The Cosworth
01-07-2009, 02:42 PM
Steering through the Recession
Things have to change in order to create a more stable economy
by Michal C. Moore
We have fallen into a deep financial hole, and like Alice in Wonderland, it just keeps going on and on, getting deeper and deeper. This is a recession unmatched in current times, perhaps unprecedented in history for its scope.
This recession is a crisis in fundamental financial relationships, but more than anything, it represents a failure of our current leadership to anticipate and ultimately deal with the problem. Part of that has been a reluctance to deliver bad news in a timely manner.
Here is the news. We spent our way into this mess, assuming we could borrow without regret. We used imaginary credit advanced by lenders who made money on every transaction. The party wasn’t supposed to end.
Unfortunately, it was a party without rules. The rule-makers (known as regulators) were interested in expanding the economic pie, not reining in the behavior of the players. Why? Because economic expansion at any cost trumped thoughtful investment and policy.
Even as the ship sinks, we have finance ministers and even chief executives exhorting us to hang on, and everything will be okay. Even Joe Six-Pack knows that is a crock.
It is not going to be okay, at least not as we knew things in the past, and it will take a lot of work and co-operation to get the economy on stable footing again. We are in a land of shadows right now. A palliative pat on the head, “everything-will-be-all-right” attitude toward consumers and markets is not just misplaced; it’s downright dangerous.
With appropriate deference to sophisticated market-makers, economic theorists and punk junior traders who think their MBA qualifies them to understand economics, much of the economic collapse and associated calumny represent a toxic combination of non-leadership, fundamental lack of understanding of market dynamics and a just plain ol’ lack of common sense.
We need elected and appointed regulators to face the inevitable, take action while it still matters, and begin digging ourselves out of this mess rather than waiting for some mythical parent figure to guide us home.
This change must include savings rates, use of credit and ultimately restructuring how we view retirement accounts, pensions and public protection of old, outmoded, destructive labour rates and manufacturing techniques.
Listen, a lot of this mess was likely inevitable. It’s the end of the long boom that started in 1983 (with a few blips along the way) and couldn’t be sustained. It’s the end of the boomers, who have run out of credit and must now figure out how to finance old age. It’s likely the end of North America as the dominant economic force on the globe. It is likely that another nation or group of nations will assume that role.
I believe that this is the time to reorder how we lead and regulate our markets, how we give people choices that can result in a more stable economy next time. Only diversified, resilient economies will survive with minimal damage and inevitably have the ability to lead the next economic expansion.
We need responsible leadership to get there. Ten-second sound bite commercials that promise no new taxes and no deficit spending are beyond silly, and ignore some of the critical functions of government. They literally throw away some of the key tools that will lead to a rational recovery.
Public expenditures on long-stalled infrastructure improvements, for instance, can provide jobs and investment in future economic expansion. Withholding tax support for failing, mismanaged or outdated industries is equally as important.
We can and should use strong measures to ensure banks behave responsibly, reinjecting money into loans that make sense rather than shareholder relief. Deficits for federal governments must be judiciously applied, but in times like this, trying to balance a budget on current revenues can sink the entire ship.
In all of this, we need the consumer to know what he or she is facing, to act responsibly, not irrationally. And you can't do that without intelligent, timely information. Some of that includes bad news. Without it, we might as well start a world war to grease the economic engine, just as they did to bail out of the 1930s Depression. History can and does repeat itself.
Michal C. Moore is an economist and senior fellow at the University of Calgary’s Institute for Sustainable Energy, Environment and Economy.
I wasn't THAT worried until now
Things have to change in order to create a more stable economy
by Michal C. Moore
We have fallen into a deep financial hole, and like Alice in Wonderland, it just keeps going on and on, getting deeper and deeper. This is a recession unmatched in current times, perhaps unprecedented in history for its scope.
This recession is a crisis in fundamental financial relationships, but more than anything, it represents a failure of our current leadership to anticipate and ultimately deal with the problem. Part of that has been a reluctance to deliver bad news in a timely manner.
Here is the news. We spent our way into this mess, assuming we could borrow without regret. We used imaginary credit advanced by lenders who made money on every transaction. The party wasn’t supposed to end.
Unfortunately, it was a party without rules. The rule-makers (known as regulators) were interested in expanding the economic pie, not reining in the behavior of the players. Why? Because economic expansion at any cost trumped thoughtful investment and policy.
Even as the ship sinks, we have finance ministers and even chief executives exhorting us to hang on, and everything will be okay. Even Joe Six-Pack knows that is a crock.
It is not going to be okay, at least not as we knew things in the past, and it will take a lot of work and co-operation to get the economy on stable footing again. We are in a land of shadows right now. A palliative pat on the head, “everything-will-be-all-right” attitude toward consumers and markets is not just misplaced; it’s downright dangerous.
With appropriate deference to sophisticated market-makers, economic theorists and punk junior traders who think their MBA qualifies them to understand economics, much of the economic collapse and associated calumny represent a toxic combination of non-leadership, fundamental lack of understanding of market dynamics and a just plain ol’ lack of common sense.
We need elected and appointed regulators to face the inevitable, take action while it still matters, and begin digging ourselves out of this mess rather than waiting for some mythical parent figure to guide us home.
This change must include savings rates, use of credit and ultimately restructuring how we view retirement accounts, pensions and public protection of old, outmoded, destructive labour rates and manufacturing techniques.
Listen, a lot of this mess was likely inevitable. It’s the end of the long boom that started in 1983 (with a few blips along the way) and couldn’t be sustained. It’s the end of the boomers, who have run out of credit and must now figure out how to finance old age. It’s likely the end of North America as the dominant economic force on the globe. It is likely that another nation or group of nations will assume that role.
I believe that this is the time to reorder how we lead and regulate our markets, how we give people choices that can result in a more stable economy next time. Only diversified, resilient economies will survive with minimal damage and inevitably have the ability to lead the next economic expansion.
We need responsible leadership to get there. Ten-second sound bite commercials that promise no new taxes and no deficit spending are beyond silly, and ignore some of the critical functions of government. They literally throw away some of the key tools that will lead to a rational recovery.
Public expenditures on long-stalled infrastructure improvements, for instance, can provide jobs and investment in future economic expansion. Withholding tax support for failing, mismanaged or outdated industries is equally as important.
We can and should use strong measures to ensure banks behave responsibly, reinjecting money into loans that make sense rather than shareholder relief. Deficits for federal governments must be judiciously applied, but in times like this, trying to balance a budget on current revenues can sink the entire ship.
In all of this, we need the consumer to know what he or she is facing, to act responsibly, not irrationally. And you can't do that without intelligent, timely information. Some of that includes bad news. Without it, we might as well start a world war to grease the economic engine, just as they did to bail out of the 1930s Depression. History can and does repeat itself.
Michal C. Moore is an economist and senior fellow at the University of Calgary’s Institute for Sustainable Energy, Environment and Economy.
I wasn't THAT worried until now