Wednesday Night 991

INTRODUCTION
Despite the promised eclectic subject matter, the evening was largely devoted to the state of the world’s economies, a topic on which guidance was offered by Jacques Clément, Chil Heward and Thuong Ngo, a delightful addition brought to us by Gregory Saumier-Finch on behalf of his Uncle André.

ALAN GREENSPAN & THE ECONOMY
Testifying in Washington before the U.S. House of Representative financial services committee, Alan Greenspan said the slowdown in the American economy that started late last year “has yet to run its full course.” Although Greenspan’s comment was widely interpreted to mean the Fed will chop interest rates again, he has given no indication today as to what will happen. This was hardly unanticipated because it would have been a gross error on his part to have indicated action by the Federal Reserve before publication of economic data. There is very little doubt however that the Fed will call for ½% decrease in discount rate, followed by 1/4 % drop by the Bank of Canada. This would be a calculated risk attempting to reconcile the wishes of investors with the risk of flight of foreign currency from the United States, an event which would be catastrophic for U.S. balance of payments and subsequently for the world economy. Some observers are convinced that he will announce the cut before the next meeting of the Fed, either some time between Thursday, the 1st and Monday the 5th.
In fact, low interest rates, while certainly a very important tool in fiscal management, are not necessarily guarantors of prosperity. Japan, with interest rates very close to zero, has not been able to recuperate, because of fundamental problems in government, banking and business.
Although very dependent on the U.S. economy, Canada was ahead of the United States with tax cuts, which places us in a better growth position this year. The Bush administration has announced further tax decreases in an attempt to stem the effect of the current economic trend.
There is a forty percent probability of a recession in the United States. Fourth quarter G.D.P was 1.1% versus 2.2% in Canada. A key indicator is consumer confidence which is the lowest in over four years. The savings rate in the United States is negative by 1%, positive by 2% in Canada. There has been a big drop in new home sales, there have been major layoffs in the automobile industry. Automobile sales have been good in January due to deep discounts, but disappointing in February. Look for higher unemployment and lower job rates.
It will probably be the first quarter in 2002 before we can look to recovery. The question that arises is whether it will follow an L curve, flattening out for a time at the bottom, a U curve with a slow bottom and slow recovery, a V or W.

POLITICS IN QUEBEC AND MONTREAL
Political life in Québec will become very interesting with Bernard Landry at the helm. It seems odd for an obviously intelligent Premier who has held the finance portfolio to be hurt by the fact that Québec receives two and a half billion dollars more from Canada than it contributes. Look for a much less controlled Party, with M.N.A.’s doing their own thing, expressing what may sometimes be unpopular opinions.

Gerald Tremblay has announced that he will challenge Pierre Bourque for the office of Mayor of the new Montréal, but Bourque is doing his homework and it is very unlikely that Tremblay will succeed in unseating him. The reception of Tremblay by the media has been somewhat lukewarm; his stumbles as Minister of Industry in the Bourassa government have been recalled and, while he is generally liked, his lack of leadership qualities, including charisma, is notable. Once again, the question was asked “why do politics not attract better quality individuals?” At the municipal level, the answer may be that there is little control exercised by a Mayor or the city councilors. This situation is unavoidable as long as the cities remain the creatures of the provincial governments (and change in the law is not likely). Only in the smaller communities are citizens able to actively participate in their local governments and this is precisely why so many are adamantly opposed to the mergers of Montreal, Québec City and Hull. However, protests have been ignored by the provincial government, giving rise to comments by at least one new-comer to Canada that it would appear that Democracy is not as strong here as it is perceived to be from afar.

QUOTES OF THE EVENING

* It is not realistic to expect eight years of excess to unwind in six months.
* Greenspan’s problems are technology and the automobile business.
* The E.C.M., Britain, U.S. and Japan all have to work together.
* Can a government manipulate the market? No!
* The most important thing is that the confidence of the businessman and the consumer have been shattered.
* Fiscal and interest rate combination can avoid recession.
* At the municipal level, there is very limited power, mainly administration.

T H E  I N V I T A T I O N

Tax cuts in the U.S. – will George W’s strategy work? The extraordinary events in Turkey; Colin Powell in the Middle East; the Bill Clinton Pardons. For a little local competition (but tame by comparison) there’s always Shawinigate and the audit of François Beaudoin.

The (U.S.) State Department annual Human Rights Report, released on Monday, was written/edited by our good friend David Jones who writes “The Canada report (and all of the others) will be immediately available on Monday on the State Department web site  but a printed version won’t be available for quite some time–at least weeks–until the Government Printing Office produces it. And once again, it will be a massive 2 volume production (last year was 2,500 pages and this year (is) longer). And to read it is to go to sleep.”

The EU has opened its markets to almost all goods from 48 of the world’s poorest countries in an effort to garner support for a new round of world trade talks.

And topics left over from last week that won’t go away … NORTEL and the sister companies caught in the wake of the incipient – or is that “apprehended”? – recession; Climate Change; Extradition to countries with the death penalty; Freedom of association/assembly and the Biker Law; Alan Greenspan (he’s not left over, he’s testifying before the House on Wednesday), along with Jacques Clément; Chil Heward; Allan Mass; John Ciaccia and Mark Roper, who will bring a friend.

Let us not overlook Gerald Tremblay’s run for Mayor of Mega-Montreal, even if, in the words of one political observer, he was “separated from charisma at birth”. But who wants to be mayor of a city that places 19th behind Zurich as a desirable place to live? Maybe that’s why we need a one with the charisma of a Zurich gnome.

Nor should we neglect the coronation of Benard Landry and his immediate rush to bring sovereignty to the fore. What are the bets on who goes where in the new Cabinet?

So – a plethora of worldwide topics for your worldly and/or world weary consideration.

Wed 2/28/01 Quebec to get windfall By: JOAN BRYDEN; KEVIN DOUGHERTY
Quebec will get the lion’s share of an extra $1.8 billion in immediate support for poorer provinces, the federal government announced yesterday
The windfall is the result of a recalculation, based on the latest economic data, of equalization payments owed the seven poorest provinces for the fiscal years 1999-2000 and 2000-01. [Was not this our own money??]

Wed 2/28/01 We’re not a province – Landry
By: KEVIN DOUGHERTY Bernard Landry will be sworn in as Parti Quebecois premier only next week, but already he is turning up the rhetoric, saying it is “insulting” to call Quebec a province. “It is absurd to say we are a province like Saskatchewan,” Landry told a crowd of about 400 in a jammed hotel meeting room.

QUEBECOR TO CHOP 420 JOBS, BLAMES TELECOM SLOWDOWN
Tue Feb 27, 2001
MONTREAL–Quebecor (T.QBR.B) is eliminating half of the workforce in its Videotron Telecom division ” 420 of the 850 jobs there ” because of “a deterioration in the financial situation of the company”, according to a Quebecor release.

Wed 2/28/01 Quebecor retrenches By: ALISON MACGREGOR and JAN RAVENSBERGEN Poor operating results at Montreal-based Videotron Telecom Ltd. have forced debt-laden owner Quebecor Inc. to abandon its new business initiatives there and dump half its 850 employees at the freshly acquired unit, Quebecor said yesterday. Roughly 420 jobs will be chopped between now and Aug. 31, the firm added.