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In our something for nothing world, some needed wisdom --"Seven Blunders of the World" by Mahatma Gandhi.

1. Wealth without work

2. Pleasure without conscience

3. Knowledge without character

4. Commerce without morality

5. Science without humanity

6. Worship without sacrifice

7. Politics without principle


—Mahatma Gandhi

Ottawa closing the tap on bank support measures - The Globe and Mail

The Globe and Mail is reporting this morning that the federal government is ending the Extraordinary Finance Framework, introduced last year. Entirely off the books (and thus very much in line with the Conservative avoidance of democratic accountability), this measure pumped $135 billion or about 10% of our GDP for the year into banks that we were told were the envy of the world.

As described by the Globe

Mr. Flaherty's budget on March 4 will come one week after banks begin reporting first-quarter results. The sector is not expected to show much profit growth, but its earnings will nevertheless likely amount to billions of dollars.

The government's economic action plan – the blueprint it created to steer the financial system through the crisis – included seven measures that collectively could provide up to $200-billion in support.

In early December, when all of the measures were still in place, they had provided $135-billion worth of support, according to the government.

About $40-billion was through the Bank of Canada. The central bank is now reducing or phasing out its extraordinary liquidity facilities.

This represents about a tenth of our GDP for last year, spent on one program, entirely off the books. And our opposition, of course, was as usual asleep at the switch.

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs - Bloomberg.com

Are Hank Paulson, Tim Geithner and many, many other Washington insiders far too inside vis a vis the financial crisis of 2008-09. Bloomberg is reporting this morning that an overlooked item in last month's Congressional hearings is the extent to which Goldman Sachs was implicated in AIG's downfall. As the article notes

Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.

Given the unlikelihood of any effective international regulation regime, it would seem to me that the only course here is for national governments, particularly the U.S., must begin looking at criminal prosecutions where warranted. This was theft on a historical scale by individuals and institutions that clearly feel no remorse for their actions. Perhaps a judge can convince them of their liability and guilt. It is obvious that governments cannot.

Is the Euro a Defacto Gold Standard

An incredibly interesting idea from Thomas Palley on the Financial Times blog today. He argues that the institutional structure of the eurozone is built on neoliberal ideas that have been largely discredited over the past two years. As he tells it

The last quarter of the 19th century witnessed a period of sustained global deflation. In the 1896 US presidential election, William Jennings Bryan famously attacked the gold standard as the cause of deflation, declaring “You shall not press upon the brow of labour this crown of thorns. You shall not crucify mankind upon a cross of gold.” Today, euroland is being crucified upon its own cross of gold that is the institutional arrangements behind the euro. Those arrangements have distorted the monetary - fiscal balance, creating deflationary central bank dominance. That balance needs correction and failure to do so could even risk the viability of the euro in its current form.

The euro was introduced in 1999, the high-water mark of neo-liberal economics. As such, its institutional design embeds neo-liberal monetary theory which in many regards rests on the same economic principles as the gold standard. These principles are that fiscal policy is ineffective; inflation is caused exclusively by money supply growth; and the real economy quickly and automatically returns to full employment in response to negative shocks.

All three principles have been fundamentally discredited by the current recession. Around the world, countries have turned to fiscal policy to offset the collapse of private sector spending, and the recession would have been far deeper absent that fiscal response. Money supplies have risen dramatically almost everywhere without matching increases in inflation, showing that the money - inflation link is highly contingent upon economic factors such as unemployment, capacity utilisation, commodity prices, and business expectations of profits. Finally, rather than rebounding to full employment, the global economy looks set for high unemployment that will last years. This possibility was Keynes’ message in his 1936 General Theory.

Owing to its neo-liberal monetary arrangements euroland has run smack into these economic realities. The European monetary union establishes central bank dominance through an independent central bank that is prohibited from providing financial assistance to member country governments. Thus, whereas the US and UK have been able to finance their fiscal and financial market rescue plans with assistance from the Federal Reserve and Bank of England respectively, eurozone governments have received no equivalent assistance. Instead, they have had to fend for themselves in private capital markets, which has raised the costs of policy and dissuaded more aggressive action.

