How Canada avoided America's economic and financial problems

A similar story to that below could be told about Australia. Australia too ran budget surpluses right up until the GFC and Australia's banks at no time stopped making good profits. And Australia's unemployment rate is in fact much lower than the Canadian figure: 5.1% versus 7.2%

In a recent Bank of Canada survey, businesses reported the highest hiring expectations on record amid broad optimism about future demand. A quarter of the Canadian businesses that responded are facing labor shortages. Respondents also indicated plans to increase investment spending - a factor critical to economic productivity that is far too often overlooked in the misguided obsession over consumer spending.[10] All of this has contributed to a surging Canadian dollar, which has risen from a low of 0.77 USD/CAD to well above parity and is presently making record highs on a regular basis.[11] By any conventional metric, Canada's economic performance can thus be demonstrated to have surpassed those of its peers during and subsequent to the recession.

While the United States rose to the occasion with their monolithic trillion-dollar stimulus package and the rest of the world followed suit, Canada, as noted by many opponents of the ruling party at the time,[12] all but sat idly by, and what little it did in the way of spending did nothing to contribute to its aversion of disaster, as demonstrated by the Fraser Institute.[13]

When opposition parties finally prodded the Tories into putting forward a stimulus package, the result was quite the anticlimax. As Canada's leading left-leaning policy think tank, the Canadian Centre for Policy Alternatives quite cogently pointed out, the government's stimulus package was "only one quarter the size of the U.S. package and half the amount advocated by the International Monetary Fund."[15] Clearly, Canada's "stimulus package" was about as ambitious as a homeless man. In effect it was little more than a clever display of political gamesmanship whereby the appearance of action was maximized, while the action itself was minimized in order to control the damage the stimulus would cause while absolving itself of any culpability in the event of any externally induced shocks.

That the ideal policy would have been to do completely nothing, rather than merely almost nothing, is a conclusion that would have been laughed to scorn by policymakers and the public at large at the time but is nevertheless a fact that has been made painfully apparent now that the results of massive government deficit spending have become manifest. And so, with reference strictly to the differences in policy following the financial crisis, the question as to how Canada managed to escape the fate of the United States and Europe is answered not by what Canada did but rather by what Canada failed to do. It is precisely in this abstinence that we find Canada's source of relative success.

As far as the immediate policy response following the crisis is capable of explaining the economic results that obtained thereafter, the foregoing provides the answer to the disparity between the Canadian economy and those of its counterparts. However, it should be understood that a debacle like Greece is not simply a product of the policies undertaken over the prior year. Likewise for the current predicament in the United States - it takes more than one political term to drive what was once the world's largest creditor nation into near-default.

The relative strength of Canada's balance sheet is thus not to be ascribed in whole to the Conservative Party and the seven years it has now been in power but rather to the oversight it received at the hands of its ruling authorities throughout the broader period encompassing both the Conservative administration, which took power just before the financial crisis and the administration preceding it. And here we find an unlikely protagonist in the Chretien-era Liberal Party.

Under the joint leadership of Prime Minister Jean Chretien and Finance Minister Paul Martin, Canada underwent one of the most fiscally responsible periods in its history. Debt reduction was a goal that figured prominently throughout the ten years of the Chretien administration and in the subsequent two years of the finance minister's administration. Taking power as Canada's debt levels were hitting record levels, Martin made it clear from the start that the priorities of the government would be fixed squarely on eliminating the deficit and the record of the following decade leaves little doubt that this was a commitment that was delivered upon powerfully.

Martin went to great lengths to bring the public on board, televising the lobbying efforts of interest groups and publishing dire reports on Canada's fiscal situation, and then embarked on what was in all probability the greatest reduction in government spending ever undertaken in Canada from its inception. Following a peak deficit of $42 billion in fiscal 1993-1994, the administration managed to reverse the deficit and produce a surplus by 1997-1998, and sustain the surplus over the following two years before posting a historical record of $17.1 billion in budgetary surplus in fiscal 2000-2001.

