Mr. President,
Canada is eagerly awaiting your visit on 19 Feb. Canadians are thankful that on your first international trip you have chosen Canada. The visit is short – for only about 6 hours – but it is coming at a time when the world is facing the worst economic downturn since the 1930’s.
As you should know by now, US is Canada’s largest trading partner. Canada is also the number one crude oil supplier to US in terms of million barrels per day. You may probably have been told that this crude oil comes from both conventional and unconventional sources – the unconventional source being oilsands, the second largest source of crude oil after Saudi Arabia.
Lumber, beef, engineering goods, agricultural products, and so on – whole host of stuff is exported from Canada to US. In short, Canada’s economy is heavily inter-twined with that of US. Not only trade, these two countries have strategic defence cooperation too – NORAD being a prime example.
Canada is hurting now because the consumers in US are in trouble, not spending as before. The whole world is hurting – Japan reporting their worst trade figures on 16 Feb mainly because their exports have fallen off the cliff. China’s exports too are down. Why? Because the largest consumer society in the world, i.e., US is in recession. By the way, this is not the opportune time to debate whether such huge consumerism is good or bad.
Be that as it may, the question that is paramount in the minds of the Canadians is: what is going to be the outcome of US President’s visit? Will he reassure the Canadians that there will be no protectionism in US policies? Will he reassure Canada that cooperation between the two countries will continue to thrive in oil and gas sector? Is this visit going to reinforce the message that Canada is a trusted, dependable ally and that both countries will continue to cooperate and expand their relationship in an environment of friendship, goodwill and trust.
Mr. President, there may be some issues where the countries may have different perspectives but they are not so divergent so as to impinge on any issue of bilateral nature. Canadians know you are a champion of environment protection and alternative sources of energy is a topic which is close to your heart. But Canadians too are aware of the challenges of global warming, and they are already doing their part to mitigate the situation.
And, this environment thing brings one to the main point. Mr. President, the crux of the matter is that Canadians are hoping that your concern for environment will not become a stumbling block in the area of cooperation in crude supplies to US from Canada, and this specifically relates to oilsands. You may have been briefed about concerns of environmentalists regarding oilsands. One hopes you have been briefed about the measures too that Alberta province has already put in place to meet those concerns.
Mr. President, it needs to be mentioned (you may be already aware though) that scientists till date don’t know the real factors that cause global warming – what they know, however, is that GHG is one of the contributing factor. The scientists also know that GHG contributes to less than 10% of entire global warming phenomenon (but they don’t mention it in the same breath as the catastrophic consequences they narrate almost like a horror story).
The point is, therefore, why oilsands should be singled out and made a whipping boy for all the supposed global warming dangers this world is allegedly facing when the global warming phenomenon itself is not understood fully by the scientific community? Just sensationalising an issue, or creating scare in the minds of people doesn’t help.
A substance in itself is not good or bad, it all depends how it is turned in to a useful thing by humans. Uranium ore in itself is not so dangerous or useful, it all depends how it is processed – whether to turn it in to a nuclear device of destruction or source of energy. Similarly, if oilsands is processed properly and its related environmental aspects are handled adequately, surely then it shouldn’t be a cause of worry to human race, should it?!
Mr. President, you said the other day during your prime time news conference that you want US to be less dependent on ‘foreign oil’ – from Middle East. Canada can contribute significantly towards this objective of US. And no body should carry any feeling of guilt if Canada’s vast oil source helps US, because oilsands is not going to do anything to exacerbate global warming.
Moreover, Mr. President, you are a very sensible and pragmatic person. You are not afraid of embracing the reality. For example, during your recent prime time presser you mentioned a figure of 4.0 million (jobs created or saved) but in later speeches you mentioned a moderated figure of 3.5 million (jobs created or saved). One hopes similar pragmatism will be evident in the matter of cooperation between US and Canada in oil and gas sector.
