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Canada's Place in the Global Economy

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A spike in food prices over one year is weather. A sustained upwards increase over a decade is inflation.

Actually, there are many overlapping factors, such as the perverse incentive's through ethanol subsidies, increasing prices of petroleum affecting the prices of fuel, fertilizer, pesticides and other petrochemicals needed for modern industrial farming, not to mention downwards pressures by people substituting cheaper foods for ones they cannot afford anymore. This makes economics a "dismal science" (it not only has a huge number of inputs, but is also a chaotic system like Earth's biosphere, where outputs are not affected in a linear manner by changes in inputs), but the year over year increase is a pretty clear marker of inflation, and the only constant input over the last decade (indeed over most of the 20th century) is the constant debasement of currency by national governments.
 
kevincanada said:
With the food prices listed above, I'm going to assume you guys did not take notice to the severe drought in the United states which destroyed all kinds of crops and virtually bankrupted many farms in one season this year.

It wasn't inflation that drove those prices up, it was the weather.

Kevin - I would add in the impact of sillybugger policies on bio-fuels (ethanol and bio-diesel).

Fuel goes up.

Farmers costs go up.

Farmers profits decline.

Farmers have the option of selling their crops as fuel.

Farmers recoup their losses.

Food processors now have to compete with the fuel industry for material as well as pay higher fuel costs.

All food processors pay higher fuel costs.

Some food processors pay higher ingredients cost.

Margarine is pure oil - It could be sold as bio-diesel.

Strawberries are hand picked, sold raw and are lousy fuel.

Margarine tracks Oil.

Strawberries don't.

Everything else falls in between.

And inflation takes its toll regardless.

Cheers.  :)
 
The Wall Street Journal is reporting that the "Chinese Manufacturing Gauge Shows Signs of Recovery," indicating that the all important 'soft landing' is more likely, thus taking out one of the props of a global Greater Recession.

The WSJ report says that "the preliminary HSBC China Manufacturing Purchasing Managers Index still showed manufacturing activity contracting in the world's No. 2 economy. But the rate was a healthy improvement from the September reading," so it is not even the "end of the beginning," just a signal that disaster is not looming large.
 
Thucydides said:
A spike in food prices over one year is weather. A sustained upwards increase over a decade is inflation.

Actually, there are many overlapping factors, such as the perverse incentive's through ethanol subsidies, increasing prices of petroleum affecting the prices of fuel, fertilizer, pesticides and other petrochemicals needed for modern industrial farming, not to mention downwards pressures by people substituting cheaper foods for ones they cannot afford anymore. This makes economics a "dismal science" (it not only has a huge number of inputs, but is also a chaotic system like Earth's biosphere, where outputs are not affected in a linear manner by changes in inputs), but the year over year increase is a pretty clear marker of inflation, and the only constant input over the last decade (indeed over most of the 20th century) is the constant debasement of currency by national governments.

Everything always goes up year after year.  It is a underlying principle of Keynesian theory.  Us in the private sector use capitalism,  this does not hold true for government.  Our leaders have the luxury of using Keynesian theory for their end of the economic spectrum.  It is a saving grace for the world if use properly.  Sadly like many things when abused the results is devastating as in this present recession.

For example, if the drought and biosphere wreck havoc that could potentially cause a inflation rate of 3 to 4% instead of the annual 2% goal for the country.  The cost of food doubled that year edging annual inflation up.  Since this is bad, The government steps in, borrows several billion from the Central bank, imports food and prevents the double of the price of food.  But now there is to much money in circulation this year, so now other products are going up in price.  The Central bank now steps in and constricts credit and stops the raise inflation so come end of the year it for the hole country is still a 2% annual increase, disaster included.

The point being of this example.  We can debate apple and oranges as in cost of wars, droughts, hurricanes etc.  When you apply Keynesian theory to the situation  It is the government that drives inflation,  What we do in the private sector gives it some nudges to the left or right, they have the final say at the Federal level not the private sector.  No matter our actions.  The bottom line is.  Government and Central Banks control the money in and the money out.