The irony, of course, is that it is interventionist Europe and not the free market ideologue U.S. that is caught in this trap. It is also a powerful argument in Canada against any sort of currency union, informal or otherwise.

American Conservatism Has Gone Insane

Jonathan Kay of the National Post, writing here for Newsweek, in part had this to say about the Tea Party shindig in Nashville last weekend

[the] modern-day prophets include Texas radio host Alex Jones, whose documentary, The Obama Deception, claims Obama's candidacy was a plot by the leaders of the New World Order to "con the Amercican people into accepting global slavery"; Christian evangelist Pat Robertson; and the rightward strain of the aforementioned "9/11 Truth" movement. According to this dark vision, America's 21st-century traumas signal the coming of a great political cataclysm, in which a false prophet such as Barack Obama will upend American sovereignty and render the country into a godless, one-world socialist dictatorship run by the United Nations from its offices in Manhattan.

and

Sure enough, in Nashville, Judge Roy Moore warned, among other things, of "a U.N. guard stationed in every house." On the conference floor, it was taken for granted that Obama was seeking to destroy America's place in the world and sell Israel out to the Arabs for some undefined nefarious purpose. The names Jeremiah Wright and William Ayers popped up all the time, the idea being that they were the real brains behind this presidency, and Obama himself was simply some sort of manchurian candidate.

A software engineer from Clearwater, Fla., told me that Washington, D.C., liberals had engineered the financial crash so they could destroy the value of the U.S. dollar, pay off America's debts with worthless paper, and then create a new currency called the Amero that would be used in a newly created "North American Currency Union" with Canada and Mexico. I rolled my eyes at this one-off kook. But then, hours later, the conference organizers showed a movie to the meeting hall, Generation Zero, whose thesis was only slightly less bizarre: that the financial meltdown was the handiwork of superannuated flower children seeking to destroy capitalism.

Sarah Palin is emerging as the leader of this movement and a viable candidate for 2012. It really does make you wish we had Bush back.

Gaimbrone Gone -- Who is Left?

Following my post Tuesday, Adam Giambrone has ended his bid for mayor. What is sad is that this could turn into a coronation for George Smitherman, hardly the progressive this city needs right now.

Giambroni Going Down in Flames?

If Adam Giambroni's campaign represents the great urban/progressive hope in the upcoming election, these hopes are quickly fading.

Having started the campaign with the TTC albatross around his neck, he has now stumbled into a tawdry sexual entanglement. Hardly Clintonian, but clearly not helpful at this point.

All elections are important, but this one seems particularly crucial. We seem to be at a crossroads with a choice between a reduced presence of government giving way to a sprawling, car-centred city -- think Atlanta or Houston or a city centred on urban growth, renewed infrastructure and the type of dense, livable city so eloquently promoted by Jane Jacobs. It is sad that most of the current candidates, and perhaps now all of the viable ones, envision the former.

Can't They All Just Grow Up?

The food fight continues over at The Better Way. Riders have now set up a website to vent years (decades?) of frustration. It is actually quite thoughtful. We have a far greater interest in effective transit than in scoring cheap points.

But on the scoring cheap points front, TTC employees have now opened a facebook site to vent on problem riders. Their crimes? Feet on seats, littering and not being polite to staff. Apparently, with our $120 metropass, we are regressed to grade 5. Perhaps we can have a detention room for wayward passengers.

The constitutional structure of Canada starves large urban centres. And other levels of government, with overrepresentation of suburban and rural voters, find it easy to overlook urban needs. Hence crumbling and decrepit transit infrastructure. But even with this, a positive and motivated workforce can make a huge difference.

We are all in this together. ATU workers are public servants. Sometimes customers are difficult. Sometimes they are too.

You are spending our money. Grow up!

Gabor Mate and Sane Drug Policy

I have written about this Vancouver doctor and outstanding humanitarian before. Here he is in an interview with Amy Goodman of Democracy Now!

Repeat After Me . . . .