Crude oil supply from Canada took up a large chunk of this epistle because this could be one of the touchy subjects for discussion between you and Mr. Harper. Thankfully, the other potential sticking point about protectionism has already been addressed suitably in the recent meeting of G-7 finance ministers in Rome. So, hopefully, there should not be any reason for concern from Canada’s side. However, you may like to reinforce the Rome message when you are in Ottawa.
So, as you can see there is cooperation and cooperation only that pervades the relationship between these two great countries. There is hardly any issue that could potentially bring in any stressful moments during the talks – even the arctic sovereignty issue is a matter where the countries have more to gain by forming allied front rather than taking separate lines of action.
The issue of how to save the big three auto makers in both US and Canada may make both sides a bit uncomfortable but given necessary maturity and understanding on both sides this issue will hopefully not bring any sourness between the two leaders.
In the past there have been many instances of sour relationship between the leaders of US and Canada. In one of the worst instances it is said that US President Johnson got so incensed when then Canandian Prime Minister Pearson (while visiting US) called for American withdrawal from Vietnam that Johnson is said to have pinned Pearson to the wall by holding his collars and yelled “You have pissed on my rug”!
One hopes nothing of that sort will happen between you and Mr. Harper. On the contrary PM Harper may like to brush up his knowledge about Chicago White Sox, and you may like to get some briefing on maple syrup as well as on what to say when a Canadian greets saying “Howdy”!
Mr. President, this is the time when the respective leaders need to be source of hope to millions, and not be a harbinger of any impending bad news, least of which should be anything to do with disagreements between them. This is not a good time for nitpicking.
If the Canadians saw you and Mr. Harper standing shoulder to shoulder (metaphorically speaking) at this hour of extremely challenging times, and telling the media how the two countries have agreed to cooperate and expand ties further in all fields including oil and gas, it will bring cheer to millions of Canadians and they will thank you, Mr. President, for the same. And, you know very well that any expanded cooperation will do more good than harm to an average American.
Did we ask for too much?
Sincerely.
Showing posts with label PM Harper. Show all posts
Showing posts with label PM Harper. Show all posts
Monday, February 16, 2009
Saturday, January 24, 2009
JAN 27 BUDGET MUST PREVENT JOB LOSSES, AND CANADIAN BANKS MUST EASE LENDING RATES!!
Canadians from all walks of life are rightly worried about the economic health of the country in coming weeks and months. And as such, various suggestions are pouring in for Prime Minister Harper about what kind of budget should it be on Jan 27.
Meanwhile, to put to rest speculations about the likely deficit, yeah deficit there will be, official leaks to the media put the deficit figure at 64 billion over the next two years.
Now, let me weigh in on the directionality of the budget. Yeah, the budget should contain stimulus for growth of economy and so on, but my fundamental submission to PM Harper and Finance Minister Flaherty is: in as much as the Jan 27 budget will be geared towards creation of jobs, it must also focus on another critical aspect – towards prevention of job losses.
Reason is simple: if two new jobs are created but if at the same time two jobs are lost, the net result will be zero. Therefore, the budget must encompass steps that will help in job retention in sectors specific to provinces, like, farming, energy, fisheries, lumbar, etc. and for small and medium industries.
Just by focussing on one sector will be of little help. Let us say, auto sector is provided necessary succour and they continue to produce vehicles but if the people are not employed, if they don’t have the purchasing power to buy those vehicles, what good would have been achieved at the end of the day?
Therefore, in very concise terms: the budget and the government have to ensure that people who have jobs don’t lose them, and at the same time new jobs are also created. With creation of new jobs the currently unemployed will finds means to earn, consequently they will have disposable incomes which in turn will help in causing higher demand for goods and services. The usual economic multiplier will come in to play. This is what the economies in recession want to happen.
However, for the growth of demand it is absolutely necessary that there is adequate money supply in the market. At the moment liquidity is a problem as the banks are being too conservative regarding their lending policies. In other words, the Canadian Banks are opening the money supply valve slowly.
