Last Chance for the U.S. Economy!

by John Brian Shannon

This blog examines Canada‘s debt and deficit-cutting success of the 1990’s and early 2000’s which improved Canada’s credit rating, lowered borrowing costs for the government and when combined with a new 7% nation-wide Goods and Services tax (1990) allowed many job-creation projects to be funded which lessened the blow of the government’s (then) austerity program.

Read “How Canada Cut Its Deficits and Debt” — by former Prime Minister of Canada Paul Martin (prior to that he was Finance Minister) who famously took Canada from second-worst among the G-7 countries to the most stable economic performer in only a few short years. The above link takes you to a downloadable PDF document. It is a must-read for students of macroeconomics.

Paul Martin, 21st Prime Minister of Canada
Paul Martin, 21st Prime Minister of Canada (Photo credit: Wikipedia)

The Fiscal Turnaround

“When the Liberal Party took office, Canada’s deficit and debt were by far the worst among the G-7 but for one, and our level of foreign debt was the highest of the industrial world. Indeed, the Wall Street Journal had publicly dubbed Canada all but bankrupt. Four years later, our debt-to-GDP ratio was dropping like a stone. Our financial record was second to none and Canada’s deficit was no more.” — Paul Martin quote in The Magazine of International Economic Policy — The International Economy.

Many American friends of mine, are asking how the U.S. can solve its massive U.S. deficit and debt problems — problems which seem almost as insurmountable as going to the Moon was viewed in the early 1960’s.

The fact is, these problems have been solved in Canada and they can be solved in the United States. What has been lacking up until now, has been the will to act. Once elected, leaders who are empowered by their electorate to slay the twin dragons of debt and deficit could do so relatively quickly.

Some final advice from the Right Honourable Paul Martin former Prime Minister of Canada, the man most directly responsible for solving Canada’s historic debt and toxic deficit problem.

“The final lesson I would draw is that if deficit reduction is to be a priority, then it has to be a “national” priority.

When Canada’s debt ratio hit 70 percent, it was assumed by most economists that we had crossed the tipping point. The United States is there now, and the IMF projects that within eight years it will hit 115 percent. [!]

These are serious numbers, and yet the so-called deficit debate in the United States is not about the deficit at all. It’s about winners and losers.

One thing to remember from the Canadian experience it is that for deficit cleansing to succeed, there can be no winners while most people are losing. If deficit reduction is to gain public support, it requires a united effort—in other words, it must be a truly national exercise.” — Paul Martin quote in The Magazine of International Economic Policy — The International Economy.

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Let’s Just Blame the 47 Percent For Everything!

by John Brian Shannon

I was pleased to find Simon Johnson’s brilliant article in today’s edition of Project Syndicate, entitled; “Mitt and the Moochers” — the best summary of America’s economic situation that I have yet seen.

The psychology of the present paradigm is very odd indeed.

It approximates the following statement; Blame 47% of the population, the mostly blue-collar working people and taxpayers for the combined failures of the banksters, a few corporations and some inept government regulations — and then at length, when some of the 47% complain about getting blamed for a situation not of their creation, just default to calling them ‘victims’ in the pejorative sense of the word.

Oh, and let’s make the 47% pay to fix the damage they didn’t cause.

Those who were the first to benefit from the $12.8 trillion dollars of corporate welfare — are among the first ones to criticize 47% of Americans, most of whom;

“pay a great deal of tax on their earnings, property, and goods purchased. They also work hard to make a living in a country where median household income has declined to a level last seen in the mid-1990’s.” — Simon Johnson

In a general way, I take these developments as a sign that the formerly deep roots of American egalitarianism are getting shallower and we are now seeing the beginnings of a class-based society.

