seek out collaborators among their subjects who will assist in the domination of their fellow citizens. In return, collaborators are frequently brought into the imperial fold and given a portion of the spoils. But this leaves the empire vulnerable to conquering from the inside out, with many masters and few servants.

[. . .]

Empire building typically falls under the purview of governments, but in the 17th through 19th centuries, European states outsourced imperial conquest to quasi-private joint-stock companies. Governments granted these companies monopoly trading rights in distant regions and frequently offered their military might to ward off potential rivals. States rarely intended for the companies to become independent imperial powers, but the potential spoils of conquest proved hard for company officials to resist. After all, they had been freed from the discipline of competition, they were thousands of miles from political oversight, and their military risks were socialized by their state sponsors. As Bown points out in Merchant Kings, the EIC and similar corporations “were less the product of free-market capitalism than the commercial extension of European national wars and struggles for cultural and economic supremacy. They occupied the muddy grey zone that exists between government and enterprise.”

I’ve been looking for a good (recent) history of the East India Company for the last several months, so Merchant Kings sounds like it’d be of interest.

July 29, 2011

Boomer bashing: how the idea evolved

Filed under: Economics, History, Media — Tags: , , , , , , — Nicholas @ 10:20

Frank Furedi looks at the evolution of the “bash the boomers” meme, and how it differs from more traditional generational conflict:

Gone are the days when the baby boomers were perceived as the personification of a relaxed but enlightened 1960s live-and-let-live lifestyle.

This cohort of people, generally defined as those born between 1945 and 1965, are globally pathologised as the source of most forms of economic and environmental distress. Constantly accused of living way beyond their means, the baby boomers are blamed for depriving the young of opportunities for a good life. They are condemned for thoughtlessly destroying the environment through their mindless pursuit of material possessions and wealth, as well as resisting change, hanging on to their power and preventing the younger generations from progressing.

[. . .]

The idea that ‘it’s all their fault’ captures the intense sense of cultivated immaturity of the parent-basher. A sentiment that is usually associated with the intellectual universe of a truculent five-year-old is now embraced in earnest by biologically mature generational warriors. Paul Begala’s Esquire article ‘The Worst Generation’ captures this sense of uncontained resentment. ‘I hate the baby boomer’, he wrote, concluding that ‘they’re the most self-centred, self-seeking, self-interested, self-absorbed, self-indulgent, self-aggrandising generation in American history’.

[. . .]

The guilt-tripping of boomers is underwritten by an unusually philistine interpretation of the way society works. The 18th-century Malthusian obsessions about natural limits has been recycled as a warning to human ambition. From this standpoint, resources are fixed and the consumption of one generation reduces what’s available to the next. Accordingly, the flipside of boomer wealth is the poverty of the generations coming of age today. Catastrophic accounts of how young people have been deprived of opportunities for a comfortable life have fostered a cultural climate where the moral status of the elderly is continually questioned.

[. . .]

One of the most distinctive feature of the denunciation of the baby boomers is that it lacks any hint of a future-oriented idealism. It is principally driven by a sense of resentment against a generation that apparently had a really good time.

Instead of tackling the question of how to create a prosperous future, anti-boomers are more interested in gaining a larger slice of the wealth created in the past. Baby boomer self-indulgence pales into insignificance in comparison to the low horizons of their unambitious critics.

Never has the term ‘rebels without a cause’ had more meaning than today. At least Bazarov’s nihilism was in part motivated by the cause of ridding Russia of its feudal autocracy. Even the Lost Generation of the inter-war period were responding to a very real event that shaped their existence. Today’s anti-boomers are freed from the burden of a cause to fight for. As Tyler Durden remarked in the 1999 film Fight Club: ‘Our generation has had no Great Depression, no Great War’, before adding that ‘our depression is our lives’.

July 26, 2011

The implied relationship between traffic tickets and corruption

Filed under: Economics, Law, Liberty — Tags: , , , — Nicholas @ 09:11

Tim Harford linked to this Forbes graphic showing an interesting correlation:

This nicely illustrates what he wrote in 2006:

An alternative view, popular among the common-sense crowd, is that corruption is a problem in Indonesia because Indonesians are crooks by nature; poor countries are poor because they are full of people who are lazy or stupid or dishonest. I disagree out of faith, rather than because the evidence is compelling. But then, what evidence could there be? You would need to take people from every culture, put them somewhere where they could ignore the law with impunity, and see who cheated and who was honest.

