Two words have become household words all around the globe – 'stimulus package' – as the world tries to grapple with the worst economic situation since the 1930’s. US President Obama made several pit stops to campaign for quick passage of the stimulus package his administration put together. Eventually, a package watered down to USD787 Billion was passed by the US Congress.
Similarly, European countries are also implementing their stimulus packages. Situation in eurozone is also spurring urgent action after some quite dismal economic news. European economies contracted in the fourth quarter of last year, with some countries registering the worst figures in decades. The eurozone economy shrank by 1.5% in Q4 2008 and 1.2% on the year. Germany's economy shrank by 2.1% compared with the previous quarter, its worst quarterly performance since 1990.
Canada announced its own economic stimulus package recently in their parliament. Australia too made known their economic measures. China has already put in to motion a huge two year stimulus package to arrest downward slide of their economy. India has also implemented its own package in two instalments, some more may follow.
The G-7 meeting of its Finance Ministers and heads of the central banks in Rome on 14 Feb agreed to avoid protectionism and work in concert to pull the world out the current economic morass. The next meeting will be of G-20 countries in April to review progress of the steps agreed to by the Group in Dec 2008 meeting in Washington.
The above is a quick recap of steps being taken by the countries, which control more than 80% of world economy, to come out of the economic woes the world has gotten into. All this news is encouraging for the millions who lost their jobs, lost their homes, went in to bankruptcies, and went from a life of hope to despair.
But amidst all the abovementioned frenetic activities and hullabaloo to get the world economy back on track, has the world forgotten about the people who brought about this situation in the first place? What about bringing those blighters to justice and punishing them? How can those ‘canine-offsprings’ just say sorry and wash their hands off the accountabilities they carried with their responsibilities?
Because of the unbridled greed of some money spinning wheeler dealers in US (and to some extent in UK, and Germany) a housing bubble got created and this bubble gobbled up trillions of dollars. Between 2004 and 2006 US interest rates rose from 1% to 5.35%, triggering a slowdown in the US housing market.
Homeowners, many of whom could only barely afford their mortgage payments when interest rates were low, began to default on their mortgages. Default rates on sub-prime loans - high risk loans to clients with poor or no credit histories - rose to record levels. The impact of these defaults were felt across the financial system world over as many of the mortgages had been bundled up and sold on to banks and investors.
The questions are: what the hell was the US Fed Chairman doing during the years (2004-2006) when the seeds of the global disaster were being sown? Why could he not get out of his self imposed dogmatic intellectual strait-jacket of free-market mechanism principles? Why the hell was there no oversight of what was going on in the American financial market?
The people who have lost their jobs, their homes, their hard earned savings and probably many years of their future would like to know who were those female parent-fornicators who authorised the sub-prime racket to start! Who were those wedlock-products who encouraged this greed infested activity to engulf the society? Who was authorising the sub-prime mortgage business in Freddie Mac or Fannie May?
Why in God’s name nobody – either from Fed Reserve or SEC or some other Federal agency – bothered to take notice of what was going on in the sub-prime market? The sub-prime racket was not just a 4-6 month event which could have gone unnoticed. It went on for months, and yet nobody took notice?
Why did somebody in the Fed not take notice of the warning bells rung by Prof Krugman (who won Nobel Prize for Economics in 2008)? Prof Krugman was repeatedly warning about the dangerous path US economy was treading on.
And then, who were those female parent-fornicators in the big banks of US and Europe who blindly authorised investing in securitised mortgages? Some of these wedlock-product bank executives took home millions of dollars as bonuses!! Why and how are these canine-offsprings allowed to go scot free and not punished?
So, the question is: why have those people responsible for bringing about this financial mess in US, which caused domino effect world over, not been brought to justice? Why should they not be punished? In fact, why are they not being punished? Why should they not be thrown in to some Gitmo kind of prison and made to ruminate over the cataclysmic financial disaster they caused to happen?
Are these people not some kind of criminals? They may not have committed homicide, or rape. But the truth is that they have ‘raped’ the financial system. Their rapacious greed has robbed millions of innocent investors of their hard earned savings. The sub-prime mortgage can be compared to an organised ‘racket’ to ‘swindle’ millions of ordinary people who were ‘enticed’ by the rosy situations.
These people are responsible for having caused untold miseries to millions around the world, why should they not be flogged - publicly? It would be primitive, is it? Let it be primitive, but at least it will send a strong message to the world. Go ask the laid off worker what is primitive or not primitive – he doesn’t bother for all this intellectual debates which are luxury of the well-heeled. He/she wants secure economic future!
So, what is the plan for bringing these perpetrators of the current financial wrong-doing to justice? Is there no law under which these cold-blooded white collared diabolical schmucks can be tried and punished? Can these female parent-fornicators just say ‘I’m deeply sorry’ and can go un-punished?
The millions of people affected by the current economic upheaval are cursing those rascals day in and day out. Whether or not the actual perpetrators of current economic crisis (and those who were supposed to keep an oversight on them, and didn’t do their job) get punished by the law of this planet only time will say, but one thing is clear that if there is something called ‘natural justice’ these gutter insects will burn in the hell fire during their lifetime.
Sunday, February 15, 2009
Saturday, February 7, 2009
ARE SOME CANADIAN & EUROPEAN OIL COMPANIES LESS MONEY SAVVY THAN SOME OF THE US COMPANIES?
The present economic downturn has hit Canada too fairly badly, and jobs are evaporating by the day. The January job loss figures indicate that Ontario province suffered the most. This is understandable due to the contagion of auto industry ills crippling the big three American auto companies affected the companies to the north of the border.
But the province which till middle of last year was riding a wave of big investments is also suffering from increasing number of full time job losses – Alberta. Till last year Alberta’s economy was riding high, fuelled by big investments in oilsands projects. But suddenly a lightning bolt hit these projects in Q4 last year.
As per Canadian Energy Research Institute (CERI) its own 2008 forecast of oil sands production of 3.4 million billion per day by 2015 has been scaled back to 2.9 million billion per day, gathering pace to 3.7 million per day to 5.4 million billion per day by 2030, compared with its previous target of 5 million billion per day.
CERI further states that Canadian oil sands is going to stagnate, capital investment over the next 11 years will be cut 31% from a forecast made only 3 months ago and will need WTI prices above USD 70 per barrel to resume growth and expansion.
A number of mega oilsands projects have been put on hold, and almost all the projects are being reviewed from the point of view of CAPEX cost reduction. What is hurting the job market is the stalling of engineering work done in Calgary and Edmonton, and absence of new construction jobs related to oilsands.