“the emergence of global megabanks was not a market outcome; these banks are government-sponsored and subsidized enterprises, propped up by taxpayers. (This is as true in Europe today as it is in the US.)” — Simon Johnson

All of the above are egregious enough in their own right. But what I take greatest offense at are those corporations which having made poor decisions, then line-up to receive billions of corporate welfare — whereby the government effectively rewards those organizations with heavy doses of cash for their poor performance — while corporations and companies which made good decisions all along are comparatively weakened.

It is a sure sign of the apocalypse, when corporations which invested in better decisions do not receive federal ‘reward’ money, but lesser performers do. No lasting good can come of this state of affairs… in fact, it is to weep.

John Brian Shannon

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ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada

Stimulus or Austerity: Can Either Succeed?

by John Brian Shannon

In the age-old debate between stimulus and austerity, many commentators fail to realize both schools of thought could be correct — and in fact, both are.

For one, look at the uncountable billions of stimulus added to the American economy during President Reagan‘s two terms. Unprecedented billions were directed towards defense, R&D, infrastructure — and even to Chrysler — although, strictly speaking, those were loan guarantees.

Do loan guarantees count as stimulus? Almost. And those guarantees tied up billions of U.S. Government dollars until they were no longer required — and served to establish and add gravitas to a new momentum in the U.S. economy. Courtesy of President Reagan’s leadership, I hasten to add.

When we look at historic stimulus, it works. When the stimulus is added at the first sign of recession it is most effective. Once all those factories are shuttered, trying to add stimulus to improve the economy is an uphill battle, every day.

The Marshall Plan to rebuild Europe at the end of WWII is a classic stimulus success story. Anyone who visited 1945 Europe and then visited again in 1960 can attest to that! About $40 billion dollars were used to stimulate the European economy — a lot of money in those days, even by United States’ standards.

Think of stimulus spending as emergency funding to keep the economy functioning. It really only works when applied immediately and at the first sign of recession.

For two, austerity does work. Although, it must be said, removing obscene debt and irresponsible deficits from a large economy constitute a major structural change. It is no band-aid solution — although as I said above, band-aids do work.

Austerity fixes the underlying structural problem — while stimulus fixes the symptoms, if you will.

There is no doubt about the Baltic austerity success story and there are others. You need only look as far as Canada in the 1990’s. Canada’s credit rating was on the rocks, the economy was in the tank and economic vital signs were heading in the wrong direction.

Prime Minister Jean Chretien and his astute Finance Minister Paul Martin, decided to adopt aggressive Canadian-style austerity and it worked (short-term pain for long-term gain) better than anyone had imagined. It just took some political leadership, unusually good communications with voters and some serious brainstorming.

A final word on economist’s everywhere. European economists work for Europe’s well-being, Chinese economists work for China, er, directly! While American economists work to arrange things to America’s advantage — you can’t begrudge any side for ‘playing for the home team’.

If the New York Times, Nobel Prize winning economist Professor Paul Krugman believes that it is in America’s best interests to float the economy with stimulus money, then he is right. Of course while agreeing with him, I always point out that stimulus is a merely a temporary fix and that additional deficit-financing (and accumulated debt) should be ‘pared down’ during the boom times.

Just as John Maynard Keynes suggested.

When this is not done, decade after decade, or should I say, recession after recession, it adds to the unbalanced economy and the entire economic structure is thereby weakened.

For now, stimulus — although it is almost too late for band-aids. Then, during the next boom, adroit movement towards zero-deficit financing — then, once that is achieved, regular scheduled debt paydowns after that.

Stimulus will stop the worst of the present economic malaise from taking an even higher toll — and later, austerity will begin to improve the entire structure of the U.S. economy.

John Brian Shannon

Will Global Sustainability Ever Be Possible?

by John Brian Shannon

If you haven’t seen these two short videos on demographics and sustainability from Professor Hans Rosling take the time to do it now. Hans at his best!