From that point, the government was able to produce a surplus every year up to 2007-2008, at times finding itself alone among G7 administrations in doing so. This was a period during which several significant tax cuts were implemented including a $58 billion tax-cut package in 2001[16] alongside the reintroduction of inflation indexing for personal income taxes. This paralleled the experience in the provinces, which themselves were able to achieve budget balance in the aggregate by 2000 while concomitantly applying substantial cuts in personal income and corporate tax rates.[17]

And thus effectively the whole of the fiscal turnaround in Canada, to the extent it was effected through endogenous factors, can be quite unambiguously attributed to cuts in government spending. Altogether, Chretien and Martin presided over more than $80 billion in surpluses[18] and there is no doubt that this is the single most enduring feature of their legacy.

Equally instructive is the counterexample of the preceding administration. Prior to the Chretien regime, the Mulroney-led Conservative Party had led Canada into a protracted period of economic decline due to its inability to shake off the prevailing Keynesian orthodoxy of deficit spending as a means of reducing unemployment.[19] Incidentally, the dramatic spending cuts implemented by Martin were accompanied and followed by a steep decline in the unemployment rate - from a high of 11.4 percent in 1993 to 6 percent in 2007.[20] Having raised Canada's level of debt-to-GDP to an unprecedented high of 67 percent,[21] the Mulroney administration is a typical example of the futility of free-market rhetoric in shaping the course of the economy so long as practice remains bound by the spell of Keynesian doctrine. Together, the two episodes form an addition to the endless wealth of historical instances of economic outcomes occurring in precisely the opposite manner from that predicted by Keynesian theory.

The lesson of the succeeding Harper government is largely the same. Following the example of Paul Martin and the Chretien administration, Finance Minister Jim Flaherty and the Conservative Party posted surpluses in their first two years in power, helping to bring down the debt-to-GDP ratio - a measure that had been as high as 68.4 percent in fiscal 1995-1996 - to 28.8 percent in 2009,[22] giving Canada the lowest ratio in the G7[23] and making Canada the only G7 country to post ten consecutive surpluses since 1960.[24] Although this quickly deteriorated into unseemly deficits in fiscal 2008-2009 and 2009-2010 due to the political jockeying of a vulnerable minority government, by that time it was too late to overcome the favorable impact of the policies of the preceding decade.

Thanks to Canada's own debt problems at the expiration of Mulroney's term, deficit spending by the government had acquired a bad taste in the mouths of Canadians and this negative association has persisted up until the present as announcing budget deficits has become almost anathema to the voting public. This goes far in explaining why the political developments in Canada leading up to 2007 were so markedly different from other developed countries and why the country is the fiscal envy of the world today.

No nation is exempt from the laws of economics and, as the United States and Europe are now learning, the ultimate bankruptcy of an unbounded government is just as inexorable in the developed world as it is in third-world countries.

The lesson of Canada can be summarized as follows: the size of a country's problems is directly proportional to the size of its government.

More HERE

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US Government Asset Seizures on the Rise

The Wall Street Journal published a disturbing article earlier this week entitled "Federal Asset Seizures Rise, Netting Innocent With Guilty."

You can already imagine the crux of the article. In the United States, there are hundreds of regulations which authorize dozens federal agencies to confiscate private property - homes, cars, bank accounts, gold, company shares, and even personal effects.

Ironically, most Americans still think that they live in a country where you're innocent until proven guilty. Nothing could be further from the truth, and it's just another clear example of how the US Constitution has become a worthless piece of toilet paper for the federal government.

The Fifth Amendment states that "No person shall be.deprived of life, liberty, or property, without due process of law." Tell that James Lieto, a New York businessman who was relieved of $392,000 when the armored car company used by his check-cashing firm was taken down by the FBI.

Lieto was innocent and not implicated in any wrongdoing, but the FBI took his money regardless as it just happened to be in the wrong place at the wrong time.

Last October, another businessman named Raul Stio was suspected of wrongdoing by the Treasury Department. The government seized over $150,000 from his account, yet in the 10-months that followed, Stio has still not been charged with a crime.

According to Justice Department statistics, the total value of confiscated property exceeded $2.5 billion in 2010, more than double from five years ago. The average take per case? $166,000.and the vast majority of cases were non-criminal.

It's truly staggering to think about how much can be taken away from you in the blink of an eye, all without any judicial oversight or right to a hearing.