What triggers this inflation is interest on money.  All money is loaned from the bank.  I cannot get money to pay someone unless it is borrowed.  I borrow a $100 at 5% annually.  I only have $100 and I now need to come up with $5 more.  Only way to do this in the current economy is to borrow more or sell a service to someone else.  But that guy has only has $100 with 5% annual interest. If he decides to pay me, he now has $95 and owes $10 while I now owe nothing.  Everyone is so from this system in the hole now all governments can do is continued Quantitative Easing, or Reform the system on how we do economics.

To offset this problem, Government goes into debt.  They never repay the debt, and never will.  At best they balance the books and the Bank keeps issuing I.O.U's in exchange for paper bills.  I can prove it.

Every single country in the world spends more on it's local economy than it takes in in a taxes in the form of GDP versus DEBT ratio.  All the countries presently collapsing or on the verge have a higher than 100% GDPvsDEBT ratio.
 
Kevin, slow down and take a deep breath. Fractional banking and interest payments have been around for a very long time; Social Credit economics, not so much.

You are quite correct that the State manipulating the currency causes inflation, but you should also take into account the other effects that this manipulation has. Hayekian "bubbles" will form as access to credit is eased and money starts flowing to follow speculative projects offering high rates of return (the .com bubble in the 1990's and the decades long housing bubble are current examples; the 1720 "South Sea Bubble" would never have formed if investors were not offered shares on generous "margin" terms).

Keynesian economics is favoured by the political class because it gives them palusible sounding cover to do what they want to do anyway (which is to use public money to ensure their re election and to shower favours on their clients [crony capitalism] who will work to that end). Looking at times and places where heavy duty Keynean economics was used for real, we don't see a sterling record; the Great Depression may have lasted seven years longer because of the "New Deal" (read "The Forgotten Man"), and of course the current administration claimed that the $800 billion "stimulus" package would bring unelployment down to the Bush era 5% range. The Stimulus and $5 trillion dollars of deficit spending later, U3 is stuck at 11.2%, putting the number of unemployed at @ 33 million, almost equal to the population of Canada. European nations are not doing a lot better, and loans and bailouts are hard to come by as people no longer have faith the governments in question will either change their policies or ever pay off the bonds (the Greek government giving bond holders a 60% haircut is something every bondholder will take active steps to avoid). Even other governments are not keen to enter the market any more, see how the EU struggles to get the northern tier of European nations led by Germany to put any more money into the game.

So the end point will really happen when either the loans are repaid (deleveraging) or struck off the books as unpayable (default). Either course of action has risks and benefits associated with it, and I am pretty sure the downside risks of default are far higher than deleveraging, but since no one wants to bite the bullet for deleveraging, we may be heading to default anyway.
 
Two good news factoids from Ian Bremmer:

"In 2009, 54% of the world’s middle class lived in the developed world. In 2020, that share will fall to 32%."

and

"More than 3/4s of the growth in the developing world’s middle class is coming from Asia."


Edit: to add 2nd factoid
 
Not trying to bash Ian Bremmer, he only pointed out the blatantly obvious. poor economies that are in a high growth has always seen a prosperous middle class.  (lots of resources, money to be spent, absorbed and used).

Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.

He was shooting for brownie points  ;D
 
kevincanada said:
Not trying to bash Ian Bremmer, he only pointed out the blatantly obvious. poor economies that are in a high growth has always seen a prosperous middle class.  (lots of resources, money to be spent, absorbed and used).

Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.

He was shooting for brownie points  ;D


I'm not sure history agrees in either count:

Plenty of countries have had high growth without ever developing a secure, stable middle class. In fact, from, say, 1500 to 2000, aside from Northern Europe,* I'm hard pressed to think of any. Russia and Spain, for example, were quite rich - high growth - in the 16th and 17th centuries but a middle class never developed. Consider, even more, China about 1000 years ago - it accounted for about half of the world's GDP but never developed a middle class.

Despite the decline in growth of e.g. the Britain and the Netherlands the middle class in each remained stable and secure.

My  :2c:

----------
* In which I include the USA, Canada, Australia, etc - all of which are culturally Northern European
 
If the global economy is to ever be fixed,  I really think we need a ombudsman type roll in all the economies to bridge the gaps from federal, corporate and personal levels and wipe out most of the credit based aspects of it so the "average joe" doesn't rack up a mountain of debt he/she is paying for years.  Make people earn their money before they spend it instead of spend now, work later.

