Tag Archives: Financial crisis

Food inglorious food

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When my forebears, fresh off the boat from Scotland, settled in the vicinity of Guysborough, N.S., on that province’s far eastern shore, they new a little something about everything that was crucial to survival in the late 18th Century.

They could wield an axe, build a house, milk a cow and, maybe most importantly, till, sow and reap the soil – which was saying something given that the ground was, and still is, 80 per cent boulders.

I am often struck by the sheer number of things we’ve forgotten how to do; how much practical knowledge has leached away over the centuries, decades, even scant years. I was skippering my own sailboat alone when I was 11. I’m not sure I could do that today – not, at least, without a refresher course in knot tying and dead reckoning.

Still, the one ancient task my wife and I have been determined to reintroduce to our small branch of the family is that of growing stuff to eat safely and well. We would call this ‘farming’, except we actually know a few farmers and, let us assure you, we’re no farmers.

We do, however, maintain a small south-facing plot in our Moncton backyard where, in the spring, summer and a good portion of the fall we grow potatoes in rotation, carrots, peas, beans, broccoli. Out front, we cultivate tomatoes and peppers.

None of this will be especially surprising to anyone who lives and works in and around a small city in Canada. Private and community gardens are springing up like efficacious weeds almost everywhere you go, and the trend continues to grow. I suspect there are good reasons for this.

Late last year, just in time for Christmas, the CBC reported on research from the University of Guelph’s Food Institute that estimated, “the average Canadian household spent an additional $325 on food (in 2015). On top of that, consumers should expect an additional annual increase of about $345 in 2016.

“Since 81 per cent of all vegetables and fruit consumed in Canada are imported, they are highly vulnerable to currency fluctuations. They are pegged to increase in price by four to 4.5 per cent in the new year. ‘It means that essentially families will have to spend more without many options, unfortunately,’ says Sylvain Charlebois, lead author of the university’s sixth annual Food Price Report.

Other organizations contend that food prices cannot be untethered to murky global forces that human civilization has, fairly recently, unleashed upon the world. Says Oxfam Canada’s website: “Droughts, floods and storms have played havoc with harvests over the past few years, and climate scientists predict the problem is only going to get worse. Some experts feel that the financial crisis that swept the world beginning in 2008 also had an impact on food prices. Investing in the rising price of food seemed to make it a safe bet.”

Finally, “crops that once were used for food are now used to make what is known as “biofuel, primarily ethanol and biodiesel. A full 40 per cent of the corn crop in the United States, and a similar percentage in Canada, now ends up in cars instead of stomachs.”

Whatever are the reasons for the escalating cost of food, the most prudent response, it seems to me, is to grow as much of your own stuff as you can (organically, naturally).

My wife and I might even double-down on the arable land we tend this year. After all, the old Guysborough homestead is good for more than the rocks in its ground.

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How hawks and doves circle

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The move was as much symbolic as practical. How better to prove to Canadians that the federal, Tory regime is on the right, fiscally hawkish course than by selling its last, remaining stock in the giant auto company it bailed out when it was on a far more fiscally dovish flight path?

With that, Finance Minister Joe Oliver proclaimed the end of an era this week, authorizing his government’s divestiture of 73 million common shares in General Motors to Goldman, Sachs & Co. “We have eliminated a market exposure for Canadian taxpayers and returned GM to private-sector ownership, having supported its continued contribution to the Canadian economy,” he declared in a statement.

What a difference eight years makes to the leadership sensibilities of the governing classes. We may recall the bad, old days of global, financial collapse in 2008 and the Great Recession that followed, when the still tender-footed Harper majority was, like the normally counterpoised Obama administration, committed to economic stimulus not austerity, spending rather than restraint.

At that time, allowing the big automakers, GM and Chrysler, to fail was unthinkable on either side of the 49th parallel. Indeed, less than a year after Parliament Hill and Queen’s Park banded together to drop a combined $14 billion on the crippled manufacturers, then-federal Industry Minister Tony Clement declared, “This was not a decision we took lightly. But, at the end of the day, we knew that if we did not participate, what was at risk was not just the (direct) jobs but all the other parts manufacturers and other industries that go into having an auto sector in this country, and that has been estimated to be over 400,000 jobs that were at risk.”

He was probably, if frustratingly, correct. Now, it appears, the nation’s economy has recovered well enough to justify liquidating the government’s auto assets (reportedly worth about $3.5 billion) just in time to balance the budget later this month, roughly half-a-year before the next general election.

All of which may only prove that hawks and doves really can occupy the same airspace, depending on which way the political wind blows.

