Handling Bailouts and Such Matters in Canada

Whispering in the Wind (WITW 110) February 24, 2016

Federal bailouts and direct subsidies have been a part of Canada’s political history going back to confederation and the building of the transcontinental railroad system – in 1871 British Columbia joined confederation on a condition that the transcontinental railroad system would be extended to include British Columbia, within 10 years.  In more recent times the injection of government cash into a troubled sector (or firm) has caused considerable debate on the role of government in propping up a firm or firms that are failing because of poor judgement and/or mismanagement – said another way, when does a firm or a group of firms become too big or too important to fail?

2008 – 2009 Banking Crisis and Bailout

The Oxford dictionary defines bailout to be: “an act of giving financial assistance to a failing business or economy, to save it from collapse”.  The global financial crisis of 2008 - 2009 hit Canada particularly hard, with Canadian banks in desperate need of liquidity (cash) – in part a result of the Canadian banks being over exposed in the mortgage business.  Rather than going to the country’s central bank and asking for the cash on commercial terms (as was done in the United States), the Canadian government’s political solution was to unload $69 billion in bank-held mortgages on to the government’s crown corporation, Canada Mortgage and Housing Corporation (CMHC).  Stephen Harper justified his actions by saying that Canada’s banks “are the only banks in the western world where we’re not looking at bailouts, or anything like that,” and his government’s decision, to undertake “some transactions with our banks to improve liquidity” – it was a purchase agreement, not a handout.  While it is understandable that the global financial market was/is an unregulated mess and it is understandable that the Canadian banks needed a major cash infusion due to the crisis, nevertheless, the bailout should have been done on quasi-commercial terms through the Bank of Canada – and that’s one good reason for having a Bank of Canada.  As to the bottom line, the Canadian banks didn’t suffer much and the taxpayer took the hit.  As far as CMHC’s role in the Harper strategy to bailout the banks, smells like a “conflict of interest”.

Other Economic Bubbles, Ready to Burst?

While a financial, bank crisis was averted in Canada seven years ago, using unconventional if not unethical means, the cash crunch was addressed with few consequences on the banking sector. That was seven years ago and Canada has a new prime minister and a new administration in control.  The country will have to wait until March 22 when Prime Minister Trudeau’s government is expected to reveal its master plan for the country.  Whether the budget and its forecasts address the real economic issues facing the country is something I’ll be watching out for: 

1.   Will the stimulus package promised create jobs, jobs, jobs? 

2.   Will the infrastructure spending create the quality jobs needed, in the needy areas of the country?

3.   Will the Bombardier “bailout” be handled with appropriate conditions, conditions that deal with the real management issues facing Bombardier?

4.   Will the budget presented on March 22 establish processes that will clearly outline the environmental targets agreed to in Paris; the steps necessary to form a National Energy Strategy; and a vision on making Canada a more sustainable nation?

5.   Will the budget undertake further steps to address the out-of-control pricing in the Vancouver and Toronto housing market, including a review of foreign investment in Canada’s housing market?

6.   Will the budget address the boom/ bust issues facing Alberta, Saskatchewan and Newfoundland and Labrador?

7.   Is Alberta’s oil sands dream still alive, in the minds of the current, Liberal government? Will the pipeline issue become a vital part in Nation Building?

Canada Needs Clarity and Vision

Whispering in the Wind (WITW 109) February 17, 2016

The Canadian economy is spiralling in the wrong direction with some observers suggesting that current economic/political circumstances are erratic, if not out of control.  Prime Minister Justin Trudeau’s answer to Canada’s economic uncertainties, stimulate the economy by tossing out huge amounts of money to the big cities and calling it “infrastructure” investment.  While the country will have to wait until March’s federal budget to see the details of his spending plans, the prime minister offered a rather ominous hint when he observed last week that the budget deficit for the 2016/17 fiscal year would be larger than the $10 billion he had promised and his government was going to find it difficult to balance the federal budget by 2019/20 – basically wiping out the economic promises he made in last year’s election campaign.  It is understandable that Mr. Trudeau would (should) re-assess his campaign promises in light of a clearly deteriorating international situation, but he might be going over-board.  My hope for March’s budget: that it will be a budget that reflects a vision for the Canadian economy; that it is progressive and sustainable; that it addresses the pressing issues at hand and focuses on the pressing issues at hand.  And what has to be avoided, that the budget is just an outline of a spending spree.

The Woes of the NDP

New Democrats will be attending their annual convention during the April 8 weekend in Edmonton.  At the convention, delegates will be asked to vote on having a leadership race – if the vote is over 50 percent, the race for leadership is on.  Thomas Mulcair indicated he is willing to carry on as the NDP’s leader, if he garners 75 percent support from the convention.  The party’s president Rebecca Blaikie has criss-crossed the country to assess the mood of the NDP membership in light of their major disappointments in the last election – she has openly concluded that Tom Mulcair will need 70 percent support if he is to remain leader.  As to other possible contenders for the NDP’s top job, Nathen Cullen’s name is often put forward.  Mr. Cullen is from British Columbia and is a well experienced Member of Parliament – apparently he is not interested in the NDP leadership job – at least for the moment.  While I’m not a supporter of the NDP, I think that Mr. Mulcair has proved himself as an intelligent, excellent parliamentarian.  If the social democratic party is to remain a viable option opposite the Liberals and Conservatives, a person of Mulcair’s stature is needed, if not required.  What is missing in the discussion and fundamental to the NDP’s future, is a frank discussion on how to carve out a center-left of center constituency that is attractive to a bewildered constituency fearful of what is to come.  As to the opportunities for the third party NDP, the party elite will have to think outside the box and structure a platform based on two long-standing issues facing Canadians:  Personal Freedom versus Responsibility to the Nation-State and Globalization versus Nation Building.