If you prefer to watch video 1 at www.ted.com click here>> “Hans Rosling Shows the Best Stats You’ve Ever Seen”

If you prefer to watch video 2 at http://www.ted.com here>> “Hans Rosling on Global Population Growth”

Bonus video from The Economist: “VideoGraphic: Global Fertility”

Bonus article from The Economist: “Go Forth and Multiply a Lot Less”

John Brian Shannon

John Brian Shannon

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada

 

The Donald. Unloved?

by John Brian Shannon

I happen to like Donald Trump. There is no doubt about his business acumen, his commitment to his family and his showmanship — and he articulates his thoughts very well.

As I was visiting the Twitterverse today looking for non-Olympics-related tweets or other newsworthy articles that I might like to read, I came across this tweet, apparently from ‘The Donald’ himself:

“I have founded and run one of the largest real estate empires in the world. I employ thousands of people. Why am I the enemy?” @realDonaldTrump 11:42 AM – 7 Aug 12 via web

Right off the bat, let’s agree that Donald Trump has founded and run one of the largest real estate empires in the world and employs thousands of people. I could now quote many articles and offer you a magnificent list of his worldwide properties and portray his wealth in many other ways. Which would take days to read. Zzzz.

Just for fun — after reading my short post, please take a look at the Donald J. Trump Wikipedia site. Many serious journalists do not like Wikipedia because they feel it is not an authoritative source for information (and good heavens — commoners can edit the articles there!) But if you look carefully at the bottom of the Wikipedia page, you can click on the links to the same Bibliography and Reference sources that real journalists use. Check out Donald J. Trump at Wikipedia here…

So the problem is not proving that Donald Trump is a billionaire, nor that he has sound business management and media qualities – all of it is easily proved by looking at his outstanding record of success. Oh yes, many people got exposed to a rapidly-changing real estate market years ago and Mr. Trump was one of those people. Notice that he came back stronger than ever?

“Why am I the enemy?” – Donald J. Trump

Human psychology is a funny thing. It makes us act in irrational ways and say odd things. It is not necessarily logical.

A good example of human psychology occurs when one person in a typical suburban neighbourhood purchases a brand-new Ferrari and drives it every day. Past all of those people who don’t have one.

About one-third of them will congratulate the happy owner on his new purchase, another one-third won’t care either way and the last third will begin hating that owner more powerfully each and every day they can see or hear that new Ferrari.

Why? Because it makes some people ultra-sensitive to the fact they haven’t got a new Ferrari and they start to realize that they are ‘missing out’. Which brings to the forefront of their consciousness that they may (or may not) have made some mistakes along the road of life and though at one time they were on-track to buy one, they cannot now buy one. Or, through no fault of their own, they just don’t make enough money to afford one and never will. Maybe they paid for their nephew’s cancer treatments with their life-savings, or something.

The point is, Mr. Trump can afford to drive a different Ferrari every day of the week – and you can’t. Which causes some people to become angry and to feel hostility towards anyone who is so obviously enjoying their success.

It is simply and profoundly, human nature at work. Is it irrational? Yes. Is it illogical? You bet. But it is human.

What would be better? Ferrari’s for everyone! Woo-Hoo! Yes, that would work… wouldn’t it? Unaffordable, but such great fun.

Much better, would be an education system which gives all students the tools to succeed at life, to weather storms and to overcome any obstacles on their way to becoming wealthy citizens themselves — contributing to our society. Let me put it plainly. Rather than continue to produce high school grads programmed to not succeed in some areas of their life, why not incorporate a sound business/financial education into the primary and high school curriculum geared towards personal financial success?

Instead of getting angry at the very wealthy, why don’t we begin educating 100% of our youth for an entire lifetime of financial success.

At this point, anything would be better than the large numbers of professional haters, people who hate successful individuals and their corporations. You know, those individuals who create jobs, add to the GDP of the nation and which help the government to counteract wealthy individuals and corporations from other parts of the world – ones definitely not benign to our Western way of life.

A nation of envious haters will not succeed. A nation of citizens properly educated and motivated for personal financial success, will!

John Brian Shannon

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada