Category Archives: Uncategorized

Depression, Inflation, I’m so confused!

The Weimar German Mark…Not just Zimbabwe – Log scale

The numbers are ugly. Something like 1 in 5 Canadians out of work. Mortgages deferred, rent unpaid, bills falling in arrears without a regular pay cheque. The 2K a month CRED money is lovely but it does not actually cover most middle class people’s mortgages, car leases, minimum credit card payments, hydro, taxes, more taxes, and, well, food.

So, economically, I think it is fair to say that we are already in a depression. GDP growth will crater, unemployment will balloon. Cash will evaporate.

But it may be worse than that. The reality is that most Western countries have said, “The Hell with the deficit and national debt, we need to helicopter money in, stat.” The problem with this idea is that to do it you need to print money. Lots of it. Billions for Canada, trillions for the US. Which, if you have your own central bank is easy to do and, initially, costless. After all, what is money? It is a book entry and if you double the total what could go wrong?

If you flood enough money into an economy that economy will look robust. It will look normal even with a fifth or a third of its citizens not actually working but still being paid.

Here is picture of a meth addict:

A country which decides to simply make all the money it needs right now is jumping on the meth train. There is a temporary high where all looks grand and then a terminal decline.

The COVID-19 crisis – if it is a crisis – has given our federal government the social licence to start shooting economic meth. The fact is that the economic meth won’t work. Real estate is going to crash. Asset prices generally will crash. The end of demand is, well, the end of demand. Without demand prices drop and, hey, pretty soon, you have a recession and, perhaps, a depression.

Depressions can be survived. They are nasty and stimulating the demand which takes you out of one is tough.

But now imagine a depression proceeded by a huge currency inflation. Where a government, in a panic, floods the market with paper currency unbacked by any actual GDP. In a matter of a year, the savings of a nation as well as the assets of a nation, can be rendered worthless in paper money.

Here’s a gent buying eggs in the Weimar Republic:

A grand inflation in front of a depression is pretty much the end of an economy. If the government prints money in serious quantities and issues debt in more or less unlimited quantities the game is over. The gold bugs will have won.

A rather smart investor named Rick Rule once said, “We don’t want to live in a world with $10,000 an ounce gold.”

Right now there is a greater than zero chance that this will be exactly the world we live in.

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Things about to get real

COVID-19

No, not the virus. It is already very real.

The economy.

2.1 million Canadians have applied for EI. On Monday, the doors will open for applications for the CREB. Real estate is crashing. A lot of small businesses are closed and there is a real question as to whether many will be coming back if this goes on until, say, May 15th.

Here’s the thing: to this point people have been able to get by on savings, informal loans and scraps of income. Not well, but ok. That will not be the case for much longer.

On Monday there is going to be the mother of all internet swarms as people try to apply for the CREB. Part of that process is, apparently, setting up a “My Account” with the CRA. My younger sons have been trying to do just that since the Prime Minister suggested it on Wednesday. They have failed because the CRA system is giving them error messages when they try to fill in their information. Not at all an encouraging sign.

My boys will be fine and my older son filed for EI a week and a half ago so he should be ok.

However, if half a million Canadians crash the CRA on Monday, many of them will not be fine. They will be dead broke with no obvious path forward.

How long will that situation remain calm?

The “application” process for the CREB is an unnecessary bottleneck which may turn out to be a break point for the system overall.

Is there a Plan “B” in case the CRA can’t handle the volume. There should be and it should be simple and get money to people who need it.

I have suggested this in a variety of places but I will suggest it again.

A smart, decisive government would have looked for every possible way to get money into the hands of the unemployed, the stay at home moms, the older adults and the welfare recipients by the end of March. No questions asked, no applications required. The Canadian government, through its various programs and the Canadian Revenue Agency, has the name and bank account information for millions of Canadians. Simply sending $2000 to people who receive the Child Tax Benefit, the GST rebate and CPP/OAP would kick start the process. Sending $2000 to every single one of the EI applicants currently in the system, without looking at eligibility would be a solid move. Then coordinate with the provinces to send $2000 to every welfare recipient.

me, a week ago

The whole point of the CREB is to get money into the hands of people who need it. The whole application/eligibility thing just gets in the way. So does the insane requirement that people re-apply every month.

