Wednesday Night #1386

A small, (competition from the Opéra de Montréal, McGill Chamber Orchestra, pension fund gathering in PEI …) but high quality gathering, devoted its energies to the economic crisis and election campaigns on both sides of the border.
President George W. Bush’s prime-time address to the nation on the financial crisis [Bush warns of serious risks to U.S. economy ] was the focus of much of the evening, although it was generally agreed that the President’s delivery lacked the convincing tone of leadership that the American public is seeking.

Canada
In a democracy it is not unprecedented that within the lifetime of an individual, a political party crosses the threshold from invincibility to oblivion.  This currently appears to be the fate of the federal Liberal Party within the next few years.  In the absence of an obvious need to call an election before the end of its mandate and an apparent lack of a platform justifying the motivation for calling the election, an attempt to interpret the only possible motivation of the Prime minister that comes to mind is to accelerate the demise of the Liberal Party.  The Liberal Party is in deep debt, has had difficulty raising funds and has had to borrow in order to fund the current election campaign.  The Conservative party is awash with funds, has carried on a campaign that seems to lack a platform except to attack the opposition parties, to promise funding targeting areas that are susceptible to supporting the Conservative Party in the current election and more importantly, to totally destroy the image of the capable but maladroit Stéphane Dion.  The Conservative party appears to be heading for a majority government, leaving the Liberals so deep in debt, disorganized and hog-tied by current election funding rules, so as to preclude any possibility of a phoenix-like rebirth.  Its successor appears to be the New Democratic Party.  The point of discussion that remains is whether the reported strict discipline within the ranks of the Conservative party constitutes a restriction of freedom of expression of opinion on the part of elected party members, a type of rule by edict.  By successfully wooing the middle class, the success of the Tories is a virtual certainty as is the demise or increasingly diminishing influence of the Liberal Party.
The current Conservative government has eliminated the sizeable budget surplus inherited from the previous Liberal government leaving it very little wiggle space in governing.  Whether one agrees or disagrees with the premise that surpluses would be better used in the hands of government or the electorate, Canadians are said to have been partially insulated from the current U.S. financial crunch because it is said that the period immediately following the creation of the surplus serves as a damper to the economy, followed by a stimulus.

The economic crisis
The strange aspect of credit is that it is ephemeral, existing only as a debit and credit entry on a ledger and totally dependent on the trust in the debtor’s ability to retire the debt.  Happily, in the event of governments, that ability is seldom in question.  No matter how egregious the debt, no government has ever declared bankruptcy.  Hank Paulson’s recovery plan would work, especially because the U.S. government issues the U.S. dollar, the World’s common exchange currency.  The Euro is considered by some as its successor, but only the United States possesses the military power base to enforce its edicts.  If the U.S. were to lose its military power, hence its monetary power, there would be no other country in the world currently able to replace it.  However, as the repayment of the enormous debt created by the Paulson plan will become the burden of U.S. citizens, the plan must be marketed to the electorate if it is to be passed by Congress, as is currently being done, rather feebly, by President Bush in the dying days of his mandate.

T H E  I N V I T A T I O N

Guided as usual by the events of the week, our topics will likely be limited to the financial crisis and proposed bailout in the U.S., the elections in Canada and the U.S. and/or anything crucial that happens between now and Wednesday Night.

As promised previously, we again pose the questions: Where is money safe today? Where should the investor be? Cash? What currency? To whom can you turn for advice that is not tinged with self-interest? What institution can you trust?
Maureen Farrow will be with us – perhaps she will have answers.
Meantime, a good early morning Sept 22  round-up from Foreign Policy Morning Brief
“The Group of Seven is happy, but it’s hard to find much enthusiasm elsewhere about the Bush administration’s answer to the financial crisis, a $700 billion proposal to take illiquid assets off the balance sheets of credit-starved institutions.
“The plan is being marketed under false pretenses,” complains Washington Post columnist Sebastian Mallaby.
“We are now going to get other sectors asking to get bailed out, such as the automotive industry,” former IMF chief economist Kenneth Rogoff warns. “Who else is Washington going to prop up?”
For NYU economist Nouriel Roubini, who supports a rescue, the problem is the authority given to Treasury Secretary Henry Paulson. “He’s asking for a huge amount of power,” Roubini told Bloomberg News. “He’s saying, ‘Trust me, I’m going to do it right if you give me absolute control.’ This is not a monarchy.”
More economists weigh in here.
Congress is under pressure to pass legislation this week before the fall recess. Democrats would like to see provisions that limit CEO pay, provide greater congressional oversight, and assist homeowners directly. President George W. Bush prefers a “clean” bill that focuses on illiquid assets.
Paulson hit the weekend talk shows to defend the rescue proposal, which critics have dubbed “cash for trash.” “This is not something that we wanted to do,” a sober Paulson insisted on Meet the Press Sunday. The secretary defended one particularly controversial part of the plan, which would allow non-U.S. banks to be able to sell their “toxic waste” to the government as well.
Investors appear to be treating the bailout plan with caution, but credit markets, not stocks, are the ones to watch in the days ahead. Meanwhile, investment banks Goldman Sachs and Morgan Stanley, seeking shelter from the winds that battered Lehman Brothers and Bear Stearns, moved to become holding companies.”

David Jones has written an excellent primer piece for American Diplomacy on the Canadian elections and possible outcomes of the two elections.

We hope that on Saturday night you all watched John Curtin’s latest offering, To Hell with Manners! , which, John writes, “drew an average audience of 619,000 for the hour  and was the highest rated show on CTV for the whole of Saturday evening and , I believe, the best-rated program on any channel in Canada that day. Of the 39 (!) interviews I did last week, my proudest moment was making it to BNN’s  Squeeze Play to take a seat normally kept warm by stock market titans like Ron Meisels and other Wednesday Night luminaries.”

We would remind everyone that the “Gentle the Condition” benefit concert on October 2 sponsored by the (Brigitte) Garceau Foundation, aided and abetted by Beryl Wajsman, offers a wonderful, blood-pressure-reducing alternative to the (Canadian) Leaders Debate and the (U.S.) vice-presidential debate.