For sheer chutzpah, it’s hard to beat Chris Gibson-Smith, chairman of the London Stock Exchange.
In an interview with a U.K. newspaper last week, Gibson-Smith urged the Occupy movement to stop blaming banks for the financial crisis and instead focus their rage on the real culprits – irresponsible governments and…wait for it…politicians
According to Gibson-Smith, governments caused all the problems by letting banks run up huge debts. Those damned politicians “allowed the financial system to explode by permitting the build-up of ludicrous amounts of debt and leverage.”
Say what?
ALLOWING banks? PERMITTING the build-up of debt? Who are these banks -- a bunch of unruly teenagers? And governments have been bad parents because they gave the kids the keys to the car instead of locking the little brats in their bedrooms until they did their homework?
They were idiots, apparently, for believing what bankers told them about the sanctity of free markets and the need to deregulate.
"No one ever said that free markets could or would be self-regulating,” sniffed Gibson-Smith. “That's where people over the past few decades have got it wrong, and many are still in denial – look at Alan Greenspan, who is still defending free markets."
Seems people got a lot of things wrong in the past few decades. What a bunch of maroons!
Wonder where they got all those goofy free-market, keep-government-out-of-our-business ideas?
Monday, October 31, 2011
Sunday, October 23, 2011
Look to China for economic salvation?
The bad news just keeps on coming for Ontario.
On Friday, a group of native chiefs from Ontario’s far northern region announced that they were withdrawing their support from an environmental assessment of a proposed chromium mining project.
The chiefs want one particular process – a joint panel review -- and the federal agency in charge of environment assessments has opted for a different process – a comprehensive environmental assessment. The chiefs don’t like that decision, so they are vowing to do everything in their power to block development until they get exactly what they want.
The announcement by the Matawa chiefs was not unexpected. They have been calling for a joint review panel for several months.
In fact, cynics have been waiting for this kind of announcement since the premier started extolling the Ring of Fire mineral zone a couple of years ago. Development of this area has the potential to light a fire under Ontario’s stuttering economy. It is important to Ontario’s economic future.
The premier was foolish enough to say so.
That was a very bad idea, because it raised the stakes. It also signalled to certain malevolent forces that there are significant benefits in opposing Ring of Fire development. Oppose it they will. At every turn. Because they stand a good chance of winning.
Cynics won’t be surprised. They don’t believe Ontario has the political will to undertake industrial development of this scope. Not in this part of the province. Not in this environment of political correctness. Not against the combined forces of native power-brokers, a reconciling court, Dudley Do-Right citizens, the U.N. and opaque social activism, much of it funded by organizations based in other countries.
So what to do?
Maybe Ontario should look to China.
Many years ago, China faced a similar problem -- impotent governments, factious regions and external mischief-making. It leased Hong Kong to the English for 99 years, got annual revenue and received back a thriving capitalist hub for its emerging economy. Today, China is flush with funds and actively searching for natural resource opportunities to feed its burgeoning industrial development.
Excellent deal all around.
If the premier is really committed to the development of the Ring of Fire, he should take a trip to China and pitch the opportunity to people who can actually make it happen. A good annual lease rate for the next 99 years would help pay the bills and pull down the debt. It's a heck of a lot better than what we’re facing now in the province's far north – high costs, low rewards, failure and frustration, international criticism, legal paralysis, endless obstructionism….
It’s not a great answer, but it’s probably the best we can do in the circumstances.
Let's face the fact that we’re outgunned and over-matched in our efforts to develop these contested lands. Maybe in 99 years we’ll have grown enough to be up to the challenge.
On Friday, a group of native chiefs from Ontario’s far northern region announced that they were withdrawing their support from an environmental assessment of a proposed chromium mining project.
The chiefs want one particular process – a joint panel review -- and the federal agency in charge of environment assessments has opted for a different process – a comprehensive environmental assessment. The chiefs don’t like that decision, so they are vowing to do everything in their power to block development until they get exactly what they want.
The announcement by the Matawa chiefs was not unexpected. They have been calling for a joint review panel for several months.
In fact, cynics have been waiting for this kind of announcement since the premier started extolling the Ring of Fire mineral zone a couple of years ago. Development of this area has the potential to light a fire under Ontario’s stuttering economy. It is important to Ontario’s economic future.
The premier was foolish enough to say so.
That was a very bad idea, because it raised the stakes. It also signalled to certain malevolent forces that there are significant benefits in opposing Ring of Fire development. Oppose it they will. At every turn. Because they stand a good chance of winning.
Cynics won’t be surprised. They don’t believe Ontario has the political will to undertake industrial development of this scope. Not in this part of the province. Not in this environment of political correctness. Not against the combined forces of native power-brokers, a reconciling court, Dudley Do-Right citizens, the U.N. and opaque social activism, much of it funded by organizations based in other countries.
So what to do?
Maybe Ontario should look to China.