Bank of Canada reduced the overnight rate to 1.0% on Jan 20 thereby bringing cumulative easing to 350 basis points since Dec 2007. BoC is doing this to stimulate the credit market which is so very vital for sustainment and growth of durable and non-durable goods, and services.
But if you look at the interest rate table provided in Bank of Canada’s Monetary Policy Update of Jan 2009, you will find that the variable mortgage rate dropped till 17 July 2008 as the Prime Rate dropped. But all of a sudden on 23 Oct 2008 the variable mortgage rate went up even as the Prime Rate declined. Since then the banks have not passed on fully the benefit of overnight rate cuts to the consumers.
The consequence of this is evident, there is drop in sales of houses which in turn affected the demand, which led to less starts, which meant job losses and initiation of one of the many downward spirals strangulating Canadian economy.
Latest numbers (including December 2008 numbers) from the Bank of Canada indicate Canadian banks' residential mortgages stood at $452.5 billion, off by 0.7 per cent from November, extending a declining trend since July's peak as realtors reported sharp drops in home prices and sales volumes.
There is also news that some banks are quietly increasing interest rate on lines of credits too. When the market is crying out for more consumer demand, the banks are insidiously trying to dip in to the pockets of the consumers and snatch some more dollars!! It seems the banks are adopting a penny wise pound foolish policy.
Obviously this is a desperate but a stupid way to improve their revenue and the balance sheets which got screwed up because the banks were putting their funds blindly like gargantuan idiots in the disastrous mortgage lending frenzy initiated by Freddie Mac and Fanny May. These banks didn’t even bother to check whether the bubble they were putting the money in to was the right thing to do or not.
So, the important question is: why are banks not passing on the full benefit of cuts being effected by BoC in overnight rates? The variable mortgage today stands at 3.8% whereas it could have been easily anywhere around 1%+0.8=1.8%. Why the hell are banks not giving the benefit to the potential customers?!!
As per Bank of Canada’s Monetary Policy Update of Jan 2009, Canada is in recession, and its real GDP is 2009 is expected to contract by 1.2% (An aside: ‘decline’ is the word used in BoC’s document which is confusing, it is poor English; decline connotes a decrease relative to something – e.g. there can be a decline of 1.2% from, say, a previous figure of 3.5%).
BoC projects that Canada’s GDP will rebound in 2010. But how the hell can it rebound when the banks are making things difficult for people? Why can’t the BoC kick on the posterior of these banks and ask them to help in a ‘real’ and ‘effective’ manner in bringing the Canadian economy back on the rails?
It is pretty darn clear that simply resorting to deficit budgets is not going to suffice unless it is backed to the hilt by the banks that showed utter callousness and incompetence which resulted in their funds getting entangled in toxic assets (consequently the banks had to resort to massive write-offs).
PM Harper and Finance Minister Flaherty have to do whatever it takes to get the Canadian banks to fall in line with BoC’s measures. If that requires adopting extraordinary measures, cracking the whip, so be it – whether through any ordinance or whatever it is. When President Obama can go to extraordinary lengths, why can’t Canada, which, fortunately, is not in such a deeper hole as US is? It is time Canadian leadership showed that it is not made up of sissies!!
Meanwhile, to put to rest speculations about the likely deficit, yeah deficit there will be, official leaks to the media put the deficit figure at 64 billion over the next two years.
Now, let me weigh in on the directionality of the budget. Yeah, the budget should contain stimulus for growth of economy and so on, but my fundamental submission to PM Harper and Finance Minister Flaherty is: in as much as the Jan 27 budget will be geared towards creation of jobs, it must also focus on another critical aspect – towards prevention of job losses.
Reason is simple: if two new jobs are created but if at the same time two jobs are lost, the net result will be zero. Therefore, the budget must encompass steps that will help in job retention in sectors specific to provinces, like, farming, energy, fisheries, lumbar, etc. and for small and medium industries.