That sounds like a tall order for any research strategy, but the economists Ray Fisman and Edward Miguel have realised that diplomats in New York city were, in fact, the perfect guinea pigs. Diplomatic immunity meant that parking tickets issued to diplomats could not be enforced, and so parking legally was essentially a matter of personal ethics.

Fisman and Miguel found support for the common-sense view. Countries with corrupt systems, as measured by Transparency International, also sent diplomats who parked illegally. From 1997-2005, the Scandinavians committed only 12 unpaid parking violations, and most of them were by a single criminal mastermind from Finland. Chad and Bangladesh, regularly at the top of corruption tables, produced more than 2,500 violations between them. Perhaps poor countries are poor because they are full of corrupt people, after all.

July 24, 2011

Bank of Ireland “suffered a restructuring credit event”

Filed under: Economics, Europe — Tags: , , — Nicholas @ 10:46

I’m not fluent in banker . . . does this Reuters report really say that the Bank of Ireland is in default?

The ISDA said a restructuring credit event occurred after Bank of Ireland closed an offer to buy back about 2.6 billion euros of Tier 1 and Tier 2 subordinated debt at a discount of up to 90 percent earlier this month.

A credit event is financial industry jargon for default on payment, breach of bond covenants or other event that casts doubt on an issuer’s ability to service its debt.

If it does mean the bank is in default, how come it hasn’t received much attention in the media? (Aside from the focus being on Norway right now for other reasons, of course.)

H/T to Karl Denninger for the link.

July 23, 2011

Virginia’s state surplus less than meets the eye

Filed under: Economics, Government — Tags: , , — Nicholas @ 10:02

Doug Mataconis takes a jaundiced eye to the Virginia “surplus”:

So, in other words, what we’ve got here are accounting gimmicks. In one case, the State legally permitted itself to defer a contribution to public pensions that were twice as big as the reported budget surplus. In the other, they legally permitted themselves to collect thirteen months of sales taxes for a twelve month fiscal year. The impact of both of these should be rather obvious. Reduce obligations while you are increasing revenues and, wow what do you know, we’ve got a surplus.

This isn’t at all new. As Virginia political bloggers Norm Leahy and Adam Bitley noted last August, the legislature used virtually the same accounting tricks to create the $220 million surplus that was reported last year.

It’s also not unique to Virginia. The same techniques are used in states across the country, and in the Federal Budget. Call it “off book budgeting.” Call it “creative accounting.” Call it whatever you like really, but it’s a pretty stark demonstration of the just how hard it really is to believe any government when they say their budget is balanced. More likely than not, they’ve used one or more of these gimmicks, plus a few others, to defer budget items and artificially increase revenue to make it appear that the budget is in balance when it really isn’t.

July 21, 2011

Ontario Finance Minister lashes out after “backroom work-over” by “bare-knuckle bruiser(s)”

Filed under: Cancon, Economics, Media, Politics — Tags: , , , , — Nicholas @ 10:30

Terence Corcoran admits to roughing up poor Dwight Duncan along with his fellow thugs in the National Post dungeon editorial board meeting last week:

Speaking to reporters Wednesday, Mr. Duncan said the Post, along with other Ontario newspapers, are part of what he described as an intellectually dishonest, right-wing, Rupert Murdoch, conservative cabal.

Mr. Duncan, whose Liberal party faces what looks like a tough election this fall, had just been asked questions about Ontario’s alleged decline into “have-not” status. For some reason not explained, this line of questioning triggered a bizarre critique of Ontario’s newspapers and media: “The intellectual dishonesty, particularly of the right wing in this country, and the right-wing media, is they don’t tell the truth. It’s kinda like Rupert Murdoch.”

[. . .]

Not that the Post has been all that harsh of late. That editorial board meeting last Wednesday was a mild affair, a friendly exchange followed by polite banter, which Mr. Duncan said he enjoyed.

The next day the Post‘s editorial board produced an editorial of such modest criticisms and waffling ambiguity that the McGuinty Liberals could use excerpts as an endorsement.

This is why the Bank of Canada will raise rates soon

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 09:58

Stephen Gordon explains why the Bank of Canada will be raising interest rates in the near term:

The relatively hawkish language in the Bank of Canada’s interest rate decision — most notably the removal of the word ‘eventually’ from the sentence describing the conditions in which interest rates will increase — took financial markets by surprise.