Trudeau's Approach to Senate Reform is Lacking

Whispering in the Wind (WITW 108) February 10, 2016

Justin Trudeau is now Master of the Ship and after 100 days in office, Prime Minister Justin Trudeau has demonstrated he is quite different from his predecessors – I haven’t decided if he is steering the ship in the right direction?  Trudeau’s decision to have gender parity in his first cabinet (based on a promise made prior to knowing who would be in his caucus) sets a dangerous president for future federal government appointments – including the 22 up-coming Senate appointments. 

Senate Reform, in Trudeau Style

Liberal leader Justin Trudeau grabbed headlines about two years ago when he announced an out-of-the-blue decision to remove the sitting Liberal Senators from his Liberal caucus – the 32 “former” Liberal Senators would sit as Independent Senators.  The justification for Trudeau’s decision was explained in an interesting way, the third ranking party leader felt that the Senate was too partisan and only existed to enhance the powers of the already, all-too-powerful Stephen Harper.  In Justin Trudeau’s view, if the Senate was to function as a chamber of independent, second, sober thought, it would have to be divorced from the whims and wishes of Stephen Harper in the House of Commons and his control of the Conservative-dominated Senate.

Senate Reform, Trudeau’s Strategy

While there has been a good number of suggestions on how to reform a scandalized Senate (including abolishment of the Upper Chamber), few have gone beyond the discussion stage,  and most trying to skirt the possibility of constitutional discussions and change.  Mr. Trudeau’s strategy is to circumvent the constitution, first by declaring those sitting as Liberal members of the Senate to be Independent. Now, Mr. Trudeau is seeking the advice of a 20 member committee (he formed) to offer their thoughts and recommendations on who should be appointed as Independents and filling the current 22 vacancies of the 105 seat chamber.  The goal of this strategy, in Mr. Trudeau’s mind, ends patronage appointments and over time will make the Upper Chamber more independent and relevant to Canada’s parliamentary democracy. 

Senate Reform, the Process

The process undertaken has three components.  First, establish an advisory body consisting of Canadians with “stature” and are credible to the Canadian population.  The advisory committee will then survey the regions where vacancies exist, assess the possibilities and judge those who might make a good Senator and refer names and recommendations to Prime Minister Trudeau - who maintains the sole authority to name Senators - in accordance with the constitution.  Second component, there will be a public input – although I haven’t seen one – to offer suggestions to the government or the advisory committee.  Third element of the process, there will be a provincial component, given that Trudeau wants the Senate to regain credibility with the provinces, confirming that the Upper Chamber is to represent Canada’s regions.  While the advisory body is functioning, little is being covered in the press and from what I have read, some announcements are close.  

Senate Reform, What’s Missing

While Prime Minister Justin Trudeau has to be congratulated on his Senate Reform initiative, the initiative as important as it is, it is not resonating with the public or the media.  The Mike Duffy trial is yet to unfold in the courts and there are other trials to come.  The Conservatives refuse to support the Trudeau strategy and NDP’s Thomas Mulcair just wants the Senate to go away.  The mood of Canadians against the Senate is one of confusion and the apprehension as to its role of the Upper House and when all is said and done, it is just a money sink-hole!  Here is a thought that might gain some respect from the Canadian public – using a cultural practice that exists in many Aboriginal communities.  The practice, instituting “elder” thought and respect into the Senate’s culture.  A culture that separates party politics from experience, wisdom and respect – a culture that looks at long term consequences over short term elections.    

    

Canada's Pipelines - It's All About Politics and Greed

Whispering in the Wind (WITW 107) February 3, 2016

The pipeline debate in Canada has become a ruse – where a number of so-called stakeholders and politicians are out to deceive and confuse the general public on an issue that is of paramount importance to the country and Alberta.  And, the way events are unfolding, Prime Minister Trudeau is in the middle of a number of political challenges which are inconsistent with his “consensus building” management style and his “sunny ways” demeanor.  In the meantime provinces like Alberta, Saskatchewan, Newfoundland and Labrador are struggling with major economic issues – said another way, Canada is in serious difficulty if it can’t find a way to move its oil resources to markets.

