Knowing the Difference Between Right and Chong

"Political parties don't work when people just announce what they are doing and expect everyone else to follow."
-Tony Abbott

It turns out it is super easy to do the job of a newspaper editor. Well, at least the part of it that involves thinking up corny wordplay for the title of pieces. In this case, the title is referring to Michael Chong, the courageous Member of Parliament from Wellington-Halton Hills, Ontario. This crusading gentleman has put forward the quite interesting Bill C-559. This bill, short-titled The Reform Act, 2013, would reduce the stranglehold of party leaders while massively increasing the rights of MPs, something many Canadians feel is long overdue.

Personally, I don't even like the idea of political parties. There was nothing originally about them in any of the constitutions of Anglo tradition. They force elected representatives to often go against the wishes of their constituents in order to fulfill a larger party strategy. However, they also are basically inevitable. If we don't have overt alliances between candidates who cooperate and share resources, we will have secret ones. This will put those who try to go without them at a distinct disadvantage anyway. So parties are here to stay. Can we make them more democratic? Chong hopes so.

Essentially, Chong's bill would edit the Elections Act and Parliament of Canada Act in some pretty major ways. It would provide a pretty substantial rebalancing of powers between the Prime Minister's Office and Parliament as well as reducing the power of opposition leaders to control their own MPs. It would do this through via three main changes:

First, since 1970, any party riding choosing a candidate to run under their political party's umbrella has needed the signature of the party leader. This meant no one could run for office except as an independent without the boss' permission. This requirement would be removed, allowing the choice of candidate to ultimately lie with the party riding association through 'nomination officers' that they elect.

Second, the House of Commons caucuses would be allowed to trigger a leadership review vote if 15 percent of the caucus decides to. If so, a secret ballot vote would be triggered which could replace the leader of the party if a simple 50 percent plus one of the caucus desired it. For the layman, a caucus just refers to a group of parliament members from within the same party. The Senate, being unelected, would not be included in these votes. Technically, there was nothing stopping parties from doing this before. For example, Joe Clark had a leadership review pushed on him. However, it would formalize this power which has previously been rarely employed, likely making it more common.

Third, the Commons caucuses would also be able to review their own MPs and choose to eject or readmit them with the same voting procedure, 15 percent to trigger and 50 percent plus one to confirm. This right will no longer be possessed by the party leader. In addition, if anyone had been ejected from the caucus but was selected by the nomination officer to run and then got elected, they would automatically be reinstated.

Some people have suggested that this bill is a revolt against the overtly caucus-controlling Stephen Harper. Others say it specifically isn't since it wouldn't actually take effect until after the next election. Either way, I suspect he appreciates the timing since it wouldn't make him the only Conservative recently in revolt against his boss' management style that makes the majority of the public's elected representatives into little more than rubber stamps. That this bill has even a faint hope of passing is only thanks to Harper's style of managing and how the current Senate Spending scandal has weakened his position and credibility.

Canada's Prime Ministers, unlike US Presidents, control the way their party votes in parliament except for rare free-votes. This means our leaders are basically unaccountable and totally free to do what they will when they have a majority. Harper has been seen as taking that a step further and limiting the rights of elected MPs to even discuss issues without the PMO's permission.

You may remember back in March when Conservative MP, Mark Warawa of BC, asked the Speaker of the House of Commons to see if his parliamentary privileges were being violated. What happened is his right to a one-minute statement in the Commons was taken away without explanation. Warawa is an opponent of abortion on the grounds that it is discriminatory against girls due to the prevalence of sex-selective abortions. It's likely he was planning to speak on this and other socially Conservative MPs backed his right to speak freely on it.

Understandably, Harper does not want his party discussing abortion as its fate is essentially already decided in Canada and a no-win issue for Harper. However, it did anger many that their MP was not allowed to represent them on an issue important to them.

You may also remember back in June that the very principled Alberta MP, Brent Rathgeber, left the Conservative caucus. He did this after his bill to publicly release civil-servant salaries was watered down by party leadership. Rathgeber would state:

“I’m obviously very, very disappointed both with the government position and certainly with the [committee’s Conservative] colleagues, many of whom philosophically support this legislation unequivocally, but seemed powerless to resist the instructions that were given to them by the [Prime Minister’s Office], by the whip or wherever the final instructions came from.”

Anyway, regardless of why Chong wants this bill, is it a good one?

Well, yes and no. The general thrust is certainly good. Party leaders should not be all powerful. They should not be allowed to squash internal debate and silence outspoken MPs just to improve election results by making the party appear more unified.