Many years ago, China faced a similar problem -- impotent governments, factious regions and external mischief-making. It leased Hong Kong to the English for 99 years, got annual revenue and received back a thriving capitalist hub for its emerging economy. Today, China is flush with funds and actively searching for natural resource opportunities to feed its burgeoning industrial development.
Excellent deal all around.
If the premier is really committed to the development of the Ring of Fire, he should take a trip to China and pitch the opportunity to people who can actually make it happen. A good annual lease rate for the next 99 years would help pay the bills and pull down the debt. It's a heck of a lot better than what we’re facing now in the province's far north – high costs, low rewards, failure and frustration, international criticism, legal paralysis, endless obstructionism….
It’s not a great answer, but it’s probably the best we can do in the circumstances.
Let's face the fact that we’re outgunned and over-matched in our efforts to develop these contested lands. Maybe in 99 years we’ll have grown enough to be up to the challenge.
Monday, October 17, 2011
OWS gets support from odd quarters
The Occupy Wall Street protesters are getting support from some unexpected quarters, among them Mark Carney, head of the Bank of Canada. And he's not the only voice from the financial world suggesting we "listen up" to the calls for change.
Last Friday, Carney told CBC's Peter Mansbridge that the protests "highlight the need for policy makers to show they are serious about forcing change." He cited an increase in inequality that started with globalization and was made worse by the financial crisis. Carney is pushing for financial reforms that would make future crises less likely.
And as a former Goldman Sachs investment banker, there's a good chance he knows and understands the murky financial backwaters that spawned the 2008 crisis.
In 1998, Goldman Sachs helped bail out Long-Term Capital Management when the overly ambitious hedge fund executed a $4.6-billion pratfall that threatened to take financial markets down with it. It was a chilling precursor to the Lehman Bros. collapse in mid-2008, and could easily have led to the same dismal outcome.
LTCM had been established by a group of financial whiz kids partly to get out from under regulatory oversight and partly to play tiddly winks with U.S. tax laws. One of its founders was Myron Scholes, a former Timmins boy who grew up to win a Nobel prize in economics for co-developing the Black-Scholes formula, which provides a mathematical model for valuing and managing the risk of derivatives.
It's not a stretch to say hardly anyone understands the Black-Scholes formula. But almost anyone trained in Finance can plug in some numbers and spit out an answer. Apparently, the formula was much beloved by the high-flying Wall Street derivative traders in the lead-up to the 2008 financial collapse.
Here's the thing. Myron Scholes, for all his qualities, has been a spectacular financial flame-out since leaving academia for the world of hedge funds. In fact, he's a train wreck looking for a place to happen. He's a serial catastrophe generator, having engineered two less dramatic, but still gob-smacking, hedge fund crashes before joining the LTCM disaster.
Presumably, he was using his award-winning mathematical model to facilitate all that crashing and burning.
Which leads to three questions -- What is the fatal flaw in the Black-Scholes model, what role did it play in the problems we are facing today, and why are we letting these people go on and on with their catastrophic financial models?
Maybe Mark Carney knows. And maybe he can do something about it.
Let's not do this again in 2018.
Last Friday, Carney told CBC's Peter Mansbridge that the protests "highlight the need for policy makers to show they are serious about forcing change." He cited an increase in inequality that started with globalization and was made worse by the financial crisis. Carney is pushing for financial reforms that would make future crises less likely.
And as a former Goldman Sachs investment banker, there's a good chance he knows and understands the murky financial backwaters that spawned the 2008 crisis.
In 1998, Goldman Sachs helped bail out Long-Term Capital Management when the overly ambitious hedge fund executed a $4.6-billion pratfall that threatened to take financial markets down with it. It was a chilling precursor to the Lehman Bros. collapse in mid-2008, and could easily have led to the same dismal outcome.
LTCM had been established by a group of financial whiz kids partly to get out from under regulatory oversight and partly to play tiddly winks with U.S. tax laws. One of its founders was Myron Scholes, a former Timmins boy who grew up to win a Nobel prize in economics for co-developing the Black-Scholes formula, which provides a mathematical model for valuing and managing the risk of derivatives.
It's not a stretch to say hardly anyone understands the Black-Scholes formula. But almost anyone trained in Finance can plug in some numbers and spit out an answer. Apparently, the formula was much beloved by the high-flying Wall Street derivative traders in the lead-up to the 2008 financial collapse.
Here's the thing. Myron Scholes, for all his qualities, has been a spectacular financial flame-out since leaving academia for the world of hedge funds. In fact, he's a train wreck looking for a place to happen. He's a serial catastrophe generator, having engineered two less dramatic, but still gob-smacking, hedge fund crashes before joining the LTCM disaster.
Presumably, he was using his award-winning mathematical model to facilitate all that crashing and burning.
Which leads to three questions -- What is the fatal flaw in the Black-Scholes model, what role did it play in the problems we are facing today, and why are we letting these people go on and on with their catastrophic financial models?