Locally. Costco held a job fair,  hiring 110 part time works for their new store opening.  A work force of all part time workers.  Last I checked 20% of the work force is in retail.  Nearly all retail jobs are part time aside for some managers and various personal at a administrative level.  Floor personal is nearly always part time minimum wage workers.

These companies often justify doing this by saying things like "you don't have to take the job"  reality says yes you do. [(Another principle of Keynesian theory that gets abused;) debt makes people work in turn creates productivity]  The roads were packed with parked cars for several city blocks.

The point is, it is a very easy legislation fixed at the provincial or federal level.  Saying companies can only employ a percentage or ratio of workers as part-time.  4:1 full time/part time.  Nobody wins when companies do these things except for the company.

Worker = working poor
Family often suffers having to help support the underemployed
Worker may give up and go on welfare
Taxes collected isn't even worth mentioning the amount is so small
Needless to say the physiological affects of being poor on the individual
Even medically, drug abuse is more common amongst the poor than anywhere else; although it still exist in the wealthy families.  Hence higher medical costs.


This is just off the top of my head, for something as simply as legislation and some voting.  This affects millions of Canadian workers, and millions more family members.  Yet it never gets fixed.
 
kevincanada said:
Middle class in developed countries has always dropped. (highways, houses, manufacturing sectors already built) no need to employ a middle class for this infrastructure projects.

Gotta disagree with you here. You still need to employ a middle class to maintain and improve the infrastructure.
 
Kevin, if you invest in stocks, mutual funds or have a pension or RRSP that is invested in the stock market, then I have some shocking news for you:

You are the reason that corporations use ruthless means to increase the bottom line, that CEOs can receive spectacular wage and benefit practices, and many of the other things you see as evil happen. After all, you want your investments to increase, your retirement to be well funded and fulfilling and your personal wealth to grow, don't you. Most of us do, and reward the companies that bring the biggest returns, while shunning the ones that don't. Activist investors would move heaven and Earth to remove CEO's and management that does not achieve the targets that you, the investor want.

So remember that you have a choice to divest yourself, or realize that the desires of the market as a whole dictate what will happen (an attempts to distort the market with regulatory intervention often have unanticipated and unwanted consequences).
 
E.R. Campbell said:
I'm not sure history agrees in either count:

Plenty of countries have had high growth without ever developing a secure, stable middle class. In fact, from, say, 1500 to 2000, aside from Northern Europe,* I'm hard pressed to think of any. Russia and Spain, for example, were quite rich - high growth - in the 16th and 17th centuries but a middle class never developed. Consider, even more, China about 1000 years ago - it accounted for about half of the world's GDP but never developed a middle class.

Despite the decline in growth of e.g. the Britain and the Netherlands the middle class in each remained stable and secure.

My  :2c:

----------
* In which I include the USA, Canada, Australia, etc - all of which are culturally Northern European



I had an interesting conversation with my son the other night where he was parroting the same line about the Middle Class shrinking.

It must be someplace out there in the ether.

In our case it came up as we discussed his job prospects and my daughter's part time employment in the service industry making ice-cream for a store-front operation.

From there to Supermarkets
From there to daughter's shop recreating The Butcher, The Baker, The Greengrocer, The Fishmonger, The Ironmonger....
From there to the Milkman.

The Supermarket required everyone to go to the Warehouse and help themselves.
The Butcher et al required everyone to go to the High Street and be advised as to what was available in their price range.
The Milkman came to your door.

You put the empties out on the doorstep every night, along with your order and the money.
In the morning, before you were up, the milkman came around with his horsedrawn wagon, scooped the empties, poured the coins out of the bottles, read the order, delivered the goods to the doorstep.
When you got up your three pints of milk, half pint of cream, dozen eggs and loaf of bread were waiting for you.


Fast forward to 2012 - anybody believe that either the money or the food or both would survive the night?


My son put it down to a more level, middle class society with food for all and no thuggery.  Of course things were good when we were young.  We have messed it all up and destroyed society and the middle class along with it.