But what is most curious is that the mega projects of some Canadian oil companies like Petrocanada and Suncor, CNRL have had to face major axing consequent to these companies hitting panic buttons. Their balance sheets and cash flow have suddenly come under such tremendous pressure that they have had to cancel large chunks of the projects, and mothball the remaining alive portions.
European player Shell cancelled its second upgrader expansion and put on hold their upstream expansion part. Other Europeans companies like Total and Statoil were chickening out even before the lightning struck the oilsands. These two companies had already been dithering for quite sometime.
Interestingly, on the other hand, Canadian oil companies developing their oilsands assets in collaboration with US based oil companies, like Encana (partnering with ConocoPhillips) and Husky (with BP) don’t seem to have run in to such panicky situation. Albeit, they also have had to scale back investment in some of their new projects but not in that drastic manner as Petrocan and Suncor have had to do.
But most interestingly, Imperial Oil whose majority shareholder is ExxonMobil (69.6%) didn’t have to press any panic button. Imperial is going ahead with their Kearl project, said to be a $7-8 billion Imperial Oil and ExxonMobil Canada project. Exxon are known to be notoriously conservative in their investment and economic rate of return analyses.
However, this can’t be said about another American company – ConocoPhillips – whose in-situ oilsands project in Surmont (in partnership with Total) has been put on a very slow track. It is not clear whether cash flow considerations were the only reason for slowdown or Total’s lack of enthusiasm was a contributing factor too.
At any rate, however, the above throws up a question: Why did the US based companies not have to drastically alter their oilsands project development plans? Why did they not seem to be pressing panic buttons and manifesting knee-jerk reactions? Are the US based oil companies better in their working out their investment strategies? Are their economic analyses models more stringent and powerful?
Surely, the world at large doesn’t get to know the details of project planning and investment decision making by various companies, therefore, one would not be in a position to provide conclusive answers to above questions. But then the folks losing their jobs in Alberta must be wondering why the heck the CEO’s of those companies, that went in to a paralytic limb late last year and started hacking down their oilsands projects, were paid the big bucks till recent past!!
It is the job of the top management to make sure that the investment decisions are rational, realistic and have been tried out for different scenarios. Why did some of the Canadian oil companies have to bite so much that they could not chew? If they didn’t have a US partner who could process their bitumen (if they went for bitumen only route) why did they not look for a partner before opting for the whole meal deal project implementation strategy, i.e., going all the way to upgraders in the first phase itself, or think of a safer project investment model?
One wonders what kind of intelligent thinking some of these companies did before committing such huge outlays! Do they realise that because of their unreasonable over-exuberance various engineering and construction companies in Alberta mobilised huge work forces, and now the same work force is being laid off in droves?!!
Some of those CEO’s will say in their defence that nobody in the world could predict the recession coming to US and the consequent slowdown in fastest growing economies like China and India, and hence their assumptions of oil price (we don’t know what they were) were justified. But that does not mean that they ought to have considered a high crude price and worked out their current and future revenues. Why were they not conservative in their assumptions and what prevented them to develop manageable portions of new projects – manageable with respect to revenue generation during project implementation phase?
May be there is lot to learn from the way ExxonMobil folks carry out their project development and economic analyses. It is not for nothing that this company has such a huge cash reserve that it could, if it wanted, buy any oil company in the world.
And, you know what, it is said that Exxon likes to implement new projects during economic downturns so that the project costs be kept relatively less. They can afford to do so –because of their strong cash position. So, you see – they set themselves up for making more money; because when good times return their revenues improve while their initial CAPEX had been lesser (because they set up their project during economic downturn). Makes sense, doesn’t it!
One feels sad to see so many engineers, tradespeople getting out of their jobs in Alberta only because some folks who in their own flawed wisdom – one can certainly they their wisdom was flawed – contributed towards huge growths in engineering and construction companies in Alberta. Currently, those companies don’t have projects to assign their folks to!
Now, all eyes are on US president’s visit. Will Mr. Obama’s visit on 19 Feb bring more bad news for oilsands projects, or, will he provide some words of comfort with regard to continued cooperation with Canada in developing this resource on a long term basis? Surely, US wishes to move away from dependence on foreign oil from ‘hostile regimes’. Be that as it may, the families of the jobless are praying for some good news – are the Gods listening?
But the province which till middle of last year was riding a wave of big investments is also suffering from increasing number of full time job losses – Alberta. Till last year Alberta’s economy was riding high, fuelled by big investments in oilsands projects. But suddenly a lightning bolt hit these projects in Q4 last year.
As per Canadian Energy Research Institute (CERI) its own 2008 forecast of oil sands production of 3.4 million billion per day by 2015 has been scaled back to 2.9 million billion per day, gathering pace to 3.7 million per day to 5.4 million billion per day by 2030, compared with its previous target of 5 million billion per day.
CERI further states that Canadian oil sands is going to stagnate, capital investment over the next 11 years will be cut 31% from a forecast made only 3 months ago and will need WTI prices above USD 70 per barrel to resume growth and expansion.
A number of mega oilsands projects have been put on hold, and almost all the projects are being reviewed from the point of view of CAPEX cost reduction. What is hurting the job market is the stalling of engineering work done in Calgary and Edmonton, and absence of new construction jobs related to oilsands.
But what is most curious is that the mega projects of some Canadian oil companies like Petrocanada and Suncor, CNRL have had to face major axing consequent to these companies hitting panic buttons. Their balance sheets and cash flow have suddenly come under such tremendous pressure that they have had to cancel large chunks of the projects, and mothball the remaining alive portions.
European player Shell cancelled its second upgrader expansion and put on hold their upstream expansion part. Other Europeans companies like Total and Statoil were chickening out even before the lightning struck the oilsands. These two companies had already been dithering for quite sometime.
Interestingly, on the other hand, Canadian oil companies developing their oilsands assets in collaboration with US based oil companies, like Encana (partnering with ConocoPhillips) and Husky (with BP) don’t seem to have run in to such panicky situation. Albeit, they also have had to scale back investment in some of their new projects but not in that drastic manner as Petrocan and Suncor have had to do.
But most interestingly, Imperial Oil whose majority shareholder is ExxonMobil (69.6%) didn’t have to press any panic button. Imperial is going ahead with their Kearl project, said to be a $7-8 billion Imperial Oil and ExxonMobil Canada project. Exxon are known to be notoriously conservative in their investment and economic rate of return analyses.
However, this can’t be said about another American company – ConocoPhillips – whose in-situ oilsands project in Surmont (in partnership with Total) has been put on a very slow track. It is not clear whether cash flow considerations were the only reason for slowdown or Total’s lack of enthusiasm was a contributing factor too.
