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ngodup yaklha

http://www.theglobeandmail.com/report-on-business/economy/eu-grapples-with-greek-crisis... - 0 views

www.theglobeandmail.com/...article1463543

Deregulation

shared by ngodup yaklha on 05 Jun 11 - No Cached
  • ngodup yaklha on 05 Jun 11
     
    The second was failure to deal with its huge structural costs, the result of excessive government hiring and lack of deregulation. Stefanos Manos, the retired politician who was minister of economy and finance in the early 1990s, launched Greece's deregulation and privatization process. Before he lost his job in 1993, the telecom industry deregulation was well under way and public-private partnerships were put in place. Later, banking was deregulated to some degree. But then the political will to keep going evaporated and the deregulation process pretty much stopped. By last year, Greece's debt as a percentage of GDP was about 112 per cent, more than double that of Spain (another ailing euro zone country) while its budget deficit reached 12.7 per cent of GDP, the EU's highest. The spectre of Greece going bust sent Greek bond yields soaring last week, sending the euro in the opposite direction.
Kiruban Mahadeva

The Canadian Press: Time for U.S. to deal with debt problem; spillover could hurt Canad... - 1 views

www.google.com/...M5gJ9kKsGOWKz-UmEeHBogtbF6PLHw

Debt GDP

shared by Kiruban Mahadeva on 02 Jun 11 - No Cached
  • concerned about the mounting level of debt in the United States and its potential to slow Canada's recovery
  • when debt exceeds 90 per cent of GDP, economic growth will slow, and that is a situation facing most of Canada's major trading partners, particularly the U.S
  • as markets lose patience with the pace of deficit reduction, the result will be higher interest rates that impact all
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  • It's a transformation that sees emerging markets like China bound forward while advanced countries — Canada's traditional economic partners — muddle along through years of slow growth because of massive debt.
dani tav

Op-Ed: Canada's deflating economy - 1 views

www.digitaljournal.com/...307371

Government attempts to Bail out Canada Debt Large Defecit

shared by dani tav on 01 Jun 11 - No Cached
  • The reason for the minimal GDP growth that we had was government spending increased over this period and government debt increased by about $139 billion.
  • Government Debt
  • The government is in a dilemma now. Despite the rosy forecasts they like to create showing how well our economy is doing there are reasons for major concerns.
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  • Government spending cannot continue to increase especially when it is financed by debt. The recession was started by economies overloaded with debt. Rather than deal with the imbalances government decided to increase spending "grow the economy" and create more debt. Now we are in a predicament that there are no tools left for governments to throw at the economic problems.
  • Canada's net debt had grown to $582 billion, up from $516 billion two years earlier.
  • The government's attempt to continue economic growth by borrowing has failed. Canada's economy is going nowhere and we are farther behind because of government debt. The future does not look much better for Canada's economy.
  • government borrowing huge amounts of money to bolster the economy
Kiruban Mahadeva

Jesse Kline: U.S. looks to Canada to fix its debt crisis | Full Comment | National Post - 1 views

fullcomment.nationalpost.com/...-canada-to-fix-its-debt-crisis

Debt Government Spending

shared by Kiruban Mahadeva on 01 Jun 11 - No Cached
  • In 1994, Canada’s debt-to-GDP ratio was around 67%, but thanks to sound fiscal management, deep spending cuts and sustained economic growth, this number was reduced to 29% by 2009
  • Canadian experience shows that government can balance the books by making significant spending cuts, and that can be done without having an adverse effect on economic growth and levels of employment
alex yesikov

Governments Are The Primary Creators Of Systemic Risk - Charles Kadlec - Community of L... - 2 views

blogs.forbes.com/...mary-creators-of-systemic-risk

Greece Systemic Risk Blog Resession Euro

shared by alex yesikov on 30 May 11 - No Cached
  • The greatest lesson of the still young 21st century is proving to be that governments are the primary source of systemic risk to the economy, our standard of living, and our liberty.
  • The latest case in point is the European government debt crisis, with Greece once again running out of money and threatening to trigger yet another financial crisis.  The government’s debt now totals more than 150% of its GDP, and continues to grow.  Last year’s bailout by other European governments was supposed to give it the time needed to reduce its budget deficits so that next year Greece could roll over its maturing debts, as well as finance additional deficits at interest rates under 6%. However, the government’s austerity plan of tax increases and budget cuts has not reduced current or projected government deficits because the economy in 2010 contracted by 4.5% and the unemployment rate jumped to 15%.
  • Normally, this would be a matter between a debtor and its creditors. However, European Central Bank (ECB) Executive Board Member Juergen Stark warns that the effects of restructuring “could overshadow the effects of the Lehman bankruptcy,” which is associated with the beginning of the 2008 financial crisis.
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  • This risk is amplified by special rules created by politicians that encourage banks to lend freely to governments.
  • In the case of Greece, government actions and regulations also lie at the heart of what threatens to be a European financial crisis.
  • Here’s how it works. Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid.  The riskier the loan, the more capital that needs to be held in reserve. However, under international rules negotiated by government representatives through the Bank for International Settlements (BIS), government loans fit into a special category that has a 0% risk requirement.  That means European banks do not have to hold any reserves against loans they make to European governments.  That’s right, politicians implicitly promised banks that governments would never default.  And, given the opportunity to make “risk free” loans that require no capital commitment, bankers purchased mountains of government debt.
ngodup yaklha