The Federal and Provincial governments have decided that Covid-19 is serious enough that it warrants shutting down the Canadian economy. (I am not sure this is actually the right response but it the response we have for now.) By doing this the governments have created an obligation to ensure that their citizens have enough money to sustain themselves as long as the shut down is in effect. This will be insanely expensive and likely deeply inflationary. But that is a “down the road” consideration. The key concern right now needs to be getting as much money to as many people as possible as soon as possible.

For the next month it likely makes sense to continue with the social distance/stay at home measures currently in effect. More and more people are masking up. By May we should have a) a useful five minute test to determine if a person currently has CV-19, an anti-body test to find out if a person has had CV-19 (and is therefore presumed immune), spreading use of  hydroxychloroquine and other treatments which help speed recovery. We will have, we hope, flattened the curve so that the number of cases stay within our hospital’s capacity to treat.

However, by the end of April we should also be looking at how we can begin to re-open the economy. At the moment we are treating everyone as a potential carrier as well as a potential patient who would have a significant chance of dying if they caught CV-19. With experience, we should be able to be more granular in our approach.

We will also be in a better position to do a cost/benefit analysis of the restrictions government imposes. At the beginning of March, when CV-19 was first seen as a serious problem, the magnitude of the problem could not be pinned down. That meant that virtually any restriction could be justified as the potential cost of not imposing the restriction was, more or less, infinite. In principle, the CV-19 epidemic could have killed us all so stopping it was worth pretty much everything.

Now we know a lot more about CV-19 and what can be done to lessen its impact. It may turn out that a simple cotton mask, (much denigrated by Canada’s Chief Health Officer, Dr. Tam) may have a significant role to play in reducing the spread of CV-19. Cheap, potentially effective and, realistically, masking might allow the resumption of some business activities.

We know that the virus is nasty to older people and often fatal to the many over 80’s in our communities. We know that care homes are susceptible because the virus spreads in communal settings more easily than through casual contact. We know that young children and teens, while they can get CV-19, almost always have light cases.

The more we know the more we can tailor solutions which will allow a bit of a return to normal or a version thereof.

If we had infinite money we could sustain our current restrictive measures for a year or two until we had a vaccine. But while we can print money by Direct Deposit, that money comes with costs. And remember, money is not actually anything at all. You don’t eat money, you eat eggs. Those eggs come from somewhere and there is a supply chain which gets them to the store.

The challenge right now is to control the virus without killing the supply chains which we all rely on.

Let’s see how our Federal government does on Monday.

Bungle

Our American friends are trying to pass an emergency finance bill to deal with the economic fall out of the Covid-19 epidemic. But Nancy Pelosi decided it would be a great idea to add layers of lefty causes to a fairly simple finance measure and, as a result, the bill has been delayed.

Our own Justine Trudeau attempted to put an Emergency Funding Act through Parliament which would have given the Canadian Cabinet the power to tax and spend without going to Parliament for 18 months. He failed. But not until more time had been wasted.

Canadians are losing their jobs. Fast. A million and half of them have apparently applied for EI benefits. The system is not designed to deal with that many applications all at once. While the one week waiting period has been waived, the reality is that there will be no new EI cheques for several days if not weeks.

The Trudeau government has announced the Canada Emergency Response Benefit which is, as far as I can see, a program designed to pay $2000 a month to people who a) apply, b) who lost their jobs, got sick, are under quarantine or have to stay home because of school closures. The application is to be online as of the beginning of April with cheques (really?) out ten days or so later.

Let’s be optimistic and imagine that the CERB goes as planned. The earliest people will get the benefit will be April 15. It is the 25th as I write. I have been broke enough to know what 20 days with no money feels like. But no money and no prospect of generating any because of Covid-19 lock downs is impossible.

