Philosophical Interlude
What I'm hearing is that we already have a smaller debt than many other countries, so we're laughing. Plus, we're just little guys. So we're not responsible for the bad news. We can sit back, do a relatively half-baked version of the spending out way out of the recession (five additional weeks of EI), and wait for the US, China and Europe to pull us out of the ditch. Not exactly a responsible position for a G7 country (or an OECD country or a NATO country projecting power).
Al Jazeera's report on Davos (Jan 29 09) puts more emphasis on emerging economies though China is on their list too.
The economies of India, China and Russia, which have been experiencing rapid growth in recent years, have taken precedence at the forum.
Timothy Garton Ash, professor of European studies at Oxford University, said emerging markets are almost overshadowing the importance of the US economy.
"What is really striking to me about this Davos, is the lack of a sense of a new beginning with Barack Obama," he told Al Jazeera.
"That is not what we've been hearing about in the last 24 hours, we've been hearing about China, about Russia, about India, about emerging economies, and that I think is a very significant fact.
"It's not just the American investment banks that have gone down, it's America's own soft power, and ability to lead that has been badly damaged by the crash."
Rachid Mohamed Rachid, Egypt's minister of trade and industry, said there would be a rush towards emerging markets.
"People understand today that there will not be growth in developed countries for a long time to come, the growth will continue to be in emerging markets, even more than before," he told Al Jazeera.
Personally, I don't think we're looking at just another dip in the business cycle. It's too big for that, and too much of it is made up of subjective factors-- confidence, trust, herding behaviour, recessionary psychology, and America's ability to lead. I do think we are looking at a permanent contraction in the range and depth of the debt industry.
I say this cautiously because I know that I have a tendency to underestimate the resilience of capitalism. I've been kicked in the head before after forgetting that, resilient or not, the greedy bastards will be fighting back.
While the CBC reports a $33.7 bn deficit for this year, the staid Conference Board adds in a figure for economic prudence, tax cuts and what it calls "a collapse in projected revenues, particularly in fiscal years 2009–10 and 2010–11" to arrive at a figure of $76.5 bn over the next three years. "This will drive up the federal debt to $542.4 billion, erase 10 years of debt payback, and push up interest payments required to service that debt by $9.7 billion per year within three years." (My emphasis).
In the near future, banks and secondary lending institutions will be slow to consider quite such a large cohort of suckers as their legitimate prey. The suits and ties are not as keen at the moment to lend to anyone, any where, any time although payday loans are still available on mainstreet Nelson and equity loans can be had just around the corner.
Borrow money and your loan might end up on some household version of a black-op vulture fund's list for legal action and rendition. Is that paranoid? Maybe, but it's smarter than trusting an institution that regards the commodification of debt (including my own personal debt) as a legitimate financial innovation. I've had the vultures on my own telephone. So thanks, but no thanks. I'll be signing up for that vicious coalition of the thrifty.
What are we supposed to do? Go out and buy up more useless shit just to keep the economy going? Buy one car, get one free. Buy three and go down faster. Take out a loan to keep the land fill in business. We are already bailing out the nitwits (and their union) who celebrated the plan (in just 2007) to start building a new generation of muscle cars in Windsor. I'm frankly maxed out in the useless shit and bad idea department. I won't be needing to go into hock for more--not for a long time.
But contraction of the debt industry is just part of the picture. Stimulating demand seems to be one of the big mysteries for economists struggle with. Then there's that collapsing-government-revenue piece of the puzzle that seldom makes it onto the evening news. Yet another story is the continued attack on pay equity, an especially expensive irony as long as Conservatives insist on using the Canadian Forces to teach Afghans how to treat women. The economic crisis also serves as another (large) milestone in the evolution of a multipolar international order that began, I believe, with Bush's abrogation of the ABM Treaty. But more on all that another time.
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