In the horse drawn society of my youth - Britain in the late 50s - my grandfather's relations still worked down the mines and my grandfather offered the first of his catch of fish to the Laird's Ghillie before taking any home for himself.  Outdoor privies were a common sight.  Baths were once a week.  Hot water, gas and electricity were bought in your living room by plugging the meter with shillings.  Borstals managed young thugs up to the age of 16 with a 1 inch thick birch rod.  Schools managed the rest of us with canes, slippers and the particularly Scottish instrument of correction - the Taws - a foot of leather split in two for the first 6 inches - the introductory version of the cat of nine tails.  Hanging was still the solution for those that wouldn't learn.

We knew those that had and those that had not.  And the divide between them was great.

We divided the world into Upper Class, Upper Middle, Lower Middle, Lower and Working ... as well as the Royalty and Wogs (Wogs were anybody not from Britain and included the French, Spanish, Italians and Germans when we were being charitable to them).  We were taught to speak "proper English" at school, punished for speaking like our parents in the playgrounds and charitable teachers encouraged us to give up the colloquialisms that identified us and our regions.

And in that slough of despond of non-progressive ideals, of class warfare and labour strife, of upper and lower class divide.... in the middle of that mess we were still able to put a couple of hours of wages on the door step, on every door step, every night,  and receive on the same door step enough food to feed a family for a day.

I'm sure that somebody, somewhere, occasionally, stole the milk money.......but in 10 years in Britain, in slums and "middle class estates" that milk was always there for my breakfast cereal.

In our current predicament (what predicament is that exactly?) when all of the above iniquities have disappeared - you can't get a milkman to countenance delivering the service under the old rules of engagement in a society where progress is so evident.

The middle class hasn't dropped.  Everybody has become middle class. What has changed is that in my youth the working class aspired to be middle class and the middle class aspired to be upper class.  Everybody acted the part regardless of their backgrounds.

These days everybody, including the upper classes, acts the part of a working class yob who would have been at home in a borstal - and revels in it.

It ain't the economy stupid.
 
Globally, the middle class is growing rapidly and markedly; the upper classes are growing, too, albeit not at so high a rate; the lower classes, especially the statistically poor, are shrinking.

Here, in North America and Europe, we perceive that the middle class is losing ground, and, relative to the upper classes, it is. But it is not shrinking - at least not according to anything I have read, not even in the wreck of the Great Recession. But we perceive that because the rich are getting richer (true) and the poor are getting poorer (not true, but believed to be true) that the middle class must be sliding into poverty.

Your five categories - rich, three middle classes and the poor - is still good, although some people subdivide both the rich and the poor into two sub-classes, but, as far as I have read over the past few years, we are looking at something like:

Rich                                            = <10%  - but have 40%+ of the wealth
Upper Middle Class                    = <10% )
Middle Class                              =    35% ) - but the 80% have only about 50% of the common wealth
Lower Middle or Working Class =    35% )
Poor                                          =  <15%  - but have <5% of the wealth

(I didn't bother to look up recent (right) numbers; the above is "off the cuff" but those who check will find I'm in the right range, agreed by most mainstream sources.)
 
PS E.R.

The last line of my missive wasn't directed at you.  Just to be clear on that.

Cheers.
 
Interesting exercise scenario for the Swiss, spotted by the Foreign Policy blog folks.....
The Swiss army is preparing for possible internal civil unrest as well as waves of refugees from euro-countries as the economic crisis drags on.

Switzerland, a non-EU, non-euro country landlocked between eurozone states, last month launched a military exercise to test its preparedness to deal with refugees and civil unrest.

“It's not excluded that the consequences of the financial crisis in Switzerland can lead to protests and violence,” a spokesperson of the Swiss defence ministry told CNBC on Monday. “The army must be ready when the police in such cases requests for subsidiary help.”

Some 2,000 officers took part in the "Stabilo Due" military exercise in eight towns around the country, based on a risk map detailing the threat of internal unrest between warring factions and the possibility of refugees from Greece, Spain, France, Italy and Portugal, according to Swiss media reports.

Swiss defence minister Uli Maurer recently told Schweizer Soldat magazine that there may be an escalation of violence in Europe. "I can’t exclude that in the coming years we may need the army," he said.