Current Pipeline Proposals

While there are at least 4 major pipeline proposals in the mix, two seem to have been politically rejected (for the present) – Justin Trudeau promised that if he was to be elected prime minister, the Northern Gateway pipeline to Kitimat would not happen – in his mind, it threatens “British Columbia costal economy” – Barack Obama rejected the Keystone pipeline proposal claiming that it would move Alberta’s “dirty oil” into the United States.  Two other proposals are still under discussion – the Kinder Morgan pipeline proposal, (an expansion of an existing pipeline facility going to Vancouver), is fraught with five conditions voiced by the province of British Columbia’s premier, including a need for a piece of the action to offset environmental risks – the Energy East pipeline proposal from Alberta to Canada’s largest refinery in New Brunswick is also fraught with difficulty.  Objections and concerns are being voiced by Quebec’s aboriginal and municipal leaders and when all is said and done, it is all about economic benefit for the so-called stakeholders?

The Pipeline Issue

With many elections to come and over the course of time, any one (if not all) of the four pipelines is possible – if not all of them – and it will have little to do with the environmental issues.  The environmental concerns are easily addressed by having effective, in-place technologies; science based regulations and a monitoring system that is unclouded by politics.  The role of Mr. Trudeau’s government will be to set the environmental standards (for both the pipeline industry and the oil sands industry) and having mechanisms (like a revamped National Energy Board) in place to assure that the national environmental targets and standards are being met.  In the meantime Alberta, Saskatchewan and Newfoundland and Labrador are struggling, big time. 

Justin Trudeau is Stumbling, From the Start

Whispering in the Wind (WITW 106) January 27, 2016

Prime Minister Justin Trudeau has been in office for three months now and there is little doubt, his “sunny ways” gait and how he mixes with the public has gotten the media euphoric, labelling him the political rock star with promises.  As to his promises and his strategies used to achieve his commitments, there are bottle necks – with serious, unintended consequences.  Admittedly it is far too early to pass judgement on Mr. Trudeau’s performance as prime minister, but there are indicators which suggest that he has stumbled out of the starting gate. 

Trudeau’s First 12 Weeks

To suggest that Justin Trudeau wasn’t busy over the past three months, he or she would be looking at reality through a clouded lens.  Mr. Trudeau outlined his agenda and priorities last December under five broad headings:  Growth for the Middle Class; Open and Transparent Government; A Clean Environment and Strong Economy; Diversity is Canada’s Strength; Security and Opportunity.  As to specific announcements made and actions taken, a number are worth highlighting:   

Gender Parity – Mr. Trudeau announced a gender parity cabinet – 15 women of a 30 member cabinet.  In my view, a new standard has been set by the Liberal government and could very well impact future federal government appointments, and that means, gender issues could trump qualifications – and that’s a very dangerous precedent.  When asked why he wants gender parity, Mr. Trudeau glibly responded, “Because it’s 2015”.  The Environment is another major priority for Mr. Trudeau’s government and as promised, endorsed the principles of the Paris Climate Change Accord.  The hope for Mr. Trudeau is to meet with the provinces in the near future to assemble a national consensus with real targets – the speculation is that the provinces will voice their own specific plans, without targets – and that means Mr. Trudeau will have failed to bring about a truly “national” environmental policy.                                                                                  Syrian Refugees – Mr. Trudeau pledged to bring in 25,000 Syrian refugees by the end of 2015 – after several adjustments the Trudeau government is now saying they will meet the target figure by the end of February, 2016 – an understandable, yet ill-considered promise on the part of the Liberal government.  The longer term issues associated with integration and assimilation could cause serious heartaches for Canadian governments in general.                                                                                 ISIS War Air Strikes – Mr. Trudeau promised to withdraw Canadian fighter jet support from the coalition efforts to fight the so-called Islamic State in Syria and Iraq.  While Mr. Trudeau is adamant against having a Canadian fighting force in a war zone, the need to offer meaningful support as an alternative to the coalition’s war efforts remains a mystery, if not unresolved.  In my view, the issue is very personal for Justin Trudeau and reminds me of those associated with the “hippie” anti-war movement of the 1960s.                                                                                                             Aboriginal Relations – In December, 2015 Justin Trudeau pledged to have an inquiry into the 1,200 missing or murdered aboriginal women and promised a “total renewal” of Canada’s relationship with its aboriginal populations.  While the inquiry into missing aboriginal women is a critical step in improving relations with the indigenous peoples of Canada, the La Loche (Lac La Roche) tragedy in northern Saskatchewan last week, has put a whole new perspective on aboriginal relations and the challenges facing Prime Minister Trudeau and his government.

What’s Missing on the Economic Side?

As to the economic side of Mr. Trudeau’s political equation, there is less transparency and Canadians will have to wait for details in the up-coming  federal budget measures.  The tax measures promised to the “middle class” have been incorporated into the taxation code and will be good for those with middle class earnings – and jobs.  Regarding measures to kick-start the Canadian economy – and a very shaky economy it is – Mr. Trudeau is banking on investments into “infrastructure” to develop confidence and create jobs.  In my view, the priority has to be about jobs, jobs, and more jobs – no matter what the cost is, in the short term.  Nevertheless, the public (and business) will have to wait for the federal (provincial) budget to see what other measures are in store for Canadians to develop confidence and jobs – the 82 mayors in the Montreal region are demonstrating just how greedy politicians can get – their recent overtures have not been helpful.