Bank of Canada plays politics

Hogwash. Seen this before. Bank of Canada deliberately suppressing interest rates to protect the incumbent government. Canada's economy needs a moderate transitional rise in interest rates. Reasons: prevents a further rise in private and commercial indebtedness, which are at record highs. Supports, and or slows the slide of, the Canadian currency.
... Low interest rates encourages the government to print money to artificially mitigate its budgetary deficits and trade deficit. All these skirt the inevitable inflation due to more costly imports. 
... Now it doesn't mean that the rates should spiral upwards, simply adjusted. Delaying a needed rise in interest rates means that when the inevitable interest rates rise, the increase will be far greater and more likely to cause out of control spiralling inflation very similar to the period in the early eighties.
... It seems the Conservatives are using the bank of Canada to protect their political butts at the price of jeopardizing the longer term Canadian economic health. Put the prime interest rates higher now to prevent catastrophic inflation two years from now. 

Time for pinky swears

What can be done? A change is needed..

The next great reform to the Elections Act? After years of angst and agony imposed on the voting citizen, a change is needed. To reduce the quantity of unrealistic promises by candidates, the solution is simple. Pinky swear.

Every candidate's promises and speeches must be made under sworn oath. Lies and broken promises then can be litigated as perjury. This oath period begins once the writ is dropped, or when the official election campaign begins. Candidate's are bound to complain. Yet voters have the right to expect those successful candidates to keep their promises and political affiliation.

A political campaign is much like an employment resume and application. Those segments are conducted and signed by the applicant as being legally true. The average successful new employee is legally expected to tell the truth on that application. If its a lie. They are fired.

Then to protect joe average citizen, all politicians promises and speeches must now have legal force. Everything they say or promise is made under sworn oath.

Money, and Coincidence. NOT

I recall a very long time ago, one of my teachers, one of the wiser ones sort of threw away the curriculum course book in economics. Liked the guy. Very smart guy. Well he covered the topic of money despite the fact that he was supposed to be teaching Geography. Why?

Well for starters he found learning Economic Geography tied the memory plagued normal geography into a dynamic of interest. Part of this linkage was understanding money.

Originally trade involved barter. In other words trading one quantity of commodity for another adjusted for intrinsic value. The value of a specific coin or bill must either be backed by gold or an agreed marked value. The actual physical price of a coin or money bill is basically nothing. People that assign value to a currency whether its bills, or coins, not governments.

Before you totally nod off, it was important to define the issue by reasserting what you likely already knew. Observe the timing that the Canadian economic performance peaked just before two events. First was the plasticization of money from a combination cotton, special fibre and cellulose or money or certificate paper. Second was the Harper government's effort to eliminate the coin denomination of the penny.

On the one point its a perpetual source of humour to point out that the Harper Conservatives have left Canada penniless. Opposing that funny bone is the serious coincidence. Ever since the penny was eliminated the Canadian economy has declined. Ever since Canadian money was physically changed form a certificate paper into plastic fibre. Ever since the government did those two actions, the value of the Canadian dollar has declined. and the Canadian economy declined.

Certainly, the devaluation of the price of crude per barrel played a significant part. Crude oil prices do hold a significant role in Harper's configuration of the economy. Basically he was playing Alberta economic politics in a Canadian theatre. He accuses both Trudeau and in turn Mulcair as being unqualified to manage the Canadian economy. It should be pointed out acidly that his government has maintained a governmental deficit for at least eighteen years. His frying pan is considerably burnt red to call others to the grill.

The price of oil languishes around the $50 mark. It has done that now for quite a considerable time during the Harper stewardship. Regardless, his government seems stifled by indecision. Another large part of the problem seems to be his very poor selection of Finance Minister, Joe Oliver. Typical of an old style banker, his solution seems to have been not to do anything other than hijack the Canadian Pension Plan and the Employment Insurance Plan money to make up the shortfall from oil revenue.

A third problem seems to be his inability to negotiate or work with others. Notoriously a control freak, he seems unable to work well with others and his political style is a Nerf plinth for the pillar of any economic strategy. His solution during an election is to come out swinging blame for the economic situation onto others. Politically this is a normal tactic but that could backfire in Canada. Canadian voters, even the dutiful ones are in the end either politically stupid or definitely uncaring beyond their own front doors.

It is to this last point which sounds like an insult. Its not meant to be. Its an established almost universal philosophy in the smokey backrooms of all political parties in Canada. There are some issues that generate national riots and strikes in other nations but barely pulls a blink from the Canadian constituent. Worse still Canadians tend to stay quiet until some issue tweaks their anger button.

Both those aspects played into a great surprise when the Conservatives called the early election or rather the unnecessarily prolonged election costing the government and in turn, the very same taxpayers excessive amounts of money. In theory this was designed to exploit the economic power of the present manifestation of the Conservative party. Politically speaking its not the amount of money one has in a campaign its how to spend it. The longer a campaign the greater the chance there is to toppling from first place into the basement.

The most recent example of this first place arrogance was the Toronto Mayoralty campaign. In the summer, Olivia Chow, had a huge lead and a lot of campaign money. It was however the guy in third place that eventually one. It was a long terrible campaign.  Any smart politician leading in the summer time before the election should never underestimate how a lead can dissipate quickly when the people returning from the cottages or vacay sit down and try to absorb the issues that have been too long in play. A short campaign would have worked better for Harper. But what has this to do with economy?

It has everything to do with economy. If you need or rely on economic resources to run your own campaign and start losing or any slide of support whatsoever that doesn't lend itself to your ability to handle a national economy. This points to a significant flaw in modern Conservative thinking. They like the amount of money rather than appreciating the quality, the value of money.

And this is what happened to the Canadian dollar. Once the quantity of cash, generated by big oil evaporates, the present Conservative government people are unable to manage. Witness how close this problem emulates the situation in Alberta. Two governments, evolved in the very same part of the world colliding with the reality of the real world.

In some way, the modern Conservatives are sort of duplicating the source of the same problem the far more dynamic Mulroney Conservatives had. Mulroney understood business but not government. His regime introduced a federal sales tax and signed NAFTA. One or the other was good for the economy but combined as a pair worked to underscore an economic downturn. In Harper, tying the economy too tightly to oil, eliminating the penny while plasticizing the paper money bills, combined to a lack of faith in the Canadian dollar value. One choice would benefit until the next election but mixing them altogether created a toxic economic environment. So toxic that Harper, who bragged that he was an economist, seems to be standing on his head to talk about anything such as travel plans, rather than the specific most important issue which is the economy.

A terrible economy will wreck a country faster than any overseas terrorist plot can. Yet he wants Canadians to vote for him based on a fear of terrorism than the original reason that people picked him before, which was economy. He strangely devalued the feel of money. So making a coin or making a paper bill is more expensive, traditionally it adds to the perception of value. At the end of ten years, Harper's tenure hasn't added any value to Canada. Just what is he doing?

Senate Reform or Deform a choice

It should be pointed out, that in his very first election he swore upside, down and sideways his aim to have a triple E Senate. Every single prospective Senator he appointed swore that he/she would support that reform.

... Well... foisted. He's just regurgitating a promise he made a decade ago.

... One reason that he didn't pursue reform was that all his consulting legal guys and the Supine Court of Canada said he needed a Constitutional Change. That good people is a pile of hooey. Why you say?

... Because it is left to the Prime MInister to recommend the names of those to the Crown for Senatorial appointment. There is nothing in the Constitutional procedure that dictates exactly how the Prime Minister selects those candidates.

... There is absolutely nothing preventing the Prime Minister requesting that the provincial government of that Senate seat vacancy furnish a name or names selected by sufferage of a part attached to the ballot of the next provincial election, by simply including the names nominated by each official political party in that province.

... The reason that most Prime Ministers would be reluctant to appoint a provincial nominee that wasn't a member of their own political ideology or party association. The advantage of appointing party hacks to the Senate is that they tend to tow the line. It is the real reason that Harper was reluctant to employ that simple method. He is after all a reputed control freak of the first order.

... Its just that selecting any provincial candidate(s) without political prejudice, or campaign contributors require a Prime Minister of exceptional ethical discipline. He/she would be often furnishing candidates he/she didn't like. Much like many former Prime Minister going back decades, Harper did not have the strength of character to do that simple and constitutionally correct method of picking new Senators.

... It should be pointed out that if in the event of a minority government and Harper would willingly flip back to the old mode if any of his legislation was threatened in the upper house. I rather suspect that if there was any NDP or Liberal minority, those Prime Ministers would gleefully stuff their party hacks into the Senate to overcome any Conservative Senatorial majority.

... And don't kid yourself, when push comes to shove it doesn't matter whether the Prime Minister is Harper, Mulcair, or Trudeau, all will be confronted by the ultimate paradox. Before the reform Bill or Act can be signed, or receive provincial constitutional ratification, that legislation must be approved by the Senate by vote. Its not the Supreme Court or the provinces that will be the major block, its the Senate itself.

... Certainly they will not vote in favour of their extinction. It is a cushy job chocked full of perks with little work, with even smaller effort. They will not give it up easily nor willingly as a group. Some will vote for reform, but that would be still a minority because most of those residing on those seats got their because they are not innovators nor people of ethical stripe, but because they are almost all political party hacks.

... Repairing the Senate people also must understand exactly what the original intent of the Senate was. The fact that it is supposed to be the house of sober second thought is beyond laughable. Its presence was instituted to protect the regions from the concentrated political power of Central Canada. It makes sense. It still does. It protects provincial rights. Canada has a very large physical land mass. The intent of the Senate structure was sound. It still can work effectively. If it did its job, regional alienation for independence would be counteracted. Had the Senators, and the House of Commons been up to the job, this problem would never have been needed for visitation. Oh curses, here we are.

... The NDP and others who lack appreciation of the original purpose of the Senate creation, fail to understand that had the Senate worked the way it is supposed to, it would facilitate a better political process than the one we have now. The major flaw of the Senate structure is that all the power resides in the Prime Minister. He's the one who selects or nominates those names to the Crown.

... This appointment structure led to two major difficulties. One all the Senators owe their loyalty to a single politician not to the regions that they are supposed to represent. The second problem is that in cases where the Prime Minister wants to expedite legislation through the sober thinkers instead of persuasion, the PM stuffs the Senate with useless and often corrupt party loyalists. As a result the Senate becomes a bloated monster.

... Without question, there are way too many Senators with a career incumbency beyond reality. They are Senators until they reach 75. They might resign to work in a real job. Resignations happen but most Senators remain in their plush jobs until death or 75 which ever comes first. Ideally all Senators should be on term limits, and replaced at the end of those terms at the pleasure of the province they represent, not the will of the federal Prime Minister.

... Then the maximum Senate Reform is abolition. That can and will be defeated by the Supreme Court on entrenched Constitutional clauses. However, simply reducing the number of Senators, removing the power of the Prime Minister in favor of the provincial governments with regard to appointing those Senators and that those nominees placed on a list subject to provincial suffrage.

... To make the process of selecting Senator even more effective, thirty Senator vacancies would be three from each province and another thirty from federal names selected from nominee lists provided by recognized official parties, and parsed by the percentage of the national popular vote from the previous but immediate federal election. The appointment terms would be eight years. Any vacancy caused by death or departure would remain vacant until the next federal election. But that will never happen as long as the power to appoint Senators remains solely in the hands of the Prime Minister.

... So this is the conundrum facing all the country, the greatest block to reforming the Canadian Senate is the Senate itself. Time has proved one thing, like the other party leaders occupying the PMO, Harper hasn't proved up to the job.

A Surprise

Oh here's a surprise. Now its I told you so time. Almost forty years ago, before it was fashionable, I was urging Northern Ontario to aggressively separate from the hideous leeches of Queen's Park.

While you read this article from today's Star and if you are a Northern Ontario resident, remember this crap next time. And realize that not a single farthing, or penny collected from any tax like this will go back into Northern Ontario, it all go into things improving the government limousine service in Toronto or a thirty pay increase for southern a$$hole politicians.

Conclusion. This is an I told you so article. Its time for a Northern Ontario Party specifically representing Northern Ontario and working feverishly for a new province or completely separate country if Ottawa proves equally ignorant to the long ignored Northern Ontario. Its time to leave.

* The following article is sourced from that money pig, Liberal loving, Northern Ontario hating newspaper the Star ...today's issue. Its purpose is solely intended for the education of the many students that read this blog and not for commercial purposes.


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Diamond tax dooms investment, northerners say TheStar.com - News - Diamond tax dooms investment, northerners say

May 06, 2007

Chinta Puxley
Canadian Press

A paragraph buried deep in the Ontario budget is crushing burgeoning optimism that northerners will see a renewed mining boom fuelled by exploration for diamonds, nickel and other mineral deposits.

The province's first diamond mine is one year away from starting production, but that didn't stop the governing Liberals from quietly introducing a new tax of up to 13 per cent on any diamonds mined in Ontario in their March budget.

To many in the province's north, that paragraph in the stack of budget papers – which came as a surprise to northerners and the mining industry alike – represents a grave threat to hope that's been building in remote communities.

Many say the tax is a signal to prospective investors and exploration companies that Ontario is prepared to single out any mineral and slap on a royalty before any mine even begins operation.

"Are they trying to kill the north?" asked Wayne Taipale, mayor of Moosonee, Ont., just south of James Bay. "What are they trying to do? Stop the development? Right now, we really need it. With the timber industry dying, there are no jobs."

Hope has been scarce as well, Taipale said. Young people don't see the point in going to university or college since they are just going to drive a cab or work behind the counter in a local store, he said.

The De Beers Victor diamond mine in nearby Attawapiskat changed all that, he said. The diamond giant is spending $1 billion to build the mine, employing many local people in the process and creating 400 local jobs, he said.

"I've been here for 49 years in Moosonee, I've never seen work like that," Taipale said. "We're all feeling the same way. We're very uncertain now what's going to happen here. This just feels like someone has put nails in the coffin for the north."

The tax isn't enough to stop the Victor project, but Timmins Mayor Tom Laughren said it's enough to deter other potential investors. It's a short-sighted tax grab given just one more $1-billion diamond mine would inject more into provincial coffers than this tax, he added.

"There is a lot of exploration going on in the north, specifically for diamonds," Laughren said. "My fear is it may trigger people to look elsewhere just because the tax regime will be uncertain."

That's a distinct possibility, said PriceWaterhouseCoopers mining tax expert John Gravelle. Exploration companies look for stable tax regimes – something Canada and Ontario has always offered, he said.

"This makes Ontario look less stable given that it has increased its tax quite substantially – two-and-a-half to three times higher," Gravelle said, adding companies also look for a fair application of taxes.

"There is no real reason why diamonds should be taxed any differently than other metals such as gold and nickel."

Opposition Leader John Tory vowed to roll back the tax, if he is elected premier in October, on a recent trip up north.

But Finance Minister Greg Sorbara said there are several good reasons behind the tax. Ontario is simply following the lead of the Northwest Territories, which has a similar tax rate, he said.

"We have to remember that the diamonds that are going to be extracted belong to the people of Ontario and we have to make sure that there is a fair return for the people of Ontario," Sorbara said in an interview.

To suggest that having a "single and similar royalty rate for the diamond extraction industry" will scare away other investment in the north is just "fear-mongering," Sorbara said.

Singling out any other Ontario metal or mineral is "simply not in the cards," he added.

Tory said it's not surprising that other companies would lose faith in the government's word given that the Liberals hiked diamond taxes less than a year after Premier Dalton McGuinty welcomed De Beers with open arms at their ground-breaking.

"To have that very same government turn around and just shaft these people and do a tax grab in the middle of the night, I think is inexcusable," Tory said. "It sends all the wrong signals . . . to every industry."

The province should roll back the tax before sitting down with people in the mining industry to set a fair standard going forward, said Tory.

The company that inspired the tax in the first place said it doesn't expect the government to change its mind now.

The best De Beers can hope for now is a "tax holiday," which would give the mine a chance to get up and running, said De Beers spokesperson Linda Dorrington. The mine represents a sliver of Ontario's overall mineral production value, she added.

"We feel that they've not really thought this royalty through," she said. "For a small amount of income coming into the government treasury, they're creating a very big negative effect."