http://www.theglobeandmail.com/report-on-business/greece-prepares-for-asset-fire-sale/a... - 0 views

www.theglobeandmail.com/...page2

Greece-Deregulation

shared by ngodup yaklha on 04 Jun 11 - No Cached
  • ngodup yaklha on 04 Jun 11
     
    Greece's first privatization effort was launched in the early 1990s under Stefanos Manos, who was minister of economy and finance at the time. Before he lost his job in 1993, the telecom industry deregulation was well under way and public-private partnerships were put in place. Later, banking was deregulated to some degree. But then the political will to keep going evaporated and the deregulation and privatization processes pretty much stopped. Mr. Mitsopoulos says the biggest potential obstacle to the success of the privatization program is a dragged-out process. Fast sales would do two things, he said. It would collect a lot of money quickly, which could be used to pay down debt, and it would deliver the message that Greece is finally serious about making its economy competitive. "All these state investments are burdens on the government," he said. "Privatizations will deliver productivity gains and they can be transformed into tax-paying entities." Privatizations are expected to pick up pace across the EU, as countries with budgets deficits above the 3-per-cent EU limit look for quick debt fixes in the absence of strong GDP growth. The Loterias privatization in Spain is expected to raise about €10-billion, valuing the company at as much as €25-billion, making it the second-largest gaming company in the world, behind casino manager Las Vegas Sands.
Kevin Yeo

How national borders impede global trade - The Globe and Mail - 0 views

www.theglobeandmail.com/...singlepage

Trade Border US Canada

shared by Kevin Yeo on 03 Jun 11 - No Cached
  • Two-way trade between the United States and Canada amounted to nearly $750-billion in 2008 before falling to $600-billion in 2009, thanks largely to the decline in energy prices and weakness in the auto sector; in both areas, Canada is the United States’ largest foreign supplier.
  • Thus, Canada’s $100-billion drop in exports to the United States between 2008 and 2009 was three times as large as the decline in Canada’s GDP during that period.
  • The point is not that internal trade flows or barriers to them are unimportant: in large countries, in particular, internal trade is often significantly larger overall than international trade and therefore even relatively small impediments to it can matter a great deal.
Alejandro Enamorado

Regional inequality: Internal affairs | The Economist - 0 views

www.economist.com/18332880

regional inequality

shared by Alejandro Enamorado on 03 Jun 11 - No Cached
  • And the income gap between richer and poorer areas is likely to widen further as government-spending cuts disproportionately hurt less prosperous parts.
  • In several places regional disparities have worsened over time. Start with America. Between 2007 and 2009 real GDP per head in the five richest states actually rose by an average of 2%, but fell by 3% in the five poorest.
  • But studies suggest that differences in productivity are far more important than differences in joblessness in explaining regional income gaps. This implies that governments also need to focus on improving education and skills in poorer areas. In Mississippi only 19% of those aged 25 or over have a degree, compared with 36% in Connecticut or 48% in the District of Columbia.
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  • Indeed, the gap between richer and poorer regions is likely to widen in many countries as the public-spending axe falls. Nowhere will this effect be more striking than in Britain. Cities in the north and Wales are much more dependent on public-sector jobs and welfare benefits than cities in the south.
Chris Li

The Progressive Economics Forum » Out of Equilibrium: Why EU-Canada Free Trad... - 2 views

www.progressive-economics.ca/...de-wont-work-in-the-real-world

Free Trade Canada European Union

shared by Chris Li on 02 Jun 11 - No Cached
  • comprehensively liberalize trade in goods and services, government procurement, foreign investment, and other important economic interactions between the two parties.
  • The recent appreciation of the loonie against the euro (up 18% since the two sides first committed to free trade talks) vastly overwhelms any cost advantage Canadian exports could hope to attain in European markets through tariff elimination.  Aggregate trade imbalances, and the skewed sectoral composition of trade, imply that Canada already loses some 70,000 jobs
  • The EU and Ottawa commissioned a joint economic study which predicted mutual economic gains from a free trade agreement, worth approximately $12 billion per year to Canada by 2014.  However, that report incorporates bizarre and far-fetched assumptions regarding the self-adjusting nature of all markets, and the manner in which free trade would be implemented and experienced. 
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  • even the government’s own report shows that Canadian imports (of both goods and services) from the EU will increase by twice as much as Canadian exports to the EU, substantially widening the existing bilateral trade deficit.
  • exports grew less rapidly with FTA partners than with non-FTA partners, but imports grew quicker with FTA partners than with non-FTA partners. 
  • In the real world, free trade agreements (not surprisingly) tend to make existing trade imbalances even worse: this is true throughout economics, where deregulation generally tends to exacerbate the imbalances and unevenness of market outcomes.
  • Three scenarios are presented: one in which tariffs are mutually eliminated; one in which EU-Canada trade expands in line with the historical experience of Canada’s previous FTAs; and one in which tariff elimination is combined with the appreciation of Canada’s currency (versus the euro) which has been experienced in fact since the two parties launched free trade negotiations.  In every case, the bilateral trade balance worsens significantly (and in the third scenario, it worsens dramatically – since the higher Canadian dollar reduces Canadian exports, even as imports from the EU are surging).  Based on average employment intensity across 23 goods-producing industries, the simulations suggest an incremental loss of between 28,000 jobs (in the first scenario) and 150,000 jobs (in the third).  Direct losses in Canadian GDP range between 0.56 percent in the first scenario, and almost 3 percent in the third.
  • A free trade agreement with the EU will exacerbate Canada’s existing large bilateral deficit, at the expense of output and employment in many important sectors of the economy. 
Carolyne Wang