Maybe Mark Carney knows. And maybe he can do something about it.
Let's not do this again in 2018.
Wednesday, October 5, 2011
Northern malaise again
What's up with one of my favourite economists, Livio Di Matteo of Lakehead University in Thunder Bay?
In his October 4 posting, Di Matteo surveys the pre-election political scene and finds little to like from a Northern Ontario prospective, no matter what outcome the vote produces. And despite all the talk about the North, he sees no indication that the main parties are prepared to grant the region any real decision-making power.
"As a sign of where the priorities really lie, consider the fact that in all of the main party platforms, there was no real mention of new institutions for the North or any real policy of decentralization or devolution of decision-making when it comes to northern resource development."
He admits there has been no push from northerners to win greater autonomy, and he seems baffled by this willingness to tolerate the situation.
In his October 4 posting, Di Matteo surveys the pre-election political scene and finds little to like from a Northern Ontario prospective, no matter what outcome the vote produces. And despite all the talk about the North, he sees no indication that the main parties are prepared to grant the region any real decision-making power.
"As a sign of where the priorities really lie, consider the fact that in all of the main party platforms, there was no real mention of new institutions for the North or any real policy of decentralization or devolution of decision-making when it comes to northern resource development."
He admits there has been no push from northerners to win greater autonomy, and he seems baffled by this willingness to tolerate the situation.
"Northerners seem to be quite happy in their role as an economic dependency punctuated by bouts of adolescent outrage," he writes. "They will be dealt with accordingly no matter who forms the government."
Decentralization will only come when the north's aboriginal population gets big enough to demand -- and get -- a new deal, he says.
He sounds a bit out of sorts and dispirited, doesn't he?
Well, it's not easy trying to push the North toward a more self-reliant future. Di Matteo is not the first northern warrior to succumb to frustration. Nor will he be the last. Over the years, many good people have thrown their hands in the air and wandered away to do something more rewarding.
At the same time, he does make good point.
Maybe it's worth looking deeper into the reasons behind Northern Ontario's soul-sucking inability to get its act together.
Di Matteo's "Northern Economist" blog -- always a good read -- is found at http://ldimatte.shawwebspace.ca/
Sunday, October 2, 2011
CRA soft on well-heeled tax cheats
Financial services reporter John Greenwood raises important questions in Friday’s Financial Post (FP Street - A taxing pursuit) about big-time Canadian tax cheats and the apparent reluctance of the Canada Revenue Agency to bring them to justice.
Goodwood says the CRA has come into possession of more than 1,000 names of scofflaws who stash tax-free cash in secret European bank accounts.
“However, despite harsh criminal penalties for tax evasion in this country, not a single one of those account holders has gone to jail,” he says.
Goodwood is far from impressed with CRA’s record.
Most of its “success” has come from a voluntary disclosure program that allows cheats to confess without penalty, he says. Other cases were related to organized crime activities in Montreal, a couple of small companies, a piano player who failed to declare U.S. property and the operator of an offshore gambling site.
In fact, CRA’s record is darned insipid – almost wilfully insipid -- compared to the aggressive efforts of U.S. authorities to reclaim some of an estimated $100-billion slippage to the offshore tax dodge.
I guess Canada doesn’t need the money right now. The rest of us don’t mind paying more, thank you. Or maybe it’s just so much easier to pluck the feathers off terrified low- and middle-income taxpayers. Oh, heck. Why not both? We’ll pay more and you can turn our lives into a living hell at the same time!
In any case, if the CRA is not going to use its lists of tax cheats, perhaps the agency would consider publishing the names for us to see.
That way, we could cheerfully disregard these fine Canadians when they pop up on our TV screens bleating for more tax cuts and corporate subsidies.
Goodwood says the CRA has come into possession of more than 1,000 names of scofflaws who stash tax-free cash in secret European bank accounts.
“However, despite harsh criminal penalties for tax evasion in this country, not a single one of those account holders has gone to jail,” he says.
Goodwood is far from impressed with CRA’s record.
Most of its “success” has come from a voluntary disclosure program that allows cheats to confess without penalty, he says. Other cases were related to organized crime activities in Montreal, a couple of small companies, a piano player who failed to declare U.S. property and the operator of an offshore gambling site.
In fact, CRA’s record is darned insipid – almost wilfully insipid -- compared to the aggressive efforts of U.S. authorities to reclaim some of an estimated $100-billion slippage to the offshore tax dodge.
I guess Canada doesn’t need the money right now. The rest of us don’t mind paying more, thank you. Or maybe it’s just so much easier to pluck the feathers off terrified low- and middle-income taxpayers. Oh, heck. Why not both? We’ll pay more and you can turn our lives into a living hell at the same time!
In any case, if the CRA is not going to use its lists of tax cheats, perhaps the agency would consider publishing the names for us to see.
That way, we could cheerfully disregard these fine Canadians when they pop up on our TV screens bleating for more tax cuts and corporate subsidies.
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