Central banks try to avoid surprises when they can, but in this case the Bank has the best of excuses: the facts changed.

[. . .]

These new numbers may well be revised away in the coming months, but policy makers have to work with the data they have before them. If you take an output gap that is shrinking much faster than you thought and add it to a core inflation rate that is drifting towards and perhaps past the Bank’s 2 per cent target, you will find yourself in a position where you have to start preparing to increase interest rates earlier than you had planned.

July 20, 2011

Here’s a bold proposal for Greece

Filed under: Economics, Europe, Government, Greece — Tags: , — Nicholas @ 10:09

Bill Frezza has an idea of what Greece really needs:

what is the purpose of casting Greece into some selective temporary financial purgatory where the irrelevant Greek economy can continue embarrassing anyone foolish enough to lend their dysfunctional government a dime? Why not go all the way and give the country what many of its people have been violently demanding for almost a century?

Let them have Communism.

[. . .]

What the world needs, lest we forget, is a contemporary example of Communism in action. What better candidate than Greece? They’ve been pining for it for years, exhibiting a level of anti-capitalist vitriol unmatched in any developed country. They are temperamentally attuned to it, having driven all hard working Greeks abroad in search of opportunity. They pose no military threat to their neighbors, unless you quake at the sight of soldiers marching around in white skirts. And they have all the trappings of a modern Western nation, making them an uncompromised test bed for Marxist theories. Just toss them out of the European Union, cut off the flow of free Euros, and hand them back the printing plates for their old drachmas. Then stand back for a generation and watch.

The land that invented democracy used it to perfect the art of living at the expense of others, an example all Western democracies appear intent on emulating. Being the first to run out of other people’s money makes Greece truly ripe to take the next logical step beyond socialism.

H/T to Jon, my former virtual landlord, for the link. As he suggests “this probably would be kinda fun to watch”. After all, retro-kitsch “Soviet theme parks” are a going concern, why not a country-sized version?

Another aspect of China’s amazing economic growth

Filed under: China, Economics, Law, Technology — Tags: , , , — Nicholas @ 07:28

Steve Jobs might want to look at the Chinese market a bit more carefully . . . something’s happening that he may need to pay closer attention to:

The Western news media is replete with pithy descriptions of the rapid changes taking place in China: China has the world’s fastest growing economy. China is undergoing remarkable and rapid change. This represents a unique moment for a society changing as quickly as China.

You probably read such things in the paper every day — but if you have never been to China, I’m not sure you know quite what this means on a mundane level. As I’ve mentioned elsewhere on this blog, in the 2+ years that RP and I have been in our apartment, much of the area around us has been torn down, rebuilt, or gutted and renovated – in some cases, several times over. I had the thought, only half-jokingly, that when we returned from a couple months abroad, we might not be able to recognize our apartment building. Or that it might not be there at all.

As it turns out, my fears were baseless — our scrappy little home remains. The neighborhood, however, has definitely kicked it up a notch or seven. Starbucks has opened not one, but THREE branches (that I encountered) within a 10 minute walk of one another. An H&M has opened across from our apartment building. These are the kinds of major Western brands that were previously only represented in Kunming by fast food chains like McDonald’s and KFC. Our neighborhood has quickly become the swanky shopping center of the city.

Update, 21 July: Andrew Orlowski thinks I’ve been taken in by a non-story:

Some stories are so unusual, you immediately wonder if they’re too good to be true. On Tuesday, a Western NGO in China posted a remarkable tale, reporting that ingenious Chinese retailers in a medium-sized provincial city called Kunming had cloned an Apple Retail Store, faithfully reproducing the staff T-shirts, furniture, display material, and name tags.

[. . .]

But another 10 seconds with Google would reveal that in China, as in the UK and many other countries, Apple has a network of authorised resellers. Apple lays down very strict guidelines on how the resellers must present the gear. The sales material is Apple’s, and the specifications are extremely precise. And to be an Apple “Premium Reseller”, you have to look a lot like an Apple Apple Store, but naturally, you can’t call yourself one. There are hundreds of these, with Apple manufacturer Foxconn’s brother Gou Tai-chang planning 100.

[. . .]

Think of it like this: if you had a Jaguar showroom, anywhere in the world, would you operate from a dodgy lock-up and advertise it with a hand-painted sign? I thought not. You’d want it to look as slick and expensive as the real thing. I’m not sure why we expect Chinese Apple resellers not to do so, too.

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