Wednesday Night #1470

Written by  //  May 5, 2010  //  Herb Bercovitz, Reports, Wednesday Nights  //  No comments

The evening opened with a brief video of the presentation of the Lieutenant Governor’s Seniors Medal (Médaille pour les aînés) awarded for volunteer service, to our OWN Herb Bercovitz on May 1st. Peter Trent, who had nominated Herb, was on the stage, beaming with pride. The honorees also included a great number of impressive young volunteers from secondary schools, CEGEPs and universities.

Greece and the global economy
Greece, and by extension, most if not all E.U. countries, with the notable exception of Germany, find themselves at various stages of the same problem, most not as desperate as that of Greece. A balanced definition of the problem must include not only the entire European Union, but the other countries in the world as well. Basically people, wherever they live, want to work and to receive increasingly costly services without the willingness to pay for them. Greece – and the other PIGS – have carried this to the extreme and Greece has no room left to manoeuvre. Unlike countries outside the European Union, Central Banks have been able to postpone the inevitable for some time to come, but the E.U. is a federation rather than a nation, hence no capital, no central bank. Greece is attempting to do whatever is necessary to bring consumer and government spending into balance but the population is resisting the requisite belt-tightening. The paradox of German Chancellor Angela Merkel having to face the resistance of her own citizens in order to have Germany bail out Greece is partly explained by Germany’s relatively rapid post-World War II recovery and subsequent commercial success.
Greece has no choice but to impose severe measures, which it has done in the face of protests and demonstrations, but it is also an important importer of consumer goods, many of which are manufactured in Germany. It turns out that Greece is one of the most important customers for Mercedes Benz Germany, the world’s biggest exporter, profits not only from the continuing exports to the entire world, but also from the decreasing value of the Euro relative to other world currencies. Thus, paradoxically, the German economy is in a manner of speaking, dependent on the Greek economy and that of the other E.U. member countries. The situation simply highlights the inter-connectedness of the global economy.
The U.K., which could well have a hung Parliament by Friday has a big budgetary problem and markets could well judge that it has neither the political will or capacity to address their problem. In fact, none of the developed countries, save Canada, has a remotely decent fiscal situation.
Since the use of the square of buckskin to represent the deposited hide, money has no intrinsic value other than confidence in a matching debit and credit entry in a ledger and we have reached the point where the paper and metal tokens no longer necessarily accurately represent the resources that they represent. This is more than a European problem; it is universal. No country appears to be conforming to the ideal of responsible fiscal security and the U.K., as well as many other countries, could ultimately be  in the same situation as that of Greece.
While there do appear to be signs of a global recovery, right now we are in panic mode that we will have a good number of fiscal problems for many years.
Regardless of the explanation or analogy, the basic problem is that in addition to Greece, many other countries of the world including our own, have been living beyond their means for years.  It would appear that the concurrence between rising public debt and the increasing size of public sector employment is rarely, if ever, coincidental. We can foresee the day when politicians will have to avoid bribing voters with their own money and return to the era of putting fiscal responsibility ahead of politics. History shows that only crises create the climate for hard decisions. It would be nice to think that our governments could make those hard decisions before the crisis arises – or is full-blown, however the evidence does not suggest that this is likely.

Environmental disasters – nature trumps technology?
Some airports in Europe have again had to close as Iceland’s volcano has again started spewing ash that, because it is so porous, clogs aircraft engines, causing them to seize up. The dangers are similar to problem with sandstorms, although sand erodes rather than congealing.
The Gulf oil disaster is of such scope that it is equivalent to a natural disaster. BP is attempting to close down the gushing oil with a dome. Theoretically, this is possible, but the operation is at such depths, in the dark and with incredible pressures that success is very doubtful.In addition to the technical considerations, there are important regional economic ones, including tens of billions of dollars in costs for the environmental clean-up. The political implications are also important – only two weeks ago, President Obama came out in favor of offshore drilling off the Virginia coast as part of the new U.S. energy bill. That is over. Inevitably, there will be serious investigation and laying of blame and our old friend Halliburton is back [Gulf Oil Spill: Who’s to Blame? BP, Halliburton and the Feds Are All Implicated].