Trudeau and his Cabinet lack any sense of urgency. They have not got a clue about how tough the next month is going to be for the million and a half Canadians who have lost their jobs.

A smart, decisive government would have looked for every possible way to get money into the hands of the unemployed, the stay at home moms, the older adults and the welfare recipients by the end of March. No questions asked, no applications required. The Canadian government, through its various programs and the Canadian Revenue Agency, has the name and bank account information for millions of Canadians. Simply sending $2000 to people who receive the Child Tax Benefit, the GST rebate and CPP/OAP would kick start the process. Sending $2000 to every single one of the EI applicants currently in the system, without looking at eligibility would be a solid move. Then co-ordinate with the provinces to send $2000 to every welfare recipient.

There is no time for a bureaucratically perfect solution here. People are being told to stay home. They can’t do that if they have no money. So get them money.

UPDATE: The geniuses at the BC government just announced a program to help people hit by the economic consequences of CONVID-19 deal with rent. Apparently they think $500 paid direct to the landlord is going to make a difference. Have they looked at rents in Vancouver or Victoria?

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Aftermath and Clean-Up

Five days ago I wrote a post called Peak Panic. I think I called it about right. There was and still is panic around Convid-19 but there is also the sense that the curve can be flattened by people self isolating (even if they don’t have the bug), practicing social distance and by limiting social interaction and group events.

Now comes word that Trump is sending Hydroxychloroquine and Z-Paks to NYC for Drug Trials. There is strong, if anecdotal evidence that hydroxychloroquine has a rapid effect on the virus. Six days and the virus is gone. We’ll see. But we will see quickly as the treatment will be given to hundreds of sick patients and, prophylactically, to front line medical personnel. It will either work perfectly or, more likely, imperfectly but effectively in many cases.

Having a treatment option – and there will be more than one – changes the entire picture. Yes, social distance and self-isolation will still be important for some time but the idea that the medical system will be overwhelmed fades very quickly if an effective treatment can be administered.

The entire world is in the process of shutting down as economic activity is judged too risky. The markets have crashed. Helicopter money is being loaded. (Although I note that the Trudeau government missed a chance when the Child Tax Benefit arrived in the same amount as last month.) Tax deadlines – both for filing and for payment – are being deferred. Employment insurance, pensions, payments to the self-employed, to companies and to institutions hit with the virus and its disruptions are all in the pipeline.

The fact that the virus may be first contained and then controlled is unlikely to have much impact on these programs. Nor should it. The economic disruption of the last couple of weeks is not going to vanish overnight even if the medicos sound the all clear. It will cost trillions.

[My minor suggestion is that governments add a virtual year to all the “monthly” entitlements they currently pay and pay that all at once. In the case, for example, of my pension the government would add one year to my life and send along the full benefits payable for that year. This would give me cash in pocket and would be as taxable as any other pension payment.]

Putting money into the hands of consumers and corporations immediately is likely a good idea. But a better idea is to begin to plan for an economic restart complete with the resumption of air travel, open pubs, non-essential businesses and so on. The exact date of this restart is unknowable at this point because we don’t know when the curve will start dropping like the Dow. However, that should not stop political and business leaders from outlining a 30-60 day restart plan which would kick in when the virus was effectively beaten.

Economies are perfectly happy to crash on their own. But there has never been a genuine economic restart. It is claimed that the Great Depression was ended by the production demands of World War II. That may well be true but, obviously, that is not an ideal outcome.

So what is?

There will be a lot of pent up demand but it will take a lot of work and a lot of money to meet that demand. There will also be a good deal of purely psychological damage which will have to be overcome. A part of the population, perhaps a large part, will be suffering from the after effects of sheer panic.

Focusing the restart on a specific day or week may be the most effective way to marshal the supply chains, employees, and businesses. We’ve seen the success of “Black Friday” in releasing the animal spirits of North American consumers.

Combining massive sales, big discounts on air fares, hotels, restaurants and a day of celebration might well be the best way of kicking the economy back into gear. Parades, Services of Thanksgiving, a truncated knock out tournament for the Stanley Cup, a reboot of Opening Day for a short MLB season, the list of potential events is endless.

