Thursday, February 12, 2009

Change, part two

Well, I see that we are heading down a slippery slope in a handbasket as usual. South of the border, we have a world leader who has just been handed a mandate to spend like a drunken sailor. Never in the history of the world has so much paper been printed to cover a debt which a lot of folks don't believe the government should have assumed in the first place. Not even in the trust fund debacle a few years ago. Mr Obama's supporters blame the previous administration, forgetting that for the last several years, both the upper and lower houses have been dominated by the Democratic Party. So, sorry, it was the Democrats who got ya into this mess, maybe the Democrats can spend y'all out of it!

Actually, it might work....since so much money existed in the form of mortgages on properties worth only half their face value, this money has essentially been taken out of the economy, and the US's trillion dollar input "should" only be shoveling money back into the hole. Normally it would take a war to pull this miracle off! If they can resist the urge to print a couple of extra trillion, you know, just to leave as tips and pocket linings, then there will not be a corrosion in the value of the cash such as exists in say, the Belgian Congo, or in Germany leading into WWII. Quite a balancing act! So it may well be the right answer, at least for the US.

Now up here in Canada, we are facing an economic meltdown of our own. For the first time since the Trudeau years, Canada has had a negative trade balance. 33 years. We are seeing thousands being laid off from GM plants, auto parts plants are closing their doors, fewer housing starts have been the norm in the US, leading to lower demand for lumber, and it doesn't take a crystal ball to spot that much the same thing will be happening here in the next year or so. Nickel, iron, copper and potash prices are falling through the floor, causing those companies to reduce their operations. We can't sell our oil! Ottawa gang bangers are coming back home because there are no longer any rich pickings in the oil patch.

Note that my examples are all of companies which are foreign owned. They employ thousands of workers here in Canada, and the Obama government is on record as saying that they have no interest in propping up any economy but their own. General Motors Canada is not going to get any of that great bail out money, so GM Canada has stated that they will simply close operations in Canada. Unless of course, the federal conservative party of Canada decides to bail out General Motors Canada. Then they would stay here, and as they piously point out, continue to employ UAW assembly line plugs. You want to bet that Wehrhouser lumber, Exxon, Gulf Oil, and Theissen Nickle are not watching this real closely, and if GMC gets a sugar plumb, their execs won't be flying their corporate planes into Ottawa International Airport asking for theirs as well?

Only trouble with that is, as we get back to the original statement, you can print money like it was growing on trees if you have a place where it vanishes just as say, a war, or a bank bailout. But Canada doesn't really have that...Canadian banks were "fiscally responsible", and therefore any massive bailout we hand out here in Canada will simply corrode the value of our currency. The trade deficit won't last the Canadian dollar crashes in value like a cessna driven by a drunken ten year old, the economy will recover.

The real question is, as the US dollar nose dives as well, which will come out of it intact and level, and which will simply thunder into the turf?

Ahh, we live in interesting times!

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