The market
Meanwhile, some wonder why the price of oil is dropping after the spill. It seems the answer is technical – a number of investors were simply liquidating long positions in the market. There is no shortage of crude at present, but oil is priced in U.S. dollars; as the dollar weakens, the price will drop. Commodity prices are also dropping. The latest figures on China’s economy indicate a slowdown economy and some wonder if in conjunction with the Greek crisis, we are witnessing an ‘investment momentum’.

Quebec
Raising taxes may appear to be the answer to Quebec’s economic woes, but in fact the situation here is typical: many middle-income families are more accurately classed as working poor. Meanwhile, the bloated civil service fails to deliver efficient services, while often engaging in programs of neither interest, nor use to the public (See Beryl Wajsman’s editorial in The Suburban on the battle between the Office de la langue française and Boutique seduction – unfortunately words fail us in trying to replicate his verbal tirade.

THE PROLOGUE

May 3rd is World Press Freedom Day – we so often talk about the future of the print media in the light of new technology and social media, however, we perhaps lose sight of the importance of free press, of whatever ilk. As media junkies, we appreciate the vast range of opinion to which we have access and can only hope that in some benevolent future, there will be not only free press, but free access for all.
It is thanks to our unhindered access to world-wide media that we can witness and marvel at how quickly our focus shifts from one week to another thanks to the rapid spread of news through the Internet and other media.

Of course, the commentary about the forthcoming British election has been white noise for most of us until the television debate between the leaders. All of a sudden, as the Economist suggests, it became a horserace worth watching – if not betting on. Down to the wire  Polls suggest an outcome that could remake Britain’s political system as well as its government. A general election in Britain that’s too close to call Unfortunately, we won’t be able to watch the results this Wednesday, but bets are acceptable.

The BP oil spill in the Gulf of Mexico has moved from spectacular to a disaster of major proportions with unbearable consequences for humans, marine life and fragile ecosystems alike – and ramifications in the political world, including calls for reversal of the Obama administration’s energy and environment reforms.  US energy sector reform to be affected by Louisiana oil spill
Although Mr. Harper says Offshore spill won’t happen to Canada, Jack Layton shares our concerns and is asking that the Gulf oil disaster be put on the G8 agenda.
Meanwhile, despite this afternoon’s faintly encouraging news, we suggest that it is time to ponder the following thought and whether it may not apply equally to other nations (Canada’s Tar Sands, perhaps?).
“As more details of the BP spill incident emerge, one spies a familiar pattern. Major projects in America seem to be rife with wishful thinking and short-term economics. Because it’s cheaper to believe in best cases. Until the worst case happens.” New Orleans: The Joy and the Dread
Paul Krugman also contributes a thoughtful piece Drilling, Disaster, Denial
“It took futuristic technology to achieve one of the worst ecological disasters on record. Without such technology, after all, BP couldn’t have drilled the Deepwater Horizon well in the first place.”

As though the President did not have enough problems, Saturday night’s (happily inept) bomb episode in Times Square is a brutal reminder that terrorism lurks in all kinds of guises and while this latest attempt fizzled, the odds inevitably dictate that sooner or later, there will be a successful attack. In this case, fortunately, it seems that with the aid of video surveillance cameras, the ‘perp’ may be identified and apprehended in record time U.S. Seeks Man From Pakistan Tied to S.U.V. in Bomb Case

On a global and therefore far scarier scale, today Nuclear Talks at U.N. Open, With Focus on Iran with the ever-on-message Iranian president accusing the United States and other nuclear powers of trying to intimidate non-nuclear countries, while stockpiling and spreading the threat of nuclear weapons. The U.S. and allies walked out on the speech.

On the other hand, it is reported that Obama Kills At White House Correspondents Dinner » on Saturday, so he’s doing something right.