Just by focussing on one sector will be of little help. Let us say, auto sector is provided necessary succour and they continue to produce vehicles but if the people are not employed, if they don’t have the purchasing power to buy those vehicles, what good would have been achieved at the end of the day?
Therefore, in very concise terms: the budget and the government have to ensure that people who have jobs don’t lose them, and at the same time new jobs are also created. With creation of new jobs the currently unemployed will finds means to earn, consequently they will have disposable incomes which in turn will help in causing higher demand for goods and services. The usual economic multiplier will come in to play. This is what the economies in recession want to happen.
However, for the growth of demand it is absolutely necessary that there is adequate money supply in the market. At the moment liquidity is a problem as the banks are being too conservative regarding their lending policies. In other words, the Canadian Banks are opening the money supply valve slowly.
Bank of Canada reduced the overnight rate to 1.0% on Jan 20 thereby bringing cumulative easing to 350 basis points since Dec 2007. BoC is doing this to stimulate the credit market which is so very vital for sustainment and growth of durable and non-durable goods, and services.
But if you look at the interest rate table provided in Bank of Canada’s Monetary Policy Update of Jan 2009, you will find that the variable mortgage rate dropped till 17 July 2008 as the Prime Rate dropped. But all of a sudden on 23 Oct 2008 the variable mortgage rate went up even as the Prime Rate declined. Since then the banks have not passed on fully the benefit of overnight rate cuts to the consumers.
The consequence of this is evident, there is drop in sales of houses which in turn affected the demand, which led to less starts, which meant job losses and initiation of one of the many downward spirals strangulating Canadian economy.
Latest numbers (including December 2008 numbers) from the Bank of Canada indicate Canadian banks' residential mortgages stood at $452.5 billion, off by 0.7 per cent from November, extending a declining trend since July's peak as realtors reported sharp drops in home prices and sales volumes.
There is also news that some banks are quietly increasing interest rate on lines of credits too. When the market is crying out for more consumer demand, the banks are insidiously trying to dip in to the pockets of the consumers and snatch some more dollars!! It seems the banks are adopting a penny wise pound foolish policy.
Obviously this is a desperate but a stupid way to improve their revenue and the balance sheets which got screwed up because the banks were putting their funds blindly like gargantuan idiots in the disastrous mortgage lending frenzy initiated by Freddie Mac and Fanny May. These banks didn’t even bother to check whether the bubble they were putting the money in to was the right thing to do or not.
So, the important question is: why are banks not passing on the full benefit of cuts being effected by BoC in overnight rates? The variable mortgage today stands at 3.8% whereas it could have been easily anywhere around 1%+0.8=1.8%. Why the hell are banks not giving the benefit to the potential customers?!!
As per Bank of Canada’s Monetary Policy Update of Jan 2009, Canada is in recession, and its real GDP is 2009 is expected to contract by 1.2% (An aside: ‘decline’ is the word used in BoC’s document which is confusing, it is poor English; decline connotes a decrease relative to something – e.g. there can be a decline of 1.2% from, say, a previous figure of 3.5%).
BoC projects that Canada’s GDP will rebound in 2010. But how the hell can it rebound when the banks are making things difficult for people? Why can’t the BoC kick on the posterior of these banks and ask them to help in a ‘real’ and ‘effective’ manner in bringing the Canadian economy back on the rails?
It is pretty darn clear that simply resorting to deficit budgets is not going to suffice unless it is backed to the hilt by the banks that showed utter callousness and incompetence which resulted in their funds getting entangled in toxic assets (consequently the banks had to resort to massive write-offs).
PM Harper and Finance Minister Flaherty have to do whatever it takes to get the Canadian banks to fall in line with BoC’s measures. If that requires adopting extraordinary measures, cracking the whip, so be it – whether through any ordinance or whatever it is. When President Obama can go to extraordinary lengths, why can’t Canada, which, fortunately, is not in such a deeper hole as US is? It is time Canadian leadership showed that it is not made up of sissies!!
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