In the case of Justin Trudeau, he was basically chosen as leader of the Liberals through social media. Many of those supporters who were allowed to choose him as leader were not even registered or able to vote for him. This means that Trudeau was chosen by many who were not real party members then and may still not be now. Should he have ultimate power over elected Liberal MPs who have been chosen at the voting booth by the real party faithful? Probably not.

As Andrew Coyne notes, the idea that party leaders should only lead with the confidence of their caucus is a normal one in the Westminster parliamentary tradition. Canada is fairly unique in often allowing leaders to hang onto power over their party even once they've become despised and seen as a liability.

Australia recently saw their Labour Party leader Julia Gillard agree to a vote that would see her removed from her leadership role if she lost. Polls had shown Labour was going to be trounced in the next election and a change was seen as necessary by her party. She lost and promptly stepped down. It might also be worth mentioning she was actually the Prime Minister at the time. The same thing happened with Margaret Thatcher during her days as Prime Minister of Britain. Her party decided to give her the boot and replaced her within the span of a few days. This method may seem extreme to Canadians but it is the norm outside of us, is extremely cost effective, and keeps leaders constantly accountable.

Although having a leader removed from power who was chosen by the party en mass may seem undemocratic, it's important to remember that the MPs choosing to do so are elected. If MPs can't get rid of them then they are unaccountable until another party convention is held which may be quite a while. This also strengthens the MPs position via the leader which is good. Leaders should have to take their caucuses seriously and listen to their complaints and demands.

That being said, some changes to the bill would improve it. The 15% thresh-hold is too low to call a review of leadership vote. It should be raised to at least 25%. With the current division of Commons seats, the Conservatives could have one with 24 members supporting, the NDP with 15, and the Liberals with a measly 6. It's possible that small factions of a party may try and replace their leader with one of their own group just so they could be the new cabinet members with the prestige and perks that come with it. This wouldn't help democracy and would wreak havoc on any parties ability to internally cooperate.

As Chantal Herbert notes, at least three Prime Ministers would probably have seen party mutinies with such a small number needed to force a leadership review vote. Harper would have over his 2006 decision to have a Quebec nation resolution in the House or possibly his continued opposition to discussing abortion laws. Brian Mulroney might have over his support of official bilingualism. Jean Chretien likely would have over his conflict with Paul Martin's group of Libs.

Another issue is that moving leader-choosing power away from delegates or party members to MPs is that choosing the leader may become more regionally determined and unbalanced. Since all areas have some delegates/party members of each party, all areas have a say in determining their leader proportional to their support. With MPs able to determine leadership, some areas will elect no MPs of a certain party due to limited support there and will thus have no say in whether leaders get replaced.

Something would also need to be set-up in the case that a local riding association becomes hijacked and winds up totally in opposition to its parent party. This isn't super likely but could be a major problem. Some system for the party as a whole to take a vote and decertify a specific riding association may be necessary. Obviously the vote would require a large majority, maybe 75-80 percent in order to do so.


There is also the issue of this bill overriding individual party's traditional rights to organize how they see fit. In a way, that is undemocratic and parties should be allowed to organize however they choose. However, no party will individually want to organize in the way this bill suggests unless forced. Giving MPs additional rights to speak their minds and weakening the leaders ability to control their message would weaken a parties electoral chances. They would seem more fragmented, like they actually are, and less lean/mean. That's why it needs to be applied across the board so no one can reject it and gain unfair advantage.

In any case, now is a good time to be pushing the bill. Harper's on the ropes with the Senate scandal and cannot be seen fighting against MP rights. Trudeau and Mulcair won't like it but won't be able to go against it either. They've already suggested they like the general thrust but would like to tweak it which is fair. If they agree to let their people vote on it freely, Harper will have to support it as well.

The MPs will be a little scared voting for it for a couple reasons. First, if it passes, the greater MP freedom from their leader's threats will mean that they really are responsible to their constituents. This costs them plausible deniability to their electorate when they done screwed up. Also, they know that voting for this bill is essentially suggesting they may be open to replacing their leaders. If it fails, the bosses will likely remember how people voted. Like Omar Little from the Wire knows, "You come at the king, you best not miss."

Overall, this will mean a change in how we think about electing our party leaders. It will mean that we really are electing and trusting our MPs, not voting for the leader who will become PM. There will be definitely be serious unintended consequences of the bill in its current form and it will require a lot of intelligent debate.

