Therion
Senior Member
Screwed.
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End of the recession?
- Thread starter kEiThZ
- Start date
kEiThZ
Superstar
You really think oil is overvalued? China and India are not going to disappear any time soon. They are soaking up all the excess production capacity freed up by a slumping US economy. They are now the new drivers for oil demand. Combine that with the possible (reckless) US temptation to resort to inflation and that only means the price of oil will rise (as the US dollar declines). I see 80 bucks a barrel as a fair price. And as long as it's up there, our dollar will be right up there with it. And that's the unfortunate bit (for all the provinces that don't have stashes of black gold).
Jonny5
Senior Member
You can already see it coming, you just have to look down the line. At the State level and the city level things are a shambles all over the country. They often used a term Zombie-Banks to talk about the concept pf government propped up banks that should be dead. Really what they created instead are Zombie-States, like California, which is insolvent but kept afloat by the federal governemnts printed money.
cacruden
Senior Member
The worst off states are all high tax states, which makes sense because you were relying on income from a bubbly economy - not the median between high and low income - so even when you had massive revenue windfalls coming in from the economy - the most these high-tax states would achieve would be break-even (not even close though for California). All these states/provinces are acting like these inflated revenue streams are going to return in a year or two (and they will not). The more non-core social programs that you add, the less flexibility a province or state actually has during downturns. If you or I suddenly loose 30% of our income - we adjust. Governments rarely do since they are only looking forward to the next election.
cacruden
Senior Member
daveto
Active Member
Spoken with great conviction. And yet, oh so wrong...
Federal + provincial deficit is expected at $100b this year, and is "projected" (we know how accurate "projections" are) close to that for next year as well. $100b is approx 7% of GDP.
Note that in the US, the states are not allowed to run deficits in the manner that our provinces can. And thus the appropriate comparison is US Federal vs Canadian Federal + Provincial.
cacruden
Senior Member
Actually there are several differences. Our accounting is closer "proper" accounting - while the US (they have multiple books - which in the private sector would get you thrown in jail).
Just minor issues, like recording social security as general revenues (which reduces the "deficit" but actually increases overall liabilities). This alone is understates the annual deficit by a large amount (a lot of US stuff is like this).
On top of stupidity like what they are doing with the Health-care (it is not the first time they do it), they are "balancing" (and not "raising taxes") by adding in revenues for the next 10 years, but the program starts in 5 years so they are using 10 years of revenues and 5 years of costs (what happens in the next 10 years is not their problem....).
So when you are looking at the numbers - they are not even the real numbers. Which makes it impossible to know what the real numbers really are
I seem to recollect that states may not "run deficits" but they do have debt - it is issued as state bonds or municipal bonds backed by future revenue - it is just recorded differently.
daveto
Active Member
Actually there are several differences. Our accounting is closer "proper" accounting - while the US (they have multiple books - which in the private sector would get you thrown in jail).
Just minor issues, like recording social security as general revenues (which reduces the "deficit" but actually increases overall liabilities). This alone is understates the annual deficit by a large amount (a lot of US stuff is like this).
On top of stupidity like what they are doing with the Health-care (it is not the first time they do it), they are "balancing" (and not "raising taxes") by adding in revenues for the next 10 years, but the program starts in 5 years so they are using 10 years of revenues and 5 years of costs (what happens in the next 10 years is not their problem....).
So when you are looking at the numbers - they are not even the real numbers. Which makes it impossible to know what the real numbers really are
I seem to recollect that states may not "run deficits" but they do have debt - it is issued as state bonds or municipal bonds backed by future revenue - it is just recorded differently.
Cacruden, fair enough. But I presume you don't dispute that Canada's gov't deficit is 7% for this fiscal year?
cacruden
Senior Member
I don't doubt our deficit for current year is probably that high - which is too high.
kEiThZ
Superstar
Spoken with great conviction. And yet, oh so wrong...
Federal + provincial deficit is expected at $100b this year, and is "projected" (we know how accurate "projections" are) close to that for next year as well. $100b is approx 7% of GDP.
Note that in the US, the states are not allowed to run deficits in the manner that our provinces can. And thus the appropriate comparison is US Federal vs Canadian Federal + Provincial.
Wow. You dredged up a post that was months old. Good job. Let me present my current view.
Deficits are relative. Our deficit-to-GDP ratio ain't all that great but it's no where near what's going on south of the border (that was my original point) and our debt-to-GDP will end up nowhere the Third World territory the US will be flirting with by 2020. Note that the other point was a rejoinder against the misinformation being spread by jade_lee. Unless she had some insider information, at the time of that post being written, the deficit was most certainly not 7% of GDP. The other points on that post stand. She made ridiculous assertions that StatsCan and the BoC were fudging stats to prop up some kind of Conservative agenda. I wonder how that explains the massive deficit being run by the Liberal government in Ontario. Must be the fault of the Harper Conservatives!