At any rate, however, the above throws up a question: Why did the US based companies not have to drastically alter their oilsands project development plans? Why did they not seem to be pressing panic buttons and manifesting knee-jerk reactions? Are the US based oil companies better in their working out their investment strategies? Are their economic analyses models more stringent and powerful?
Surely, the world at large doesn’t get to know the details of project planning and investment decision making by various companies, therefore, one would not be in a position to provide conclusive answers to above questions. But then the folks losing their jobs in Alberta must be wondering why the heck the CEO’s of those companies, that went in to a paralytic limb late last year and started hacking down their oilsands projects, were paid the big bucks till recent past!!
It is the job of the top management to make sure that the investment decisions are rational, realistic and have been tried out for different scenarios. Why did some of the Canadian oil companies have to bite so much that they could not chew? If they didn’t have a US partner who could process their bitumen (if they went for bitumen only route) why did they not look for a partner before opting for the whole meal deal project implementation strategy, i.e., going all the way to upgraders in the first phase itself, or think of a safer project investment model?
One wonders what kind of intelligent thinking some of these companies did before committing such huge outlays! Do they realise that because of their unreasonable over-exuberance various engineering and construction companies in Alberta mobilised huge work forces, and now the same work force is being laid off in droves?!!
Some of those CEO’s will say in their defence that nobody in the world could predict the recession coming to US and the consequent slowdown in fastest growing economies like China and India, and hence their assumptions of oil price (we don’t know what they were) were justified. But that does not mean that they ought to have considered a high crude price and worked out their current and future revenues. Why were they not conservative in their assumptions and what prevented them to develop manageable portions of new projects – manageable with respect to revenue generation during project implementation phase?
May be there is lot to learn from the way ExxonMobil folks carry out their project development and economic analyses. It is not for nothing that this company has such a huge cash reserve that it could, if it wanted, buy any oil company in the world.
And, you know what, it is said that Exxon likes to implement new projects during economic downturns so that the project costs be kept relatively less. They can afford to do so –because of their strong cash position. So, you see – they set themselves up for making more money; because when good times return their revenues improve while their initial CAPEX had been lesser (because they set up their project during economic downturn). Makes sense, doesn’t it!
One feels sad to see so many engineers, tradespeople getting out of their jobs in Alberta only because some folks who in their own flawed wisdom – one can certainly they their wisdom was flawed – contributed towards huge growths in engineering and construction companies in Alberta. Currently, those companies don’t have projects to assign their folks to!
Now, all eyes are on US president’s visit. Will Mr. Obama’s visit on 19 Feb bring more bad news for oilsands projects, or, will he provide some words of comfort with regard to continued cooperation with Canada in developing this resource on a long term basis? Surely, US wishes to move away from dependence on foreign oil from ‘hostile regimes’. Be that as it may, the families of the jobless are praying for some good news – are the Gods listening?
Sunday, February 1, 2009
PRESIDENT OBAMA’S VISIT TO CANADA – SOME CRITICAL BILATERAL ISSUES NEED TO BE HANDLED CAREFULLY BY BOTH SIDES!
President Obama, reverting to the tradition of newly elected US presidents, will be visiting Canada on his first overseas trip. This trip, dubbed essentially a working visit, will have to grapple with some tricky issues which are bound to be on the table.
One of them is the controversial provision that President Obama’s US$800+ billion economic stimulus plan is proposed to contain. The proposed legislation aims to ban foreign iron and steel used in any building project undertaken under the massive stimulus plan - which could potentially cut out a major portion of the Canadian steel industry's $7 billion in annual exports.
If this provision got implemented to the letter it would be severely detrimental for Canada, so Canada is rightly worried. It should be, it is a serious matter coming as it does when the economy is already in recession. Canada views the proposed legislation, and correctly so, as a protectionist measure on part of US.
It was heartening to see that Canada is being proactive in this matter rather than fume and fret. International Trade Minister Stockwell Day did well to speak with US Trade Representative Peter Allgeier at the economic forum in Davos, Switzerland which ended on Feb 1. Later Day told reporters that he was cautiously optimistic that something could be worked out.
Canada has also conveyed to US that this type of protectionism is exactly what helped push the Great Depression forward at the start of the 1930s. On a parallel track Canadian PM Harper said in Ottawa that such measures would see the U.S. renege on its "international obligations" to eliminate barriers to worldwide trade.
It is a good positive strategy. The message has reached US prior to Obama’s planned visit on Feb 19 – that Canada would like this issue to be resolved to mutual benefit. US acknowledged that it had got Canada’s message. US White House Press Secretary Robert Gibbs said on 30th Jan "the administration is reviewing that provision" and acknowledged the concerns on both sides of the U.S.-Canada border.
Another important matter that would need to be discussed and mutually beneficial path forward identified relates to oilsands fronted crude/bitumen supply to US. Oilsands has attracted lot of attention, of late, from environmentalists. As well, President Obama places great importance on protection of environment. But at the same time Canada is the largest supplier of crude to US – crude both from conventional and non-conventional sources. This pitches tarsands in a dichotomous situation.
Other issues that are likely to form part of the conversation between Obama and Harper are: war against terror – Canada’s role in Afghanistan, NAFTA, ailing auto sector, claims to Arctic assets and security of passage to that area, cross-border security, intelligence sharing, global economic reform.
President Obama is obviously briefed on the importance of US-Canada ties – ranging from NORAD to crude oil. Obama’s economic team led by Treasury Secretary Timothy Geithner is putting together US economic recovery package which is expected to be finalised by middle of February. This timeline adds urgency regarding what assumptions the package is going to be predicated on.
If Geithner et al base their package including some protectionist premise (like, the one relating to steel), that certainly will not portend well for both US and Canada. Or, will there be some selective waiver for friends (Canada), or, the package will prefer not to mention such contentious premises at all?
Obama and Geithner would do well to be aware that a very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. The group said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."
Both Obama and Harper should be cognizant of what someone said in Davos about the economic downward tailspin that we are in: “I tell you we have not turned the corner, we can't see the corner, we don't even know where the corner is." In such a situation creating new protectionist walls, or getting in to some kind of head-butting will be damaging for either parties.
It is, therefore, imperative that US and Canada handle the bilateral issues carefully and with sensitiveness. Political rhetoric sound good from the podiums placed in political rallies but if they are carried to the policy making blueprint without evaluating the various pros and cons, that is opposite of everything that embodies the word ‘prudence’.