Der Sonntag newspaper reported that army chief Andre Blattmann intends to table a proposal for the potential deployment of 1,600 troops to guard airports, industrial plants and international headquarters in Geneva ....
EUobserver.com, 12 Oct 12
 
Thucydides said:
Kevin, if you invest in stocks, mutual funds or have a pension or RRSP that is invested in the stock market, then I have some shocking news for you:

You are the reason that corporations use ruthless means to increase the bottom line, that CEOs can receive spectacular wage and benefit practices, and many of the other things you see as evil happen. After all, you want your investments to increase, your retirement to be well funded and fulfilling and your personal wealth to grow, don't you. Most of us do, and reward the companies that bring the biggest returns, while shunning the ones that don't. Activist investors would move heaven and Earth to remove CEO's and management that does not achieve the targets that you, the investor want.

So remember that you have a choice to divest yourself, or realize that the desires of the market as a whole dictate what will happen (an attempts to distort the market with regulatory intervention often have unanticipated and unwanted consequences).

Easy there big guy. I know you said "if" but then went speaking as if I am doing these things, which I certainly 100% am not.  Attempts to distort the market?  The market is manipulated every single day by government.  What I singled out is something that exists, which is 100% abuse.  Nothing is gained or lost by hiring someone for a 40 hour week, versus hiring 2, 20 hour week labourers,  unless this is some hidden accounting pitfall which is being exploited, if true then the blame is on the government for allowing it to continue and should be corrected anyway.

Forcing companies to employ a normal work week will harm no corporations and raise the quality of living for the people who work for these scum bag retail chains that use these tactics.  Our government baises minimum wage on a 40 hour week,  anyone who gets less ours is Abuse of the system by the very definition which our government allows to happen.

So you know. I am a employer,  I always shoot to hire for a 40 hour week, I can tell I am aware of no accounting differences from having part-time to full-time, aside for a little extra paperwork from having extra unneeded employees.
 
Kevin:

Don't forget that these companies are exploiting loopholes in the various labour laws of the jurisdictions they are in that treat part time workers differently than full time workers. For example different requirements for medical benefits, paid time off, termination notice and so forth. It also allows flexibility in having people work extra time at straight time wages.
 
Kevin, I was not attacking you personally, but pointing out that the actions of the market are determined by all of our choices. Since you and I and millions of other people (including, ironically the very full and part time workers who we are talking about) invest in various markets demanding the highest possible returns, then there are many built in incentives to lower costs and do everything possible to maximize ROI.

I applaud you for following you convictions, and perhaps in your industry (whatever that may be) there are no real advantages to having part time over full time workers. From a larger perspective (having worked part time, full time, as a contract employee and commissioned sales over the years), full time employees are generally more expensive because they get benefits. I felt relieved when I was in a position that provided benefits, and bore the costs of not having benefits when I was part time, contract and commissioned. In fact I can recall being annoyed working in a bank branch that the shifts were designed to be short enough that we didn't get a meal break. OTOH, while it sucked to be me at the branch, Canadian banks pull in billions in profit, some of which accrues to my investments.

Best of luck in your business, and remember that there are all kinds of forces out there (Adam Smith's Invisible hand) which are directing decisions and the flow of investment, many of which we will never be directly aware of.  You might also consider reading The Use of Knowledge in Society
 
Hi Cupper: 

You don't have to pay full time employees benefits or any perks.  This is often confused as some companies volunteer to pay it, and many unions.  Automotive comes to mind; they Negotiate benefits in their contracts.  There is no regulation saying you have to pay anything extra to a full time employee.  Only time off pay is holidays, this is government enforced for everyone,  there is a vacation pay in the form of percentage, but again it's static to both employee types.  Termination notice is on length of employment, not sub-types.
 
Hi Thucydides:

I knew a banker who did investments with CIBC, she invent in the millions of dollars and make huge profits for the bank,  The average worker cannot do this.  It was high stakes investing for a quick fast profit.  Even the average millionaire cannot do this.  Some people make money from stocks, although most do not,  I looked at Costco, they have a 0.275c dividend on a $96.64 share price. LOL A whooping 0.28% return for every hundred bucks you give them hehehe  ;D at that share price giving them any money is pointless. they make take 30 years to hit $115 a share.

I'm a General Contractor in the housing market, small business, it's incorporated since 2006 I often have a few people running around working on houses filling contracts I generate.

I'll have a look at those resources your posted.
Thanks.
 
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