As for the current deficit-to-gdp ratio...so what if it's 7%? Most of the developed world and a good chunk of the developing world would love to trade places with us right now. Our deficits remain some of the lowest around even if it's 7%. Even if we end up adding 20% to the debt-to-GDP ratio instead of 15% as originally projected we'll still be in a far better fiscal position than most of the world. That's why I find some the fearmongering unwarranted. We'll come out of this recession in decent shape. That may be cold comfort to somebody who's lost their job, but that individual is still better off living here than anywhere else (economically speaking).
As for different rules and accounting methods, let's stick to internationally accepted stats provided by recognized bodies and not come up with our own accounting methods. That rules on debt issue vary from state to state does not mean you change the rules of comparison. If a state is not allowed to run a deficit by its own rules, how is that relevant to a statistical comparison? When deficit and debt vs. GDP ratios are compared, gross or net public sector debt should simply be compared to the GDP across the board. It should not matter whether a state or a province ran the debt or is allowed or not allowed (by its own rules) to run up the tab.
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jade_lee
Active Member
Ticking time bomb comes to mind. It's time for a reality check and some hard choices to be made again. The fact is that our federal and provincial governments are following the lead of the Americans. That is dumb. On one hand it's being stated that we are not in the same position as the American economy yet following their "fix it" plan appears to be what is being offered and a spending spree has followed. Of course the only difference apparent now is that our accounting of what we are doing and the rewards being reaped don't appear to be made for public viewing like is being done in the states. Instead the accountability people are getting boxes containing copious amounts of paper but very little analysis so far.......
As far as accounting practices, it should be obvious to most tax payers by now that the government engages in "creative accounting" practices. A study completed suggested that even the great accounting minds in our universities are unable to figure out exactly how the government of Canada keeps tract of money in and money out.
As far as accounting practices, it should be obvious to most tax payers by now that the government engages in "creative accounting" practices. A study completed suggested that even the great accounting minds in our universities are unable to figure out exactly how the government of Canada keeps tract of money in and money out.
daveto
Active Member
Spoken with great conviction, and yet....wrong.
The referenced posts from above were from Aug 14. Unless you think that an ability to read the newspaper is insider information?
Note the following links
$50b+ Federal Debt printed May
http://www.wsws.org/articles/2009/may2009/cana-m29.shtml
$18+ Ontario Debt printed June
http://www.torontosun.com/news/canada/2009/06/02/9645896-sun.html
Add in the rest of the provinces and you'll get your 7%.
I'm not going to spend the time to google up the rest of the provinces, but if you'd like to do so yourself in order to refute my post, you are welcome to do so
kEiThZ
Superstar
Fair enough. 7% .... The rest of my argument stands. I would like to know your position, other than being an excellent Google fact-checker.
What do you suggest we should have done? Raise taxes to balance the books? Drop the auto sector bailout and watch Ontario enter a depression?
A 7% deficit is a reasonable price to pay for the modicum of stability we have. Personally, I'd rather have seen a larger deficit and more immediate stimulus to really get the economy going. But it is what it is. We are still by far, in one of the healthiest fiscal and economic situations in the world. To argue that we should have been more mean stingy in our own aid, seems to me a bit foolish.
What do you suggest we should have done? Raise taxes to balance the books? Drop the auto sector bailout and watch Ontario enter a depression?
A 7% deficit is a reasonable price to pay for the modicum of stability we have. Personally, I'd rather have seen a larger deficit and more immediate stimulus to really get the economy going. But it is what it is. We are still by far, in one of the healthiest fiscal and economic situations in the world. To argue that we should have been more mean stingy in our own aid, seems to me a bit foolish.
Glen
Senior Member
I would place a 'currency tax' on imports from countries that manipulate their currencies.
daveto
Active Member
I think the worlds economies moved in unison with the move to low rates and deficit financing. And I think it is not a solution but rather a deferral of the rebalancing of our economies over a longer period of time. Sometimes it's better to crash slowly, rather than all at once.
However, I have serious misgivings with our present government's directives (both published and implied) to the CMHC. I think it is politics, rather than management and leadership. And I think that history will not be kind to our present government.
However, I have serious misgivings with our present government's directives (both published and implied) to the CMHC. I think it is politics, rather than management and leadership. And I think that history will not be kind to our present government.