In cooperation with Canada there is so much to be gained for US – towards its goal of gaining independence from crude imports from ‘hostile regimes’, war on terror, joint US-Canada defence partnerships and so on. Canada has already offered a bi-nation energy agreement, and also proffered to participate in environment related joint-action plan. Canada is aware of what needs to be done to make tarsands industry more environment friendly, and actions are already being implemented in that direction.
Finally, the current economic crisis is one such which can be ridden out of only through collaborative, combined effort – on a global basis. Such efforts will be rendered severely ineffective if countries resort to raising trade walls. President Obama has mentioned on a number of occasions that US will ‘lead’ again. Surely, raising protectionist measures (e.g., use of US steel only for US projects) will not raise the US to the moral high ground that it seeks to regain in post-Bush era.
One of them is the controversial provision that President Obama’s US$800+ billion economic stimulus plan is proposed to contain. The proposed legislation aims to ban foreign iron and steel used in any building project undertaken under the massive stimulus plan - which could potentially cut out a major portion of the Canadian steel industry's $7 billion in annual exports.
If this provision got implemented to the letter it would be severely detrimental for Canada, so Canada is rightly worried. It should be, it is a serious matter coming as it does when the economy is already in recession. Canada views the proposed legislation, and correctly so, as a protectionist measure on part of US.
It was heartening to see that Canada is being proactive in this matter rather than fume and fret. International Trade Minister Stockwell Day did well to speak with US Trade Representative Peter Allgeier at the economic forum in Davos, Switzerland which ended on Feb 1. Later Day told reporters that he was cautiously optimistic that something could be worked out.
Canada has also conveyed to US that this type of protectionism is exactly what helped push the Great Depression forward at the start of the 1930s. On a parallel track Canadian PM Harper said in Ottawa that such measures would see the U.S. renege on its "international obligations" to eliminate barriers to worldwide trade.
It is a good positive strategy. The message has reached US prior to Obama’s planned visit on Feb 19 – that Canada would like this issue to be resolved to mutual benefit. US acknowledged that it had got Canada’s message. US White House Press Secretary Robert Gibbs said on 30th Jan "the administration is reviewing that provision" and acknowledged the concerns on both sides of the U.S.-Canada border.
Another important matter that would need to be discussed and mutually beneficial path forward identified relates to oilsands fronted crude/bitumen supply to US. Oilsands has attracted lot of attention, of late, from environmentalists. As well, President Obama places great importance on protection of environment. But at the same time Canada is the largest supplier of crude to US – crude both from conventional and non-conventional sources. This pitches tarsands in a dichotomous situation.
Other issues that are likely to form part of the conversation between Obama and Harper are: war against terror – Canada’s role in Afghanistan, NAFTA, ailing auto sector, claims to Arctic assets and security of passage to that area, cross-border security, intelligence sharing, global economic reform.
President Obama is obviously briefed on the importance of US-Canada ties – ranging from NORAD to crude oil. Obama’s economic team led by Treasury Secretary Timothy Geithner is putting together US economic recovery package which is expected to be finalised by middle of February. This timeline adds urgency regarding what assumptions the package is going to be predicated on.
If Geithner et al base their package including some protectionist premise (like, the one relating to steel), that certainly will not portend well for both US and Canada. Or, will there be some selective waiver for friends (Canada), or, the package will prefer not to mention such contentious premises at all?
Obama and Geithner would do well to be aware that a very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. The group said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."
Both Obama and Harper should be cognizant of what someone said in Davos about the economic downward tailspin that we are in: “I tell you we have not turned the corner, we can't see the corner, we don't even know where the corner is." In such a situation creating new protectionist walls, or getting in to some kind of head-butting will be damaging for either parties.
It is, therefore, imperative that US and Canada handle the bilateral issues carefully and with sensitiveness. Political rhetoric sound good from the podiums placed in political rallies but if they are carried to the policy making blueprint without evaluating the various pros and cons, that is opposite of everything that embodies the word ‘prudence’.
In cooperation with Canada there is so much to be gained for US – towards its goal of gaining independence from crude imports from ‘hostile regimes’, war on terror, joint US-Canada defence partnerships and so on. Canada has already offered a bi-nation energy agreement, and also proffered to participate in environment related joint-action plan. Canada is aware of what needs to be done to make tarsands industry more environment friendly, and actions are already being implemented in that direction.
Finally, the current economic crisis is one such which can be ridden out of only through collaborative, combined effort – on a global basis. Such efforts will be rendered severely ineffective if countries resort to raising trade walls. President Obama has mentioned on a number of occasions that US will ‘lead’ again. Surely, raising protectionist measures (e.g., use of US steel only for US projects) will not raise the US to the moral high ground that it seeks to regain in post-Bush era.
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!!
Sunday, January 18, 2009
THANK YOU, MR. IGNATIEFF, FOR YOUR POSITIVITY ON OIL SANDS – ALBERTANS AND CANADIANS APPRECIATE IT!!
Canada’s Federal Liberal party leader Michael Ignatieff has come out with some very sensible views on oilsands – an issue on which his predecessor (Stephane Dion) had championed a revenue-neutral carbon tax which, oilpatch observers were worried, would have inflicted disproportionate damage on Alberta's carbon-based economy, and consequently on Canadian economy.
Dion’s party fared poorly in Federal elections last year and along with him went out of the door his thought-less policy too.
In an interview to a radio station on 16th Jan, Ignatieff admitted that any policy that comes from Ottawa can't jeopardize the oilsands - which is one of the only industries propping up the Canadian economy right now. "When you're in St. John's airport and you see a guy in cowboy boots and a cowboy hat getting on the plane you know what the oilsands mean to the entire Canadian economy," Ignatieff reportedly said.
The present Liberal leader admitted his party made mistakes with energy policy in the past, including the national energy plan. He said his goal was to develop environmentally and socially sustainable policies for the oilsands.
While speaking to a newspaper last week, Ignatieff went on to insist the federal government must consider offering the oil and gas sector a stimulus package in its Jan. 27 budget, comparable to the multi billion-dollar bailout of the Ontario-based auto industry. "The West should be rightly angry if we assisted only Central Canada," Ignatieff told the newspaper. "We can't put money into the auto sector in Central Canada without considering the legitimate concerns of the B.C. forest industry and the Alberta oil industry. There has to be regional fairness in the stimulus package."
Ignatieff’s views clearly go above partisanship, beyond petty politics; they are patriotic, pro-Canada. Ignatieff’s pan-Canada outlook got further articulated when he said that while oilsands has its environmental challenges, oilsands are a lucrative tool, both financially and politically, that increases Canada's stature around the globe and allows the country to stand its ground on several policy fronts against the U. S.