Start the planning now, even before we have solved the virus issue, because if the economy continues in “shut down” the effect of that “shut down” could be much more severe than the virus itself.

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Peak Panic

Are we there yet?

States of Emergency, daily Presidential Briefings, fatality numbers, businesses closing, TP shortages, no meat, social distance, markets yo-yoing and everyone looking to “flatten the curve”: COVID-19 is scary and people are responding with varying degrees of terror and reason.

I took this graph from PowerLine. It is interesting and as John Hinderaker observes there we want to be like South Korea. He was referring to the US. Canada is not even on this chart because we are a few days away from the starting point of 10 deaths. Health Canada indicates 4 deaths as of March 17 at 10:30 Eastern. We’ll get to 10 but, with luck, a little more slowly.

There is a lot of skepticism about the Chinese numbers but, apparently, new cases and new deaths have fallen significantly in the past few weeks. We’ll see if that holds as China goes back to work.

There are plenty of reasons to treat COVID-19 seriously beginning with the fact that we lack infinite medical resources to deal with the very real possibility of broad scale infection. We currently lack effective therapies for people unlucky enough to catch CV. We are at least months away from any sort of vaccine.

Panic has been useful in alerting people to handwashing and staying out of crowds. It has given social licence to people who simply want to stay at home. And those basic things may very well reduce the overall incidence of the infection. We won’t know for a while.

What we do know is that testing for COVID-19 is confirming cases across Canada. Here is the weekly case graph to the 8th of March:

So far, so good. However, I have to suspect that there will be surges in these numbers in the coming weeks as more and more people are tested.

If something like this graph holds, even with surges, Canada will have the time needed to reconfigure its medical resources to deal with the challenges presented by the virus. We will also have the time to test potential therapies: yes, an ounce of prevention is worth a pound of cure – but it would be helpful to have some cures available.

There are also purely environmental effects to look forward to. We don’t know if heat and humidity will kill the virus but there is evidence that they slow its spread.

Spring is around the corner in Canada.

As we get a better handle on the virus, its spread, its effects and, with luck, its treatment the urge to panic will vanish. It will be replaced by an understanding of what it takes to avoid contracting the virus.

In China it appears people are going back to work and production is resuming. Or so it is claimed. South Korea seems to have resumed a relative normalcy. Europe seems, at the moment, to be in the grip of the first wave where the death count shoots up and the case load is overwhelming. They have hit lockdown and there seems to be some improvement in the number of new cases in Italy at least.

Panic grabs people’s attention but it is useless unless it leads to clam, rational, action. Which is what we are beginning to see in Canada.

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OK, Boomer

My Millennial son, not wanting to be out of step with his generation, referred to his dear father at an “old white boomer” in a chat we were having today. Absolutely accurate. I am an old white boomer and delighted to be one. But for the ageist Millennials this is supposed to be a real slag. And for real ironic cred, the phase, “OK, boomer” is a great comeback when a boomer says something the Millennial has no answer for.

However, it is always fun to shoot back and I tried, Mill – epic fail.

However, pensées d’escalier, I realized I had been close. What Mill lacked was a useful sense of faint derision.

What could do that job?

“Millie”. Just the right note of soy-boi, effeminate, dimness combined with a dash of condescension. And for a hint of Edwardian neo-colonial hauteur in the face of imbecility, “Righty-O, Millie”.

Done.

Our Dog Died

Stoffal

I lost a very dear friend just before dinner tonight.

My old, thirteen and a half, dog Stoffal died lying against a bookshelf, his tail having wagged its last about ten minutes before. He was comfortable, in no pain at all, and had been out in the morning.

Stoffal was a golden doodle that my lovely (and currently devasted) Susan found on Used Victoria when he was three. A very nice South African doctor named Santa had moved to a condo and Stoffal was not a condo dog. (Stoffal is, apparently, a common dog name in South Africa.) So he came to us as a used dog from Santa.