Greece‘s problems seem to have been settled – for the moment – by the EU and IMF, however, there is a lot of commentary to the effect that As Greek Drama Plays Out, Where Is Europe?
As during the 2008 financial crisis and the more recent halt in European air traffic due to volcanic ash – European leaders have failed to surmount national interests and cobble together a coherent policy quickly enough to address a problem. In the process, they may have done permanent damage to the credibility of the European Union. It wasn’t that long ago that The Independent was shrilling about the EU President’s secret bid for economic power

On another note (and continent) we believe that the recent Foreign Policy article Africa needs a new map –  It’s time to start seeing the redrawing of the continent’s colonial borders as an opportunity, not a threat deserves some serious consideration. It is certainly rare – if not unique – that we endorse an idea put forward by Muammar al-Qaddafi, but this time, he has it right. The ‘how to” is another story – an impossible dream?

At a more local level, warmest congratulations to Herb Bercovitz, who is the recipient of the Lieutenant Governor of Quebec’s Seniors Medal (Médaille pour les aînés) awarded for volunteer service. Sam Totah recently reported that he attended the exhibition of Jewish painters in the 1930s ….”excellent show… I was very pleased to see. for the first time many, paintings and posters done by Harry Mayerovitch.” Allan Mass also recommended the show. Unfortunately it ended on May 2nd.
Claudia reminds us that we should be actively observing the continuing dialogue (polite word) regarding the Turcot Interchange.

Finally, two topics that have apparently been brushed aside given all of the foregoing, have been reunited in this M&A news: Somali Pirates Say They Are Subsidiary of Goldman Sachs

Greece, and by extension, most if not all E.U. countries, with the notable exception of Germany, find themselves at various stages of the same problem, most not as desperate as that of Greece. A balanced definition of the problem must include not only the entire European Union, but the other countries in the world as well. Basically people, wherever they live, want to work and to receive increasingly costly services without the willingness to pay for them. Greece – and the other PIGS – have carried this to the extreme and Greece has no room left to manoeuvre. Unlike countries outside the European Union, Central Banks have been able to postpone the inevitable for some time to come, but the E.U. is a federation rather than a nation, hence no capital, no central bank. Greece is attempting to do whatever is necessary to bring consumer and government spending into balance but the population is resisting the requisite belt-tightening. The paradox of German Chancellor Angela Merkel having to face the resistance of her own citizens in order to have Germany bail out Greece is partly explained by Germany’s relatively rapid post-World War II recovery and subsequent commercial success. Greece has no choice but to impose severe measures, which it has done in the face of protests and demonstrations, but is also an important importer of consumer goods, many of which are manufactured in Germany. Germany, the world’s biggest exporter, profits not only from the continuing exports to the entire world, but also from the decreasing value of the Euro relative to other world currencies. Thus, paradoxically, the German economy is in a manner of speaking, dependent on the Greek economy and that of the other E.U. member countries.
Since the use of the square of buckskin to represent the deposited hide, money has no intrinsic value other than confidence in a matching debit and credit entry in a ledger and we have reached the point where the paper and metal tokens no longer necessarily accurately represent the resources that they represent. This is more than a European problem; it is universal. No country appears to be conforming to the ideal of responsible fiscal security and the U.K., as well as many other countries, could ultimately see themselves in the same situation as that of Greece. Regardless of the explanation or analogy, the basic problem is that in addition to Greece, many other countries of the world including our own, have been living beyond their means for years and we can foresee the day when politicians will have to avoid bribing voters with their own money and return to the era of putting fiscal responsibility ahead of politics as has happened in Saskatchewan, Newfoundland and Canada at various times in our history. It would appear that the concurrence between rising public debt and the increasing size of civil service is rarely, if ever, coincidental.

It is difficult to think of anything more addictive than technology. The Y2K crisis that never occurred did not even cause a microsecond’s pause in the interest or use of digital technology; fires, floods, tsunamis have not changed our lifestyle and neither the near simultaneous volcanic eruption and unbridled oil surge is unlikely to significantly change our life either. There are some who question the significance of the closeness in time of both events, but, with the incredible disruption of means of travel, the main emphasis is on the power of nature to trump technology. It is probable that the environmental cost of cleaning up the crude oil in the twenty-first century version of “Why the Sea is Salt” will be in the range of hundreds of billions of dollars. A really frightening sequel would be the true twenty-first century analogy to “Why the Sea is Salt (and crude).”

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