The above bodes well for not only for Alberta but the whole of Canada. His views are now more or less along the lines of views held by Alberta’s Premier Ed Stelmach, and Canada’s Prime Minister Steven Harper. These statements will no doubt be providing much needed hope to the people of Canada who can now justifiably look towards political stability in Ottawa.
Canada’s federal budget will come up for voting on Jan 29, and Harper’s minority government needs support of at least one opposition party to survive the voting. Harper has indicated that he will listen to Ignatieff’s suggestions on the upcoming budget with an open mind.
If Harper can accommodate some of Liberal party’s suggestions, he can undoubtedly rest assured that Liberals won’t let his government fall. That will mean stability in Ottawa, and political stability is what encourages the potential investors, including the big oil companies, who are currently sitting on the fence in wait-and-watch mode.
It is important to note that the sudden slow down in investment in oilsands projects was not prompted by slumping oil prices alone; in fact, it is farcical to believe that any short-term drop in oil prices should have disrupted many oil companies' investment plans, as it did; oil companies which are run by people of decent dose of competence base their decisions on the WHOLE life span of the project. The life span of oilsands projects range from 20-40 years, even more.
It does not require much intelligence to grasp that given the aggressive production cutting stance taken by OPEC countries (plus drop in non-conventional oil production), and stimulus packages announced by the G-7 countries, China and India, the aggregate demand of oil will start picking up by Q3 of this year. Coupled with the impact of production cuts, by the end of 2009 price of oil is expected to be any where between 60-100 dollars per barrel, probably more likely upwards of $70. The price of oil will remain on an upward looking curve thereafter.
So, the price of oil was not so much of a concern for the likes of Shell, TOTAL or Statoil et al. It was the uncertainties on policy level of both Canada and the new US administration regarding oilsands that impelled these companies to adopt more circumspect approach. Unless these companies are sure of policies on oilsands – of both Canada and US – and sure of a stable government in Ottawa ,which has a balanced view on oilsands, the oil companies would remain on the fence.
It may be mentioned for the benefit of those not familiar with Canadian politics that leader of an opposition party, known as NDP, had gone on record to say that given the chance his party will stop all oilsands projects. Such intellectually-challenged people were willing to cut their noses to spite their faces. Their political aspirations got better of whatever amount of intelligence they have to ignore the vital importance of a resource, like, oilsands to Canada as a whole – on economic and political fronts.
However, Liberal party’s aforementioned views on oilsands will certainly help Harper’s folks in formulating bi-partisan policy on environment, including policies relating to carbon capture. Once there is clarity on Federal environment policy, again, that will provide necessary confidence to the investors to finalize their investment decisions in regard to oilsands projects.
It is hoped that taking cue from Ignatieff, leaders of other Canadian opposition parties will set aside petty-minded politics and rally together to do what is in the best interest of the country. They will do well to remember there is much to gain, nationally and politically, in a prosperous Canada rather than in an economically and politically weak Canada.
Dion’s party fared poorly in Federal elections last year and along with him went out of the door his thought-less policy too.
In an interview to a radio station on 16th Jan, Ignatieff admitted that any policy that comes from Ottawa can't jeopardize the oilsands - which is one of the only industries propping up the Canadian economy right now. "When you're in St. John's airport and you see a guy in cowboy boots and a cowboy hat getting on the plane you know what the oilsands mean to the entire Canadian economy," Ignatieff reportedly said.
The present Liberal leader admitted his party made mistakes with energy policy in the past, including the national energy plan. He said his goal was to develop environmentally and socially sustainable policies for the oilsands.
While speaking to a newspaper last week, Ignatieff went on to insist the federal government must consider offering the oil and gas sector a stimulus package in its Jan. 27 budget, comparable to the multi billion-dollar bailout of the Ontario-based auto industry. "The West should be rightly angry if we assisted only Central Canada," Ignatieff told the newspaper. "We can't put money into the auto sector in Central Canada without considering the legitimate concerns of the B.C. forest industry and the Alberta oil industry. There has to be regional fairness in the stimulus package."
Ignatieff’s views clearly go above partisanship, beyond petty politics; they are patriotic, pro-Canada. Ignatieff’s pan-Canada outlook got further articulated when he said that while oilsands has its environmental challenges, oilsands are a lucrative tool, both financially and politically, that increases Canada's stature around the globe and allows the country to stand its ground on several policy fronts against the U. S.
The above bodes well for not only for Alberta but the whole of Canada. His views are now more or less along the lines of views held by Alberta’s Premier Ed Stelmach, and Canada’s Prime Minister Steven Harper. These statements will no doubt be providing much needed hope to the people of Canada who can now justifiably look towards political stability in Ottawa.
Canada’s federal budget will come up for voting on Jan 29, and Harper’s minority government needs support of at least one opposition party to survive the voting. Harper has indicated that he will listen to Ignatieff’s suggestions on the upcoming budget with an open mind.
If Harper can accommodate some of Liberal party’s suggestions, he can undoubtedly rest assured that Liberals won’t let his government fall. That will mean stability in Ottawa, and political stability is what encourages the potential investors, including the big oil companies, who are currently sitting on the fence in wait-and-watch mode.
It is important to note that the sudden slow down in investment in oilsands projects was not prompted by slumping oil prices alone; in fact, it is farcical to believe that any short-term drop in oil prices should have disrupted many oil companies' investment plans, as it did; oil companies which are run by people of decent dose of competence base their decisions on the WHOLE life span of the project. The life span of oilsands projects range from 20-40 years, even more.
It does not require much intelligence to grasp that given the aggressive production cutting stance taken by OPEC countries (plus drop in non-conventional oil production), and stimulus packages announced by the G-7 countries, China and India, the aggregate demand of oil will start picking up by Q3 of this year. Coupled with the impact of production cuts, by the end of 2009 price of oil is expected to be any where between 60-100 dollars per barrel, probably more likely upwards of $70. The price of oil will remain on an upward looking curve thereafter.
So, the price of oil was not so much of a concern for the likes of Shell, TOTAL or Statoil et al. It was the uncertainties on policy level of both Canada and the new US administration regarding oilsands that impelled these companies to adopt more circumspect approach. Unless these companies are sure of policies on oilsands – of both Canada and US – and sure of a stable government in Ottawa ,which has a balanced view on oilsands, the oil companies would remain on the fence.