Stoffal was relaxed. He’s moved with us from mansion to slum and back again, city to country, always adapting to whatever came his way. When he was younger he’d swim and fetch sticks – three times, after that you were on your own.

He slept beside my sons, alternating rooms, and when he could, he prowled the dinner table reminding us that dogs love steak but are willing to settle for potatoes.

He managed to steal, not one, but two rounds of Brie we were foolish enough to leave on a low coffee table at cocktail hour. He loved to walk in the woods in North Saanich but, in the last year, his ambition was greater than his legs could support. As he loved car rides this was not a problem.

A dog creates a special place in a family. No matter what is happening there is a big, furry, friendly, creature who wants nothing more than a scritch on the ear or a walk or to just lie beside you.

That is an empty place right now.

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The trivialization of Canadian Politics

faith goldy and justin trudeauDock Currie (not related) apparently posted something to the internet several years ago which was offensive. So he felt he had to resign as an NDP candidate. [Anyone who sees Dock on Twitter has to wonder if he has ever posted something which is not offensive, but there is is.) Several conservatives have, at various times been in the same crowd of several hundred or thousand people as Canada’s answer to Toyko Rose, Faith Goldy. The shock, the horror.

I realize that a race between Trudeau, Scheer, Singh and May is not very inspiring. (It would have been so much more interesting had the Conservatives actually run a conservative like Max Bernier rather than whatever the hell Scheer is, but them’s the breaks.) But piling on to candidates for ancient statements or mau-mauing them for distant association with a cartoon fascist simply sets the bar even lower.

Having accomplished nothing of substance in their years in government – they even screwed up the pot file which took real ingenuity – the Libs are reduced to going negative from the outset. Their war room knows that Canadians are unimpressed with “climate change needs higher taxes” as a campaign theme. They also know that Trudeau’s legal and ethics problems offset what charisma he has as a campaigner.

So now it is time for “Project Fear”. Scheer = Harper = Trump. Scheer is going to take away abortion rights, Scheer is not an ally of the gay community because he does not jet all over the country to march in pride parades. The Conservatives hate immigrants and so on.

Going negative this early strongly suggests that the Lib’s internal polling is suggesting a fair bit of weakness. Conventionally, a party will save the negative stuff for the last couple of weeks of the campaign when it is the most damaging and the hardest to refute. I suspect the Libs have realized that with their own leader either under RCMP investigation or credibly accused of impeding that investigation, they need to distract and terrify the under 30’s, newer immigrants and the ladies if they are going to win.

After years of public school and woke university, the under 30’s are ignorant enough to fall for the climate scare. Newer immigrants might be frightened by conservatives who attended a rally at which Faith Goldy was present because, well, that would make them Nazis too. And the Libs think the ladies will swoon over the suggestion that Scheer (a major breeder and Catholic) will be jumping right in to create a Handmaiden’s Tale anti-abortion dystopia where the State will mandate that pregnancy will only end with birth.

With a bought and paid for mainstream media pumping out those themes, keeping Max off stage and lobbing Nerf ball questions at Trudeau, the Liberal war room may well be right.

After all, when not plotting with the Pope to make pregnancy mandatory, Scheer is a dull, decent, dog of a candidate. Dirty him up a bit and the poor man may never recover.

The Liberal war room and the mainstream media seem to think this is what politics is about. It isn’t. Right now there are actually serious issues facing Canada beginning with the fact that because of the disaster which is Canadian energy policy, the shut down of 50% of Saudi Arabia’s oil production may mean the Eastern Bastards really do freeze in the dark this winter. Will that come up on the campaign trail? Will real, if painful solutions to Canada’s deficit and debt problem come up? Will the fact that our current External Affairs minister is persona non gratia in China, Russia, Saudi Arabia and the US come up?

These are real issues. Dock Currie’s usually odious comments and being in the same city as Faith Goldy are not.

The Liberals and the paid for Canadian media are pretty sure we’re too dumb to see the difference.

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Live From Belmoral

The PM spent Friday and some of Saturday with Her Majesty. A transcript has just been released.

