So the idea that economies are national and can be managed by an inspired bank of Canada is nonsense. These global expansions have been universal. They afflict everything, and when the party is on everybody thinks it’s great and they take on a whole lot of debt. The problem in the contraction is that the economy isn’t big enough to service the debt, so then you have to go into the great “bond revulsion” whereby, as I said, they’ll get marked down and priced to exceptionally low numbers. Many issues will be in default, a feature of a post bubble contraction.The fed or the bank of Canada can provide a stimulus, but all it is is throwing credit at a credit contraction and hoping that it will go away. I mean these guys are dealing with no empirical evidence whatsoever. They are dealing with theories that have been pulled out of somebody’s imagination.
An interview with Bob Hoye. (I know – I too thought the imagination was located somewhat higher on the body).
Related – The Irish Independent is reporting that the Swiss Central Bank no longer will accept Irish government bonds as collateral. The story also notes that one of the world’s largest bond firms, PIMCO, is no longer purchasing debt issued by the Irish government.
But I thought it ‘was different’ in Canada? The news keeps reporting that the recession is over and that the outlook is great??
The people that ‘know better’ than us would never be wrong would they ;^)
It may be that stimulus spending works when you start from a base of low government debt, although I agree the actual evidence for this is not particularly good.
When you start from a high government debt, however, stimulus spending could have the opposite effect. Businesses know that when governments go deeply in debt, you can expect higher taxes, inflation, and interest rates in the future, none of which are good for business. So they batten down the hatches, negating the positive effects of stimulus spending.
They are dealing with theories that have been pulled out of somebody’s imagination.
I think they were pulled out of something other than somebody’s “imagination”. Or is that a euphemism?
In any case, the end result is that we all get reamed up the imagination.
Stimulus funds in Canada were distributed quite differently in Canada and the USA.
A inordinate amount of stimulus funds in the US went towards protecting union jobs, and bailing out poorly run state legislatures.
In Canada most went towards infrastructure projects and job training. A much more intelligent approach.
Sure made a difference for my 32 year old son when he was laid off. Twelve years out of High School in the same job qualified him for Second Careers funding. When he qraduates from college with new skills becoming a productive taxpayer again will be very achievable.
Buying land, seeds and wheel weights. And tools, lots of tools, because pretty soon the amazingly cheap-but-good tooling from Taiwan and Korea will be vanishing.
All I need to complete my collection is a Bridgeport mill and a lathe. It’d be nice to have robotic ones, then I don’t have to become a machinist to produce functional work.
“wheel weights”
Heh.
I suspect my 5 gallon bucket of 7.62 brass is increasing in value every day…
Laughing my imagination off………….
This won’t affect the flow of Iris whiskey will it. Millions of Irishmen want to know.
…but PIMCO will gladly buy China bonds.
Guess why? Because our jobs have gone there and they earn their cash. We print it. That’s the difference. Ireland bond credit was good while ‘Made in Ireland’ was printed on the Compaq computers etc.
Good call.
Coming relatively soon – likely within the next three to five years – canadian provincial debt/bond issuance crises – Quebec and NB the likely first two. It could happen sooner if things really go downhill in Europe. And without a doubt the provinces will as the Feds for a bailout.
“They are dealing with theories that have been pulled out of somebody’s imagination.”
Do these pants make my imagination look big?