Inflation is not a problem. It might be, and likely will be in the longer term future, but it is not now. Even that bastion of free-spending, left wing thought, the Economist, is making this argument:

A month ago, I probably would have said that while inflation basically posed no threat in the short- to medium-term, the risk of deflation had been more or less eliminated thanks to Chinese growth and the effect of ample central bank liquidity on asset prices. Now, I'm not so sure. Markets have lost nearly 7% of their value in the past two weeks. Commodity prices have tumbled, as well. China's government is tightening. The American economy has yet to return to steady job growth, and the momentum in American housing markets appears to have hit a winter plateau (while rents continue to decline). Loan demand among businesses and households continues to weaken. James Hamilton reviews the evidence and concludes:

My bottom line: the scales tipped last week in the direction of near-term deflationary pressures, despite the strong 2009:Q4 U.S. GDP report and falling unemployment rate.

I'd have to agree. This is a dangerous time for the global economy. Policymakers seem to be overestimating the return to stability. I'd say the argument for forgetting about inflation entirely until we see two quarters of core inflation at or above a 3% annual rate is quite strong.

None of the fundamentals are strong. Market optimism and a renewed housing bubble do not a recovery make. While we are not likely to return to the depths of last winter, a market decline of 20% is not unthinkable. In less than three weeks, we are half way there.

As I have said so many times, talk of inflation is ideological. It arises from political fears that governments are set to take a much larger role in economies worldwide.

Insanity -- Part Deux

Simon Johnson, ex of the World Bank and someone who perhaps more than anyone else saw the role of the banks in precipitating the 2008 financial crisis, writing today in the Financial Times

As this pressure mounts, we’ll see cracks appear also in the private sector. Significant banks and large hedge funds have been selling insurance against default by European sovereigns. As countries lose creditworthiness – and, under sufficient pressure, very few government credit ratings will hold up – these financial institutions will need to come up with cash to post increasing amounts of collateral against their derivative obligations (yes, the same credit default swaps that triggered the collapse last time).

Remember that none of the opaqueness of the credit default swap market has been addressed since the crisis of September 2008. And generalized counter-party risk – the fear that your insurer will fail and this will bring down all connected banks – raises its ugly head again.

In such a situation, investors scramble for the safest assets available – “cash”, which actually (and ironically, given our budget woes) means short-term US government securities. It’s not that the US is in good shape or even has anything approaching a credible medium-term fiscal framework, it’s just that everyone else is in much worse shape.

Another Lehman/AIG-type situation lurks somewhere on the European continent, and again our purported G7 (or even G20) leaders are slow to see the risk. And this time, given that they already used almost all their fiscal bullets, it will be considerably more difficult for governments to respond effectively when they do wake up.

With markets down sharply over the past month or so, it might be time to stay on the sidelines for a while yet.

Oh . . .

And remember that government debt that a robust recovery was going to torpedo the price of? Its looking better every day.

Not So Sure What to Make of This

Murray Hill Inc., which appears to be a progressive consulting firm, is running for Congress. I take their point -- but did last week's U.S. Supreme Court decision really put is in a Max Berry world?

How Low Can They Go?

Every time we think the Harper government cannot sink lower . . .

According to an Ottawa Sun report from yesterday, the Conservatives are about to send out a household mailer explaining to their core constituency how our concerns with allegations of acquiescence by senior officials in abuse of detainees in Afghanistan amounts to a slandering of the men and women serving there.

No one, of course, has suggested that any Canadians serving in the field did anything but act honorably. What is being suggested, quite credibly, is that senior military and civilian officials did not, and in fact may well have contravened Canadian and international law.

It is shameful and embarrassing that our Government, that speaks in our name, would use those who serve in Afghanistan as pawns in a political game of hiding from what they know are likely devastating facts. If the air could be cleared, they surely would by now have cleared it.

Even greater shame, however, rests on the opposition. They could inform the Harper government now and publicly that unless a credible investigation begins now then the moment Parliament returns a motion of non-confidence will be tabled and passed.

This is no longer a government that I disagree with. It is one that embarrasses me and diminishes all of us. It is a minority government. It serves at the pleasure of the opposition parties. Those parties know what is going on. They are now responsible for the outcome.