The Queen: Prime Minister.

Boris: Your Majesty.

The Queen: Bit of a pickle Prime Minister.

Boris: Well yes, Your Majesty. Dominic thought it might turn out this way.

The Queen: Boris, you may think you are Pooh but I assure you, Dominic is more Owl like than you realize. He sounds quite smart but isn’t.

Boris: Perhaps your Majesty. But what can one do?

The Queen: Are you asking seriously?

Boris: Oh yes, your Majesty, I am up the spout without a pickle, or paddle.

The Queen: Well, yes, Boris, you are. Not the first Prime Minister and, the way things are going, not my last. But being a bear of very little brain you might take some advice. Do you know about residual powers?

Boris: I have heard of them but they have not been used in centuries.

The Queen: They most certainly have. Each time a Prime Minister cocks something up and needs to make Parliament go away for a while I prorogue the thing. Or, as my royal prerogatives are being abridged by the act I, or, rather, you can withhold consent. And you might suggest to me that my assent to the bill might be withheld for, say a month or two. And you might want to do that after prorogation. Or, and I doubt your clever Mr. Cummings has thought of this, you might ask me to write a letter to the EU asking for a one day extension to November 1. I am, after all the Head of State and can write in my own name on the advice of Cabinet which would put paid to any question of violating the “law”. Or you might try a combination of some or many of these maneuvers and then move a motion of non-confidence against yourself just for the sheer joy of the expression on Mr. Corbyn’s rather scruffy face.

Boris (doing a small dance as bears do when finding an unexpected honey pot): Thank you very much, Your Majesty. You have given me much to ponder.

The Queen: Well don’t ponder too long. My powers grow rusty in their scabbards and if you wait too long I might die and you’ll have to deal with Charles who has forgotten what a scabbard looks like.

Boris: Thank you Kanga, I mean, Your Majesty.

The Queen: You’re very welcome, Prime Minister. Now get on with it. Lovely gal by the way. Phillip was very impressed.

The Mighty Mueller has Struck Out

I have been watching snatches of poor Robert Mueller’s testimony before Congress. Seeing him flailing and apparently not remembering what was actually in his own report was sad. We all get old and Mueller showed all the signs of decline which older people can experience.

None of which was a secret going into the hearings which raises the question, “Why were the Democrats so insistant on having Mueller tesitify?” While I think the two Democratic Committee Chairmen, Nadler and Schiff are dolts, they have been in the game long enough to know Mueller would be a weak witness. So why ask the old fellow to subject himself to five hours of Democratic posturing and some quite serious counter barrage from a number of Republicans who actually know what was going on during the Trump campaign and into the Trump Presidency.

My own surmise is that the Democrats are so invested in the idea of impeaching Trump (because they are pretty sure they can’t beat him in 2020) that they had to try to keep the story alive by bringing out Mueller. Not because he would reveal anything very new nor because he would be a dynamite witness, rather because without at least trying Mueller, the whole impeachment narrative would have been over. So out came Mueller and, in five hours of testimony, he managed to end the whole impeachment narrative.

However, Mueller did let a little light into the origin story of the Special Counsel investigation when he indicated that he did not know what Fusion GPS was, who Greg Simpson was and refused to discuss why spook and professor Joseph Mifsud was not charged with lying to the FBI when a) he did, b) various Trump connected people were so charged.

What Mueller did not know, what his investigation did not examine, are the starting points for what I expect will become the largest political/justice/intelligence scandal America has ever endured.

Mueller’s strike out retired Team Obama/Clinton but now Trump and his AG Bill Barr get their turn at bat. With impeachment off the table, Barr has a clear shot at what very much looks like a broad, co-ordinated, conspiracy to pervert the course of justice (Hillary exoneration on the email file) and conduct illegal surveliance on the Trump campaign and, possibly, the Trump Presidency through the use of fraudulently obtained FISA warrants. The bottom of the inning promises to be something of a hit fest as compared to the strikeouts, foul balls, walks and pop flies which were the best the Dems could do to impeach Trump.

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