It may be mentioned for the benefit of those not familiar with Canadian politics that leader of an opposition party, known as NDP, had gone on record to say that given the chance his party will stop all oilsands projects. Such intellectually-challenged people were willing to cut their noses to spite their faces. Their political aspirations got better of whatever amount of intelligence they have to ignore the vital importance of a resource, like, oilsands to Canada as a whole – on economic and political fronts.
However, Liberal party’s aforementioned views on oilsands will certainly help Harper’s folks in formulating bi-partisan policy on environment, including policies relating to carbon capture. Once there is clarity on Federal environment policy, again, that will provide necessary confidence to the investors to finalize their investment decisions in regard to oilsands projects.
It is hoped that taking cue from Ignatieff, leaders of other Canadian opposition parties will set aside petty-minded politics and rally together to do what is in the best interest of the country. They will do well to remember there is much to gain, nationally and politically, in a prosperous Canada rather than in an economically and politically weak Canada.
Saturday, January 10, 2009
HOW CANADA CAN TURN THE CURRENT CHALLENGES IN TO OPPORTUNITIES!!
Canadians, potential investors (and probably to some extent its southern neighbour) are waiting with bated breath to see what happens in Ottawa on Jan 29 when the budget will be put to vote. The current Prime Minister Stephen Harper, of Progressive Conservatives (PC), is leading a minority government. If for whatever reasons the main opposition parties - Liberal, NDP and Bloc Quebecois - don't like the budget presented on Jan 27, they can pull the government down by voting against it.
Now, let us step sideways and look at some key aspects currently confronting Canada. First, Canada is also in the grip of recession as are the other G-7 countries; the good news, however, is that Canada's economic woes are least as compared to any other G-7 country. Albeit, Canada's economic problems are less compared to its G-7 peers but they are not trivial either.
The unemployment figures released on 9th Jan paint a grim picture, and coupled with current contractionary tendencies of the economy (exacerbated by recessionary perception in the minds of the Canadians) the future doesn't portend encouraging signs.
When a country passes through tough times, if you had to pick up one thing that is needed to pull the country out of trouble what would you choose? Without doubt, the answer would be: 'real' leadership. It is a well known fact, to even non-academicians, that right leadership is fundamental to devising necessary strategy/suite of actions, convincing the people of the country to embrace the same and implementing it in timely and proper manner.
This is where current Prime Minister Stephen Harper is now called upon to show his mettle as a true leader. History is beckoning him to step up to the plate and do whatever is necessary, in the interest of the nation, to take Canada out of this present economic upheaval and put it back on the path of sustained economic growth. Fall of PC govt on Jan 29 has a potential for another election. That will certainly not be a welcome thing for the Canadians; the nation can ill afford a period of instability at this stage.
So, whichever way you look at from, the present challenge is, in fact, the right opportunity for PM Harper to deliver and carve a niche for himself in the Canadian history. People say of Harper, based on their past experience, that he is prone to stubbornness, often short sighted, less open-minded, afraid of facing the nation (prefers to disappear at the time of crisis), poor negotiator, untactful, impulsive, unable to grasp the big picture, and so on.
But this is the ideal opportunity for Harper to prove people wrong. Can he do it? Sure, why not? But to do that he has to overcome some mental blocks and fixations. If you watch his body language, his choice of words on critical/difficult issues one often finds him exhibiting lack of confidence, lack of substance and trying to cover that up with sheepish smile. And, in the process of overcoming his lack of confidence, on many occasions Harper ends up overdoing his policy action. This has been a major weakness in his style of functioning.
But he can right his this weakness. He need not feel weak-kneed, nor find his confidence somewhat less. Why? Because, after all, he led his party to be the largest single party in the parliament in the recent elections. Surely that is indicative of his ability to connect with people in most parts of Canada, his ability to articulate, and to get good grasp on various issues.
So, instead of being diffident, sheepish, apologetic on key issues, he needs to go out there full blast in confidence and take the bull by the horn - understand what the problems are, what the possible options are, what the challenges in implementing them are, and what needs to be done politically and nationally to implement them.
After grasping all that, Harper needs to rise above the fear of failure (this is fundamental to succeed in life) and go about his business of showing what true leadership is and stand tall amidst his political peers. Once he is not afraid to fail and at the same time puts national interest to be paramount he would be able to deal with any Layton, Ignatieff, Duceppe and come out trumps. And, best of all, the Canadians will back him up in his efforts to pull the country out of the morass.
It will not be so simple as stated above, but once Harper plays on the front foot with confidence (and full grasp of the situation/solutions) he will automatically be able to come out with necessary tactfulness, negotiation skills, political savvy required to implement what is best for the country in the present moment.
His actions will, however, have to demonstrate that he is above petty politics, he knows what is good for Canada, he is clearheaded, honest, not bumbling and that he is most suited to be the captain of the team. The more he will succeed, the more will his confidence grow and he will keep firing on all cylinders. Gradually, his path will appear more smoother, with less hurdles.
Meanwhile, there is good news that Mr. Obama has decided to visit Canada after taking over as President of US. This provides a gilded opportunity to Canada to forge stronger partnership with US on various fronts - energy, trade and defence. But to be able to do so Harper has to first survive the vote on budget. If Harper can be the decisive Prime Minister the country needs him to be, surely he can not only survive the vote, he can further strengthen his position.
If PC's continue to lead the country after the budget vote, Harper will get the opportunity to meet with and to convince Obama about the strategic importance of Canada-US relations, about oilsands' relevance to US (and the steps Alberta is taking to address environment related concerns), clear confusions regarding NAFTA, cooperation on defence related matters. But Harper would do well not to carry any past baggage (i.e. close ties with outgoing president Bush etc) or raise any thorny issue like Arctic sovereignity etc.
One of the drawbacks of Canadian leaderships' 'thinking' in last 50-60 years has been that on international level it was not expansive enough, and not contextually politically savvy. (An aside: On national level the 'thinking' seemed to have been debilitatingly overshadowed by Anglo-philic predilections.) In any case, it is a golden opportunity for Harper to show that his policies are entirely Canada-centric, pragmatic, streetsmart on all issues - be it environment, Islamic radicalism, natural resources, economic world order or anything else.
A strong and vibrant Canada is also in the interest of USA, and world in general. Canada's journey towards becoming a strong and vibrant nation can be sure and certain provided Steven Harper gets his act correct. He probably is aware that he will be judged by history by his performance at this critical and historic juncture.
Mr Harper, opportunity is there for you to get your name etched in golden letters - but to do that you will have to rise to the occasion and grab it!