Is income inequality just business as usual? - The Globe and Mail - 0 views

www.theglobeandmail.com/...singlepage

Income Inequality Historical Trends Cultural Attitudes toward Income

shared by Carolyne Wang on 02 Jun 11 - No Cached
    • Carolyne Wang
      Carolyne Wang on 02 Jun 11
       
      The visuals in this link show the distribution of wealth among the highest income earners in Canada.
  • international statistics show that poverty rates are lowest where income inequality is lowest too. That can be because of culture -- the wage spectrum is compressed, as in Japan, where it is unseemly to get too far ahead of others in pay -- or through active redistribution programs, where taxes and the services they buy redistribute incomes and opportunities to try to level the playing field a bit more.
  • For most of the 20th century inequality in Canada - and in virtually all developed nations, actually - had been declining. By the 1980s that long term trend reversed. First because of recessions (where the bottom end of the spectrum lost ground) then because of rowth (when the top part of the income spectrum zoomed ahead). So for the past generation inequality has grown in Canada, in good times and bad.
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  • There are two reasons for hope. One is, oddly, the result of an aging population and the consequent shrinking pool of workers, which may push up wages for workers producing basic goods and services, not just those at the top of the skill spectrum. The other is a culture shift, where a growing number of boomers understand what is at play and start working with others to come up with ways to ensure there will be a resilient middle class for the next generation.
  • When the cost of something goes up, we tend to consume less of it. So, since living wages are higher than minimum wages, employers are likely to hire fewer workers. A living wage campaign is part of the effort to raise the visibility of a sorry development in Canada. The saying that "the best social policy is a job" is in many ways true; but a new reality has developed over the past decade or so - that you can't necessarily escape poverty by working. Working full-time full-year at a minimum wage job, as many adults do, condems you to poverty.
  • Professor Richard Wilkinson just finished a tour of Canada, discussing his research findings from the past 30 years or so. A social epidemiologist, he has gathered international data showing the very tight correlation between life expectancy and income inequality, between literacy and income inequality, between rates of incarceration and income inequality, etc. etc. Over and over again he shows a range of issues that have a strong social gradient which reveal that almost everybody is better off in a society with greater income equality, including the rich. You can see his presentation in Vancouver at this link. http://i.sfu.ca/TmyYCh
  • The Mincome experiment in Manitoba in the mid 1970s, the MacDonald Commission i n the mid 1980s, and the House Report from Newfoundland and Labrador in the early 1990s all had proposals for providing a basic income. Only Manitoba tried it, as a pilot project, for a few years. The problem with the guaranteed income idea is at what rate you set it, and at what rate you tax it back. It could remove the stigma of income support programs, but it could just as easily be a costly experiment that, essentially, guarantees poverty. Also, as Dr. Wilkinson has suggested, at some point on the GDP per capita curve, income inequality is no longer about material deprivation, but rather one of psycho-social responses. We are, after all, pack animals.
  • We can redress some of the vagaries of the market through public policies, but the root cause of growing inequality is how different peoples' work is valued. IN a slow growth environment, which seems to be the foreseeable future for Canada, it will become harder and harder for those at the top of corporate structures to take the types of increases they have been commanding in the marketplace and expect unionized workers to be happy about losing their pension, benefits and wage increases, and expect low-end workers to essentially stay put or lose more ground. Two things can happen - those at the top start moderating their increases; or those in the middle and the bottom start seeing solid increases, particularly as the wave of retirements starts accelerating. The problem with rising incomes, generally, is that usually goes along with rising prices; and we're about to host the largest cohort of retirees we've ever had in history, a group that lives on fixed and low incomes, to whom rising prices are toxic. So how will the highest priced workers get away witih demanding more in that context I wonder?
  • Historically, increasing economic growth first deliver rising inequality, then lowering inequality (Simon Kuznets' famous work back in the 1950s). That's still true of developing nations - economic growth is first badly distributed, then leads to demands for greater equality.
  • We can raise our kids more equitably - but it will take more taxes. We can have less of a winner take all society - but it will require some people at the top to trim their expectations. We can beat this in small ways, but we also need leaders to express the way forward. In the US they have Warren Buffett, Bill Gates and politicians leading the way. We're waiting for more people like Ed Clarke, the CEO of TD Bank, to weigh in on how to make Canada fairer (his suggestion is higher taxes on the rich).
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