Still, the larger issue that concerns many economists in this country is whether a hell-bent rush to book a balance in the public accounts, come what may, is rational (or even possible) in the medium-to-longterm. The GM cash-out may not be, technically, a windfall, but something about it feels awfully like found money (“Don’t worry, Mabel, we’re saved from perdition; I just found Uncle Harry’s collection of gold nuggets buried in a coffee can down by the river).

Meanwhile, storm clouds are once again gathering in the broader economy – which is expected to grow only fractionally over the next quarter – a point that Bank of Canada Governor Stephen Poloz made clear in an interview with The Financial Times last week. “When the oil shock came, it was clear we would no longer be able to close the output gap by 2016, but by 2017,” he was reported to have said.

“Since we had some firepower, we took some insurance and cut rates. . .The first quarter of 2015 will look atrocious, because the oil shock is a big deal for us. . .

In theory lower oil prices mean (putting) more money in consumers’ pockets, but. . .if an oil company cancels (an investment) project, laying off a worker, that guy will not have the money to buy a new pickup truck.”

A balanced budget is a desirable objective for any lawmaker, but not when there are girders in the economy to support – and certainly not when all such book entries are manufactured for more symbolic than practical reasons.

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The tragicomedy stylings of the expert elites

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Every so often, when a major newspaper musters a considerable pool of expertise to explain what it regards, with solemn conviction, as an enormously complex tale of hubris and woe, I am struck not by how difficult but by how strangely easy it is to follow the human saga.

This, despite the fact that the customary, editorial waiver clearly alerts me, like a warning label on a pill bottle, that what I am about to consume may cause drowsiness, confusion or even nausea.

So it was a few days ago when, on the fifth anniversary of the global liquidity  meltdown, I had occasion to delve into the Report on Business’s (ROB) cover story, “The financial crisis: Through their eyes,” in which no fewer than nine senior reporters presented the results of their interviews with 18 “key players” in Canada’s capital markets, including Finance Minister Jim Flaherty, former Bank of Canada Governor Mark Carney and three private bank CEOs.

Part testimony, part confession, the piece reads a bit like a transcript of a group therapy session for capitalists still suffering from the effects of post-traumatic stress disorder even as, the ROB notes, “the visible scars of the financial crisis are fading.”

But if I had expected, while reading the piece, to fight a battle for illumination with only dim certainty of winning – if I had assumed that I would necessarily marshall every weapon in my intellectual arsenal to fully understand what really happened to the global economy in 2008 and 2009 – it became quickly apparent that no such effort would be required of me.

These experts, these “key players”, are no more lucid on the subject today than they were a half-decade ago. Their most revealing observations are entirely familiar, thoroughly explicable, and could apply to any catastrophe the fates and furies periodically visit on hapless souls.

“In July of ’08, I attended what’s called the international pensions conference, [attended by] CEOs of the 40 largest pension plans, corporate and public,” Jim Leech, who was a senior vice-president of Teachers’ Private Capital in 2008, tells the ROB. “They were pretty oblivious to what was going on.”

Mark Carney: “The summer of 2008 was awful because the system was coming apart and people didn’t appreciate what was happening.”

Louis Vachon, CEO of the National Bank of Canada: “It’s definitely not the end of financial crises. I think there will be more. Will we see something as bad, and as socially impacting as we saw in ’08? I think the odds of that occurring again are very, very low in the next few decades. From my lips to God’s ears on that one.”

That all of us – common investors and financial adepts, alike – were “oblivious to what was going on” and that “people didn’t appreciate what was happening” and that avoiding a repeat performance at some point down the road may hinge on some sort of supernatural intervention confirm what we already suspect, and have suspected all along: None of us really know much about anything, especially the big things in life.

Still, David H. Freedman, a regular contributor to The Atlantic, thinks he knows just enough about the blind spots in human comprehension to write a whole book on the subject. In his 2010 effort, Wrong: Why Experts Keep Failing Us – And How to Know When Not to Trust Them, he observes, “Economists weren’t exactly lining up in late 2007 and early 2008 to warn us all that national economies, global financial institutions, and real estate markets were rapidly spiraling toward a black hole of potential collapse.”

That’s because they didn’t know. At least, they didn’t know the larger story as it grew unwieldy, elaborate and, ultimately, out of control.

In fact, I like to express the limits of expertise almost algorithmically: Specialized knowledge grows increasingly superficial and unreliable in direct proportion to the degree of complexity built into any system of human endeavor. This goes for financial markets, political regimes, Greek tragedies, Norse sagas, and the comedy routines of the late, great George Carlin.

Of course, I could be wrong about this. I’m no expert.

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