Now, let us step sideways and look at some key aspects currently confronting Canada. First, Canada is also in the grip of recession as are the other G-7 countries; the good news, however, is that Canada's economic woes are least as compared to any other G-7 country. Albeit, Canada's economic problems are less compared to its G-7 peers but they are not trivial either.
The unemployment figures released on 9th Jan paint a grim picture, and coupled with current contractionary tendencies of the economy (exacerbated by recessionary perception in the minds of the Canadians) the future doesn't portend encouraging signs.
When a country passes through tough times, if you had to pick up one thing that is needed to pull the country out of trouble what would you choose? Without doubt, the answer would be: 'real' leadership. It is a well known fact, to even non-academicians, that right leadership is fundamental to devising necessary strategy/suite of actions, convincing the people of the country to embrace the same and implementing it in timely and proper manner.
This is where current Prime Minister Stephen Harper is now called upon to show his mettle as a true leader. History is beckoning him to step up to the plate and do whatever is necessary, in the interest of the nation, to take Canada out of this present economic upheaval and put it back on the path of sustained economic growth. Fall of PC govt on Jan 29 has a potential for another election. That will certainly not be a welcome thing for the Canadians; the nation can ill afford a period of instability at this stage.
So, whichever way you look at from, the present challenge is, in fact, the right opportunity for PM Harper to deliver and carve a niche for himself in the Canadian history. People say of Harper, based on their past experience, that he is prone to stubbornness, often short sighted, less open-minded, afraid of facing the nation (prefers to disappear at the time of crisis), poor negotiator, untactful, impulsive, unable to grasp the big picture, and so on.
But this is the ideal opportunity for Harper to prove people wrong. Can he do it? Sure, why not? But to do that he has to overcome some mental blocks and fixations. If you watch his body language, his choice of words on critical/difficult issues one often finds him exhibiting lack of confidence, lack of substance and trying to cover that up with sheepish smile. And, in the process of overcoming his lack of confidence, on many occasions Harper ends up overdoing his policy action. This has been a major weakness in his style of functioning.
But he can right his this weakness. He need not feel weak-kneed, nor find his confidence somewhat less. Why? Because, after all, he led his party to be the largest single party in the parliament in the recent elections. Surely that is indicative of his ability to connect with people in most parts of Canada, his ability to articulate, and to get good grasp on various issues.
So, instead of being diffident, sheepish, apologetic on key issues, he needs to go out there full blast in confidence and take the bull by the horn - understand what the problems are, what the possible options are, what the challenges in implementing them are, and what needs to be done politically and nationally to implement them.
After grasping all that, Harper needs to rise above the fear of failure (this is fundamental to succeed in life) and go about his business of showing what true leadership is and stand tall amidst his political peers. Once he is not afraid to fail and at the same time puts national interest to be paramount he would be able to deal with any Layton, Ignatieff, Duceppe and come out trumps. And, best of all, the Canadians will back him up in his efforts to pull the country out of the morass.
It will not be so simple as stated above, but once Harper plays on the front foot with confidence (and full grasp of the situation/solutions) he will automatically be able to come out with necessary tactfulness, negotiation skills, political savvy required to implement what is best for the country in the present moment.
His actions will, however, have to demonstrate that he is above petty politics, he knows what is good for Canada, he is clearheaded, honest, not bumbling and that he is most suited to be the captain of the team. The more he will succeed, the more will his confidence grow and he will keep firing on all cylinders. Gradually, his path will appear more smoother, with less hurdles.
Meanwhile, there is good news that Mr. Obama has decided to visit Canada after taking over as President of US. This provides a gilded opportunity to Canada to forge stronger partnership with US on various fronts - energy, trade and defence. But to be able to do so Harper has to first survive the vote on budget. If Harper can be the decisive Prime Minister the country needs him to be, surely he can not only survive the vote, he can further strengthen his position.
If PC's continue to lead the country after the budget vote, Harper will get the opportunity to meet with and to convince Obama about the strategic importance of Canada-US relations, about oilsands' relevance to US (and the steps Alberta is taking to address environment related concerns), clear confusions regarding NAFTA, cooperation on defence related matters. But Harper would do well not to carry any past baggage (i.e. close ties with outgoing president Bush etc) or raise any thorny issue like Arctic sovereignity etc.
One of the drawbacks of Canadian leaderships' 'thinking' in last 50-60 years has been that on international level it was not expansive enough, and not contextually politically savvy. (An aside: On national level the 'thinking' seemed to have been debilitatingly overshadowed by Anglo-philic predilections.) In any case, it is a golden opportunity for Harper to show that his policies are entirely Canada-centric, pragmatic, streetsmart on all issues - be it environment, Islamic radicalism, natural resources, economic world order or anything else.
A strong and vibrant Canada is also in the interest of USA, and world in general. Canada's journey towards becoming a strong and vibrant nation can be sure and certain provided Steven Harper gets his act correct. He probably is aware that he will be judged by history by his performance at this critical and historic juncture.
Mr Harper, opportunity is there for you to get your name etched in golden letters - but to do that you will have to rise to the occasion and grab it!
Monday, December 29, 2008
NO MEANS TO DEAL WITH GLOBAL RECESSION? HOW ABOUT A TURMOIL IN MIDDLE-EAST?
From a price of $147.27 per barrel on July 11, 2008, the price of crude oil tumbled to alarmingly low levels - levels which couldn't be explained based on any rational economic principle. Yes, there is a situation of recession in US, Euro zone, Japan but that situation can not justify a demand contraction happening overnight which should trigger a drop in crude price more than 70% below the July 11 level.
Anyway, in the aftermath of this precipitous fall from the cliff the oil companies worldwide started behaving like pansies - new E&P projects started getting put on hold, especially, projects related to non-conventional crude sources, like oilsands in Canada.
[One wonders what kind of economic model these companies follow that low crude prices prevailing even for a month sends their economic viability haywire. It is well known that economic analyses of such projects are done over the life cycle of the source of oil - the life cycle ranging from 25-40 years. So, it is hard to imagine that the oil companies chicken out just on the basis of one, two or six month period of relative low crude prices.]
More than the oil companies, most of whom have reasonably good balance sheet position, the oil producing countries are hurting more. So much so that even a country like Saudi Arabia was forced to delay the issuance of Request for Bids for their two refinery projects which were slated to go out in Q4 2008.
Iran, Venezuela and Russia are already in bad shape. Venezuela is considering to nationalise some profitable foreign owned mining leases to supplement their national revenue. Russian Rouble has plunged to unprecedented lows. Iran has had to ration their fuel supplies. Well, if these three countries find themselves in trouble it is music to West's ears.