The reason could be anything. Maybe you violated some arcane, meaningless regulation among the hundreds of thousands of pages of US Code (ignorance of the law is NOT an excuse!). Maybe you were at the wrong place at the wrong time. Or maybe they had no real reason at all other than mere suspicion.

One minute you have money, the next you're completely locked out of your wealth and livelihood. They force YOU to prove to them that you aren't guilty, but they take away any means you had to defend yourself.

Look, this is the new reality in America. The entire country has become a nation of criminals - there isn't a single man, woman, or child alive who is not in violation of some obscure regulation or cannot be `suspected' of wrongdoing.

This is really just a form of cannibalism - a government feeding on its own citizens in order to keep the party going just a little bit longer. They'll raise taxes, seize assets, take over pension funds, erode freedoms, start wars and send people to die - whatever it takes to maintain the status quo.

I've long advocated for an internationalization strategy: diversifying various assets and interests overseas so that no one single government has total control over your livelihood.

Store your gold in Switzerland. Open a bank account in Hong Kong. Register your company in the BVI. Establish a `backup' residency in Chile. Expand your business in Brazil. Get a better job in Singapore. Obtain a second passport in Malta. Open a brokerage account in the Cayman Islands.

This approach is NOT just for the super rich. In fact, I've helped all kinds of people to internationalize, young and old, rich and poor.

Taking some simple steps to protect yourself will give you extraordinary peace of mind. You'll know that, without doubt, you have some savings socked away that NOBODY can touch. You'll know that you have a solid emergency backup plan. You'll know that everything you've worked for won't vanish in an instant.

SOURCE

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ELSEWHERE

Zogby Poll: More Bad Numbers for Obama, as 35% Say He Deserves Re-Election: "Majorities of likely voters continue to disapprove of President Barack Obama's job performance (60%) and say it is "time for someone new" (55%) in the White House. Among those who do approve of Obama's performance, 34% say they are disappointed by the president, but don't want to undermine him by saying they disapprove. The job approval and re-election results in the Aug. 25-29 IBOPE Zogby interactive poll are little changed from the last similar survey conducted Aug. 2-4."

Do we really need a national weather service?: "As Hurricane Irene bears down on the East Coast, news stations bombard our televisions with constant updates from the National Hurricane Center. While Americans ought to prepare for the coming storm, federal dollars need not subsidize their preparations. Although it might sound outrageous, the truth is that the National Hurricane Center and its parent agency, the National Weather Service, are relics from America's past that have actually outlived their usefulness."

Leave the hurricane price-gougers alone: "Well, if it's hurricane season, it must be anti-price-gouging season. It's bad enough for people to be hit by a hurricane. You'd think that statists would show some mercy and spare people some economic idiocy during difficult times. Alas, it is not to be. North Carolina Attorney General Roy Cooper announced that he would prosecute anybody engaging in price-gouging during Hurricane Irene."

President Obama, the Blamer-in-Chief: "I usually write songs and this is my first attempt at writing an op-ed piece. It always amazes me how most political commentators beat around the bush. Well, that's not how you write a song so let's just cut to the chase and get to the chorus: My song 'Obama Budget Plan' can be seen on YouTube. It indicates that President Obama's budget plan appears to be to spend as much of our money as he wants, on anything he wants and to pay for it by just printing more money. The fact is, President Obama doesn't really seem to have a plan at all."

Another criticism of "animal rights": "Any careful observation of the rest of nature will make it evident that applying moral criteria to how animals live is in error -- what philosophers have called a 'category mistake.' And at the same time and for similar reasons, ascribing rights to animals is also misguided, just as would be to ascribe guilt to them when they carry out their killings and maiming in the wilds"

Whose axe made your axe? You better find out: "For the second time in two years, federal agents from the U.S. Fish and Wildlife Service have raided two Tennessee factories that make iconic Gibson guitars. The government alleges that Gibson imported woods in violation of the Lacey Act, a century-old law that makes it a federal crime to trade in plants, wildlife, or timber that have been harvested in violation of 'any foreign law.' While this seems simple enough, and the anti-poaching/conservation impulses behind the law are certainly commendable, the Lacey Act has become one of many federal statutes that create invisible minefields of federal regulations into which anyone can stumble unknowingly"

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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)

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