With recession casting a pall of gloom globally, and US, Japan and Europe not knowing what to do to get out of this morass, is a crisis in the Middle-east a welcome event at the moment? Who would gain if there is a turmoil in that region? Will a military conflict, which can potentially become a full blown crisis in the region threatening to cut off oil supplies, be helpful to global economy at this time?
The world's top three GDP regions are struggling to find ways to bring about higher liquidity in the markets so as to increase aggregate demand for goods, housing and so on. So, in such a scenario will these economies not suffer a whammy by having to cope with higher crude oil prices which invariably happens whenever there is a conflict in Middle-east?
But this is exactly what is happening at the moment. Israel is going full blast at Hamas in Gaza, and there are fears that this operation might escalate. Crude prices are nudging their way upwards.
Granted that Israel will have their parliamentary elections in two months and Prime Minister Olmert is allegedly gambling on this military operation to come back in power. But the billion dollar question is: Will Israel ever carry out this kind of an operation and, more importantly, at this point in time without the knowledge and/or acquiescence of their godfather - USA? Hard to digest that they have gone ahead without keeping Washington informed.
Further, US and its lackey (UK) would have immediately figured out the consequential economic ramifications of a potential Middle-east crisis. Yet they would have apparently agreed. Why? Is there some smart Alec who theorised that should there be a disruption of sea lanes (and the trade dependent on it) leading to 'perception' of disruption of goods globally, there can be a rebound in consumer demand triggered by panic buying?
Bear in mind, consumer spending is key to the big economies getting back on track. So, if the consumer spending can be triggered for some reason it is most welcome. And, apart from increased consumer spending there is a potential of arms supply by major powers, like, US, UK and to some extent, Russia. Dollars and Pounds flowing in exchange of arms supply can grease the economic wheels of these countries. Never mind, if Russia also gets some crumbs.
Moreover, rise in crude prices will again restore the projected inflow of money for OPEC countries who will then have funds for their new oil & gas projects which will in turn be good news for vendors, contractors and EPC companies - most of which come from G-7 countries.
So, it may seem that after all a crisis in Middle-east is what the doctor ordered for at this very moment. Is it likely that this is an event which has been engendered in a scripted manner? Will it escalate? Will it suck in Hamas supporters, like, Iran and Syria? And, will this provide an opportune time to Israel (and US) to hit at Iranian nuclear facilities, since Iran is down in dumps economically?
The concern is: Will it be possible for Israel (and its allies) to play this crisis as a scripted event? If the crisis goes out of hand and/or plays outside the script what will happen? Or, are the phantom scriptwriters damn sure that they can control it right till the denouement? By the way, on the flip side, who knows, this event can end up in a whimper too without bringing in the spin-offs for the G-7 visualised so glibly in the foregoing. Let's wait and watch!
Anyway, in the aftermath of this precipitous fall from the cliff the oil companies worldwide started behaving like pansies - new E&P projects started getting put on hold, especially, projects related to non-conventional crude sources, like oilsands in Canada.
[One wonders what kind of economic model these companies follow that low crude prices prevailing even for a month sends their economic viability haywire. It is well known that economic analyses of such projects are done over the life cycle of the source of oil - the life cycle ranging from 25-40 years. So, it is hard to imagine that the oil companies chicken out just on the basis of one, two or six month period of relative low crude prices.]
More than the oil companies, most of whom have reasonably good balance sheet position, the oil producing countries are hurting more. So much so that even a country like Saudi Arabia was forced to delay the issuance of Request for Bids for their two refinery projects which were slated to go out in Q4 2008.
Iran, Venezuela and Russia are already in bad shape. Venezuela is considering to nationalise some profitable foreign owned mining leases to supplement their national revenue. Russian Rouble has plunged to unprecedented lows. Iran has had to ration their fuel supplies. Well, if these three countries find themselves in trouble it is music to West's ears.
With recession casting a pall of gloom globally, and US, Japan and Europe not knowing what to do to get out of this morass, is a crisis in the Middle-east a welcome event at the moment? Who would gain if there is a turmoil in that region? Will a military conflict, which can potentially become a full blown crisis in the region threatening to cut off oil supplies, be helpful to global economy at this time?
The world's top three GDP regions are struggling to find ways to bring about higher liquidity in the markets so as to increase aggregate demand for goods, housing and so on. So, in such a scenario will these economies not suffer a whammy by having to cope with higher crude oil prices which invariably happens whenever there is a conflict in Middle-east?
But this is exactly what is happening at the moment. Israel is going full blast at Hamas in Gaza, and there are fears that this operation might escalate. Crude prices are nudging their way upwards.
Granted that Israel will have their parliamentary elections in two months and Prime Minister Olmert is allegedly gambling on this military operation to come back in power. But the billion dollar question is: Will Israel ever carry out this kind of an operation and, more importantly, at this point in time without the knowledge and/or acquiescence of their godfather - USA? Hard to digest that they have gone ahead without keeping Washington informed.
Further, US and its lackey (UK) would have immediately figured out the consequential economic ramifications of a potential Middle-east crisis. Yet they would have apparently agreed. Why? Is there some smart Alec who theorised that should there be a disruption of sea lanes (and the trade dependent on it) leading to 'perception' of disruption of goods globally, there can be a rebound in consumer demand triggered by panic buying?
Bear in mind, consumer spending is key to the big economies getting back on track. So, if the consumer spending can be triggered for some reason it is most welcome. And, apart from increased consumer spending there is a potential of arms supply by major powers, like, US, UK and to some extent, Russia. Dollars and Pounds flowing in exchange of arms supply can grease the economic wheels of these countries. Never mind, if Russia also gets some crumbs.
Moreover, rise in crude prices will again restore the projected inflow of money for OPEC countries who will then have funds for their new oil & gas projects which will in turn be good news for vendors, contractors and EPC companies - most of which come from G-7 countries.
So, it may seem that after all a crisis in Middle-east is what the doctor ordered for at this very moment. Is it likely that this is an event which has been engendered in a scripted manner? Will it escalate? Will it suck in Hamas supporters, like, Iran and Syria? And, will this provide an opportune time to Israel (and US) to hit at Iranian nuclear facilities, since Iran is down in dumps economically?
The concern is: Will it be possible for Israel (and its allies) to play this crisis as a scripted event? If the crisis goes out of hand and/or plays outside the script what will happen? Or, are the phantom scriptwriters damn sure that they can control it right till the denouement? By the way, on the flip side, who knows, this event can end up in a whimper too without bringing in the spin-offs for the G-7 visualised so glibly in the foregoing. Let's wait and watch!
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