I'll be honest, I respect fiscal conservatism. Canada needs a healthy dose of it. However, although I've approved of some of the stuff he has gotten done, I'm not a big Harper fan. His leadership style has been poisonous to healthy non-partisan dialogue and has concentrated far too much power in his own PMO office.

The fact the bill is getting all the hype it is and might actually pass proves that others agree with me. There's a certain irony that Stephen Harper may be responsible for decentralizing power within Canada.

I suspect he hasn't failed to notice that.

AS

Protesting the Other: Kiev to Brussels to Moscow

“Disobedience is the true foundation of liberty. The obedient must be slaves.”
-Henry David Thoreau

Some people are protesting right now.

Which is good.

People need to protest in order to demonstrate they care enough about something - anything! - to get off their butts and put themselves out there to change it. Even if it's not a super important issue, getting together with a bunch of other concerned citizens and showing you aren't apathetic keeps the authorities honest plus ensures the protestors are practiced for when greater challenges arise. Government should always fear its people.

With Nelson Mandela freshly buried, I have to wonder if it isn't some of his spirit infecting those protestors out in the streets of Ukraine. Mandela's apartheid experience made it clear that systems could change if a social injustice was great enough and your determination didn't waver. His experiences also demonstrated to him that attempting great change can rarely rely totally on legal and compliant means. Sometimes disobeying unjust authority and accepting the consequences is necessary to awaken that higher and better part of our consciousness. Visible martyrs personify and actualize issues that most of us would ignore if they remained safety abstract.

Of course, not all protests are equal and few are aimed at fixing situations as obviously evil as segregating a nation down racial lines into first and second-class citizens.

For instance, the Quebec student protests in 2012 over mildly raised tuition garnered very little support. I mean, it's always good to see students protesting because there are so many deserving issues and they are the demographic in the best situation to do so and with the most to lose through inaction. Still, I think it made everyone a little bit pissed off to see students from the most heavily-subsidized province with the lowest tuition rates whining like that. It's pretty much impossible for a protest to be seen as deserving when you are asking for additional government funds to be given to your group which is already seen as privileged.

The Idle No More protests which began roughly a year ago have also failed to gather much widespread support. In their case, it's not because they didn't have important issues to talk about. The situation on many reserves is horrific and everyone agrees it needs to change. The environmental impact of fracking also needs to be discussed as the chemical run-off and dangerously high levels of methane it can produce in people's drinking water are both extremely troubling.

No, they mostly lost their support in how they went about their protests. Although many were peaceful, a large chunk behaved more like the reckless Black Bloc protestors than the peaceful Occupy Wall Street ones. Some intimidated and hassled journalists which guarantees bad media coverage. Some of the protests blocked main roads and hugely inconvenienced random normal people trying to go about their day instead of targeting government or relevant institutions and industries. This reduced support amongst the general population. There was also a racial component in that the Idle No More protests were, or at least made it easy to be depicted as, xenophobic against non-First Nations. A more inclusive approach would likely have been more successful.

Anyway, so what's with the protests going on in Ukraine. Just for the record, it is no longer referred to as "the Ukraine." They dropped the 'the' when gaining independence in 1991.

Basically, there is a struggle for Ukraine going on between Brussels and Moscow. Both the European Union and the Russians want to bring the country into their economic spheres. Earlier, it seemed that the country was moving towards greater ties with the West but threats from Russia has caused Ukrainian President Viktor Yanukovych, on November 21st, to back-out of the comprehensive association and free-trade agreement they had negotiated with the EU over the last few years.

While the EU was trying to lure Ukraine over with some carrots, Russia was making more progress with some fancy stick-work. Ukraine with its 46 million people is facing gas and debt bills of $17 billion due next year and has a total debt of about $124 billion. Do to disputes between the two countries over the cost of the natural gas Ukraine was buying from Russia, Ukraine has been suggesting it will cut down gas imports, even threatening that “Ukraine may stop buying gas altogether at that price.”

Ukraine was hoping to continue using its position of being courted by both Russia and the EU, playing them off against each other to get a better deal from both. Russia took this poorly and had followed up by threatening to basically bankrupt Ukraine if they went ahead with the EU deal. They would raise gas prices even higher as Ukraine went into the winter or even potentially shut it off completely since Russia provides one-third of their domestically-used supply. This threat may seem familiar as Russia had turned off the gas in both 2006 and 2009 over financial disputes between their respective state-owned energy companies.

Russia also threatened heavy tariffs and trade checks on Ukrainian exports which is a problem because Russia takes about a quarter of them, worth some $18 billion annually. Despite rapidly strengthening trade ties with the EU, Ukraine cannot afford to have Russia stop taking it imports. There have already been some difficulties in getting certain exports into Russia such as chocolate which isn't surprising considering that temporarily banning imports from former Soviet-states in order to apply pressure is something they've done before.

Russia considers Ukraine to be a fundamental piece of the plan for the Eastern Partnership program, unofficially referred to as the Eurasian Union, a proposed political and economic rival to the EU, US, and China. Unsurprisingly, Russia is the main engine behind the idea, the brainchild of Vladimir Putin. Critics are concerned that a new Cold War may emerge alongside a new USSR which would potentially include Russia, Armenia, Belarus, Kazakhstan, Krygyzstan, and Tajikistan. Kazakhstan and Belarus already signed an agreement with Russia in 2011 and the Union will be fully operational by 2015. Other countries with historic ties that may be invited are Finland, Hungary, the Czech Republic, Bulgaria, Vietnam, Mongolia, Cuba, and Venezuela.

If Ukraine stays away from the EU, Russia will be willing to lower its gas prices, keep trade walls down, and even provide needed loans, funds Russia has available but the struggling EU does not. President Yanukovych asked the EU negotiators whether they could supply enough benefits and loans to offset the consequences of not going with Russia. He was told no and saw that he really had no options here, at least until Ukraine gains some energy self-sufficiency.

There is a lot of resentment in Ukraine against Russia, what with the centuries of brutal oppression. The northwest and center of Ukraine is predominately ethnically and linguistically Ukrainian while the southeast is much more tied to Russia. Ukraine's election results are basically divided this way and this important decision of choosing to either side with the West or with Russia is thus split this way as well. All things considered, it makes for a very divided country where the two halves don't even speak the same language. A poll suggests about 45% of Ukrainians want stronger ties to the EU while 14% said they want to join the Eurasian Union. The rest are undecided.

Kiev is the capital of Ukraine and located in the northern region. This is where the vast majority of the protests have been occurring. Angry at a bad economy, the perceived electoral fraud that brought Yanukovych to power in 2010, government corruption, the continued imprisonment of former Prime Minister Yulia Tymoshenko, and the move away from the West after their leadership caved in to Putin's demands, protestors have been rioting for the last couple of weeks with the blessing of opposition parties.

The protests have many reminiscing of the 2004 Orange Revolution when similar massive protests in Kiev managed to have a fraudulent election overturned. Yanukovych was the main focus in those ones as well, having beaten out opponent Viktor Yushchenko only to have the results recalled and thrown out after accusations of corruption, intimidation and direct voter fraud.

Two days ago, 500,000 thousand protestors were going at it, calling for the president's resignation and smashing a statue of Lenin to show their anger with Russia and anything that smacks of the old USSR-Ukraine relationship. Opposition leader and former heavyweight boxing champion Vitaly Klitschko claimed that yesterday, opposition headquarters was raided by masked men who smashed up their servers. Today, police are scuffling harder with the protestors after being quite calm and composed since clashes on Nov. 30th threatened to explode the situation into something worse.

Either way, the protests seem to be making their mark. Yanukovych is back talking with the EU about the association agreement and has said he could sign it if Europe can give better financial conditions to lessen the negative effects of Russia's response. This association agreement is not EU membership though and I don't think the EU has the ability or the will to compete with Russia on this. They have neither the carrots nor the sticks Russia has. For the time being, it looks like Russia will take Ukraine back into its sphere and that's the cold hard reality. The problem is that Ukraine is screwed either way. If they go with the EU, Russia will cut off gas during the winter and society will destabilize. If they don't go with the EU, the protestors who hate Russia will freak out and society will destabilize.

The worst part is that this all could have been handled differently so that Russia wasn't put into such a face-saving, all-or-nothing position. Russia has tried to cozy up to and repair relations with the West on several occasions and has been refused, ensuring the Cold War mentality remains. In 1990, Gorbachev asked to have a united Germany be in NATO as well as the Warsaw Pact. Thatcher and Bush Senior refused.

After 9/11, Russia supported the US in everything, even allowing US military bases to expand into what was traditionally Soviet territory. It tried to use its new and improved relationship with the US to improve relations with all of NATO and come out of its isolationist mentality. However, after differences emerged in how the countries wanted to fight terrorism and Russia heading the opposition to the illegal Iraq invasion alongside Germany and France, the US undid all the gains in relations when it started to plan the construction of a missile defense shield in Eastern Europe. Also, NATO was hinting it would offer membership to Georgia and Ukraine, two countries immediately within Russia's sphere, without improving relations with Russia. Russia logically saw this as a threat. 

A third failed chance to improve relations with Russia and prevent this kind of 'us vs them' mentality is probably the stupidest. Yanukovych invited Russia to join in on the EU-Ukraine negotiations when it was clear Russia didn't want to be left out. Brussels had refused, turning the whole thing from a trade negotiation that could have improved relations all-around and let each group know their interests were represented into a pissing contest that it seems Russia is winning.


Ironically, it seems that the Ukrainian ties to the West will only be allowed to strengthen if the West improves its own ties with the East.

So maybe everyone will win.

Or maybe the ol' Cold War mentality will split Ukraine down the middle.

AS

Usury-R-Us

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
-Henry Ford

With the J. P. Morgan Chase settlement finally decided, now seems as good a time as any to discuss those most hated of all villains: Bankers.

Generally seen as undeserving of their truly obscene wealth, most people instinctively distrust their skill at jumping their horse over your front line to checkmate you on turn two when you were pretty sure you were playing checkers.

We don't understand most of what they do is what I'm trying to say there.

Also, realize that I am primarily talking about US investment bankers. Canada's banks did pretty well through the crash, primarily because Paul Martin had rejected deregulating the banks as finance minister. Instead, alone amongst the Group of 8, Canada tightened loan-loss and reserve requirements while disallowing major bank mergers. This he did while being criticized by the banks and Stephen Harper, both of whom felt it would put the Canadian financial sector at a disadvantage globally. Fortunately, they were very wrong and Canada came out in a pretty strong position bank-wise.

After the 2008 financial collapse, which was primarily brought about by greed and fraud within the banking sector, it was unclear whether the economy would recover at all. Understandably, there were a lot of people mad. In 2009, Obama spoke to the bankers and made it clear that: "My administration is the only thing between you and the pitchforks."

Fortunately for them, Obama did a damn good job of getting between them and the pitchforks to the point that none of them outside Lehman Brothers actually had to suffer at all. In fact, while 2 million Americans were losing their jobs at the end of 2008 due to the crisis, 2009 would prove to be Wall Street's best year ever. Amidst a $175 billion dollar taxpayer-funded bailout for 9 of the major banks, $32.6 billion of it was being used to provide bonuses even though 'the talent' had only managed to achieve massive losses. Despite the financial sector providing 20% of Obama's campaign funds in 2008, more than any president for the last 20 years, even he had to put his foot down and complain about the obscene culture of huge bonuses for bankers who almost destroyed capitalism.

It was this pro-Main Street, anti-Fat Cat rhetoric that would cause Wall Street to support Romney for the 2012 election, providing him $61 million and only $18.7 million to Obama. Now, I can hear you say, "Surely this lack of support and this record-breaking $13 billion dollar fine for J. P. Morgan shows that the Obama administration is finally getting tough on financial crime and taking the crooked bankers to task!"

Well, it doesn't. And don't call me Shirley.

This fine is unfortunately far less consequential than it sounds and accomplishes nothing except providing a good sound-bite that Obama is 'taking on the bankers'. Essentially, this settlement is their punishment for engaging in criminal fraud and routinely overstating the quality of mortgages it sold to investors. This includes bad loans made by Washington Mutual and Bear Stearns, two firms purchased by JP Morgan during the crash. 26-27% of the loans they packaged did not meet the guidelines investors had demanded but they knowingly lied and said they did.

This payment is likely to just be one of many as there are at least 9 other government probes into JP Morgan for various other illegal behavior. In fact, they just finished up another $4.5 billion dollar settlement with 21 institutional investors who they had ripped off. Clearly a very ethical institution. The bank currently has $23 billion set aside to deal with these other approaching litigations.

The problems with this approach to punishing banks is that it doesn't actually make them stop the behavior. First of all, the settlement doesn't actually include an admission of wrong doing. This means it can work as a shield against other lawsuits. In fact, upon announcing the $13 billion dollar settlement, their stock price would increase roughly $12 billion since smooth legal sailing was assumed from then out. Second, potentially as much as $9 billion of the settlement is tax deductible which seems to defeat the purpose. Third and most importantly, no one is going to jail.

This is a big problem because the company is raking in much more money from these illegal behaviors than it is being required to pay in fines. Thus, fines just become a cost of doing business that may possibly hurt shareholders but won't affect those who choose to commit crimes. Which means they have no reason to not commit crimes. Which is ridiculous.

In 1995, bank regulators referred 1,837 cases to the justice department. In 2006, that had fallen to 75. It has been clear for a while that when a bank breaks the law, it is generally not treated like a crime. During the late 1980's savings and loans scandal, more than 800 bank officials went to jail. This time around? None. Some fines have been paid by those who knowingly committed fraud after investigations by the Securities and Exchange Commission but there has been no jail time. It was argued this was because restoring stability was goal number one and arresting major bank executives for their crimes could destabilize the recovery.

Of course this is nonsense. The top people who agreed to break the law should not be considered "too big to jail." Working for a business should not grant immunity to the law anymore than Nazis were protected for "just following orders."

Being asked to return what you stole is not a deterrent, especially if you don't have to return all of it. Locking the bosses up and promoting somebody else would not somehow destabilize the system. It would increase trust in the system since people would know you play by the written rules or suffer actual consequences.

Even worse is that the Dodd-Frank Wall Street Reform and Consumer Protection Act was gutted. This was supposed to be the big piece of consumer-protecting legislation designed specifically to prevent this whole sloppy mess from happening again. Matt Taibbi over at the Rolling Stone provides a grim narrative of how it was done and how friggin' impossible it is in the US to successfully pass and keep legislation desired by voters but that is opposed by a wealthy industry. This means that their is basically a zero chance of getting in legal trouble for breaking banking laws and basically no law to break anyway.

It isn't surprising that Obama sides with Wall Street when you consider he stacked his administration with Wall Street insiders. He was even been trying to put Larry Summers in charge of the Federal Reserve when Ben Bernanke steps down in 2014. This is despite Summers being an idiot who was partially responsible for the deregulating of the derivatives market that lead to this collapse in the first place. Fortunately, the Senate raised too much of a ruckus and this clown has to go away.

The Obama administration, the banks, and almost all the state attorney generals were desperately trying to prevent prosecution and prevent those defrauded from being properly reimbursed. They had agreed to a $20 billion dollar settlement for the crimes that left millions homeless and almost caused another great depression. The $20 billion would go towards "loan modifications and possibly counseling for homeowners." This is an obscenely small amount considering how much money was lost to investors due to illegal practices. In 2008, the state pension of Florida alone lost $62 billion due to investing in these fraudulently packed securities.

Fortunately, New York's Attorney General Eric Scheiderman was a principled man and refused the settlement and stalled the process. When he did so, Kathryn Wylde, a board member of the Federal Reserve who is supposed to represent the public, would state:

"It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street - love 'em or hate 'em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible."

That's a pretty messed up quote for someone who is being paid by the public to work for the public good. What they were doing was clearly illegal. I'm not sure what else it needs to be in order to be indefensible.

Since then, things have generally gotten worse. Andrew Huszar, a former Federal Reserve official, has admitted that the Quantitative Easing program the US has engaged in, to 'stabilize the economy,' is really only benefiting the banks at the expense of the public. The program has basically consisted of the US central bank, the Federal Reserve, creating money to purchase treasury bonds and mortgage-backed securities from the banks in order to lower interest rates and free up funds to lend to Main Street. Currently, it is creating about $85 billion a month in order to buy up bonds and has bought over $4 trillion worth in the last 5 years.

As Huszar notes, this hasn't worked and the banks aren't creating more loans. It brought down the cost for Wall Street to make loans but they have simply been pocketing the difference and using it to speculate, therefore raising prices and causing a new bubble. The Fed has admitted that the return on this massive $4 trillion dollar investment has been, at most, a few points of GDP growth and possibly even as little as $40 billion.

Because of this nonsense, the big US banks have seen their stock prices triple since March of 2009 and made them even more concentrated and risk-prone than before. 0.2% of the banks have been able to buy up smaller ones and now own 70% of US bank assets. In addition, it killed the urgency of dealing with the problematic US economy which is only producing low-wage jobs at home.  

Simply handing out the cash in the form of infrastructure job programs would have been a much more logical solution. Inflation would have been a bit of a problem but it would certainly have beat this alternative. It's what FDR did during the Great Depression and it spread the wealth around enough to reboot the economy. Quantitative Easing has done the opposite and concentrated wealth so that income inequality hasn't been this bad since the end of the Roaring Twenties, right before the world fell into said Great Depression. One percent of the population owns 40% of the wealth while the bottom 80% get by with 7%. That means the richest 400 Americans have the same wealth as the bottom 150 million. That doesn't bode well for the future of the country.

It's also worth noting that that both Canada and the US have messed up central banking systems. The publicly-owned Bank of Canada was established in 1935 and allows the federal government to borrow money at almost no interest. This borrowing helped us escape the Great Depression and fund WWII. It also allowed for many amazing Canadian achievements without bankrupting the country. These include the Trans-Canada Highway, McDonald-Cartier freeway, St. Lawrence Seaway, various subway lines and airports as well as funding our universal healthcare system and Canadian Pension Plan.

In the 70's, high inflation was the result of the OPEC oil shocks and a tendency in governments to pursue full employment through monetary policy. Together, these would drastically raise the price of all goods and services. This situation would cause our various governments to follow the advice of the International Basel Committee, a think-tank composed of the central bank governors of the G10, and start borrowing almost exclusively from private sources. It was argued that this wouldn't cause further inflation since it is old money being recycled instead of new money being added.

However, this is debatable since now it is just the private banks creating money through fractional reserve lending. They don't lend out the principle which means they are just creating cash, and inflation, the same way the central bank would. Except we have to pay interest on it.

Canada now only uses its central bank for between 1% and 5% of its financing needs. This is a big problem as it puts the Canadian government in debt to private banks when there is no need to. This means we are all in debt to private banks since the Fed's debt is our debt. Between 1935 and 1974, there was almost no inflation except for during WWII. However, wars are always inflationary so this can be considered a blip.

The fact is that money lent by the Bank of Canada to the Canadian government would only be temporarily inflationary. The inflation would go away once the debt was repaid and the cash was removed from the money supply, same as when private bank loans are repaid. This means we could borrow to pay our bills without interest.

This would of course be difficult since it would mean challenging the private-banking structure. However, the advantages would be enormous. In fact, between Confederation and when we switched to borrowing from private banks instead of our central bank (1867-1974), our public debt level only reached $21 billion.

After 1974, our debt level increased 20% annually, reaching $563 billion in 1997. There was a Auditor General report which noted that of the accumulated net debt of $423 billion in 1993, only $37 billion was principal. The rest was compound interest payments, payments there was no reason to make. It is estimated that between 1974 and today, we have needlessly paid over one trillion dollars in interest.

Of course, people are right that there are pretty terrible examples of governments going insane with the printing press. Germany during the 20's, Zimbabwe recently, Chile during the early 70's, etc. Each experienced brutal inflation due to having too much cash around. However, each of those countries had reasons for their hyperinflation that Canada would not face. Germany was making massive reparation payments to Britain and France for its role in WWI, Zimbabwe is a basket-case with insane leadership, and Chile was going through a socialist revolution under Salvador Allende where he fixed prices of goods too low and raised wages by decree. This resulted in too much money chasing too little goods. Canada is safe from all those problems.

This makes the idea of having to pay massive interest payments when we don't have to because we don't think we can handle the responsibility of printing our own money kind of a lame cop-out. If we passed legislation saying that we could only have the Bank of Canada buy a limited amount of Canadian government bonds yearly and that they had to be repaid the next year from tax revenue, we could avoid the massive interest payments to private banks with no risk of hyperinflation.

The United States has an even weirder system. They needed a central bank to prevent various banking crises and got one in 1913 when the Federal Reserve Act was passed. It was pushed through under President Woodrow Wilson two days before Christmas when most of Congress was not there. The main problem with it is that the Federal Reserve Bank is actually a privately owned corporation with stocks owned by member banks that cannot be traded or sold.

However, knowing which banks own it is difficult since it won't tell and has stated that it doesn't need to respond to Freedom of Information Act requests since it is "not an agency" of the federal government. However, it is known that some of its member banks are at least partially foreign owned. This means that the US Federal Reserve is partially owned by foreign citizens and governments.

Either way, the Federal Reserve buys US government bonds and T-bills and provides the US treasury with money. The profits made by the Federal Reserve doing this are given back to the US treasury except for an annual 6% dividend on their paid-in capital stock. I honestly have no idea what this 6% dividend works out to and am having trouble finding out. Please mention in the comments if you can.

Now, the Fed's policy of Quantitative Easing has consisted of the Federal Reserve printing money to buy treasury bonds/bills and toxic bank assets in the hopes of pushing down interest rates and making banks solvent enough to lend. As explained by Andrew Huszar, we already know that the QE policy has only benefited the biggest banks who are not lending any more but are instead buying up smaller banks and speculating. Also worth noting is that it is these biggest banks who are also the member banks that make up the Federal Reserve. Which means the Federal Reserve which is made up of the biggest banks has chosen to implement policies that only benefit the biggest banks. That's not suspicious.

What is clear is that the Federal Reserve is not controlled by the people whose money is made in its name. Between December 2007 and July 2010, the Fed gave out secret loans at almost no interest to various corporations to a sum of $16.1 trillion dollars. The link to the Government Accounting Office's audit showing who got it is here.  

Now, just a few useful quotes on private banking and paying interest when creating your countries own money:

Thomas Edison on the Federal Reserve system:

"That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.
 
Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we 
simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good."

Benjamin Franklin on producing own money:

"That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one." 

Benjamin Franklin declaring that the cause of the Revolutionary War was the poverty in the colonies resulting from the British Parliament demanding they stop using Colonial Scrip and instead use gold and silver borrowed from the English bankers with interest:

“The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.”

Thomas Jefferson on private central banks:

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."

William Mackenzie King on private central banks:

"Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of sovereignty of parliament and of democracy is idle and futile."

Overall, I think I've made my point that the big private banks are taking us to the cleaners. Productivity keeps increasing but the benefits keep getting more and more concentrated. My advice for everyone is two-fold.

First, join a credit union that supports your local economy, has less fees, and is more democratic in nature than corporate banks.

Second, push for a change for governments to begin borrowing, at least partially, interest-free money from their central banks to pay their debts. The money saved in interest payments should prevent countries from going deep enough into debt that printing to cover it would cause much inflation. After the government debt to the central bank is repaid, the money is destroyed and the inflation is gone. Make sure debt-minimizing legislation is passed simultaneously to avoid government spending sprees and hyperinflation.
 
Man, banks and money are complicated. But I think everyone knows we're being robbed. There is a reason the major religions and most older empires have all opposed usury, or the charging of interest on debt, beyond a very limited amount.

I doubt that this is the correct answer and I know I'm missing a bunch of unintended consequences but it seems the current system is unsustainable, prone to crisis, and needs to change.


AS

In it for the Long Haul

"The baby boomers are getting older, and will stay older for longer. And they will run right into the dementia firing range. How will society cope? Especially a society that can't so readily rely on those stable family relationships that traditionally provided the backbone of care?"
-Terry Pratchett

Honestly, I'm not totally sure why I'm interested in this considering I won't be retiring from anything for at least 40 years unless I win those lotteries I never enter. Still, it's an interesting subject if only because it demonstrates that there appears to be a growing reliance on the government to force people to be responsible for themselves.

There has been some discussion in Canada about raising Canadian Pension Plan contributions due to concerns that the middle-class Baby Boomers are not saving sufficiently for retirement. Essentially, Prince Edward Island Finance Minister, Wes Sheridan, put forward the idea of raising the maximum contribution from $2,356.20 to $4,681.20 starting in 2016. The maximum annual benefit would then jump from $12,150 to $23,400.

Qualifying for this maximum benefit would require income of $102,000 as opposed to the current cutoff of $51,000. This means under the new plan, if you make over $102k, you will contribute $4,681.20 annually while working and receive $23.4k annually in retirement. I know this sounds boring but keep listening, it's important.

At the moment, payroll contributions are 9.9% on income between $3,500 and $51,000. This is split evenly between employees and employers. The new proposal would raise the contribution rate to 13% of income between $25,000 and $51,000 and to raise the combined contribution rate to 3.1% for income between $51,000 and $102,000.

All of these pension changes will only apply going forward so you will have to have spent roughly 40 years contributing at this rate in order to receive the larger benefit payout. Which is good because it would be pretty unfair if those who pocketed the difference instead of contributing it get to piggyback on this change.

This whole proposal is based on a 2009 report by tax specialist Jack Mintz. The report found that low-income Canadians generally have equal or higher incomes in their retirement years due to income supplements. For them, their working income needs to basically be replaced in full for them to maintain a decent standard once they finish working.

This means, there will be no change for low-income earner's pensions since they need all their income to live on while working and their incomes are topped up by Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) once they retire. For people making $90,000 or more, the report suggests 50% of their working income would be adequate for a good life as an old fogey. Which is what this proposal ensures would happen.

Basically, the concern is that many Canadians are not saving enough into voluntary retirement plans. The suggested solution is to force people to stick more of their money into the only pension plan all Canadians have so that we don't wind up with lots of broke old people.

Now, there is a certain logic to this. Although CPP was never supposed to be anyone's sole source of retirement funds, having large numbers of people who made good money during their working days living in squalor is a pretty stupid situation. It will also be an extremely frustrating one if those who willingly saved need to subsidize those who didn't because they blew their cash on nice cars and fancy gizmos. And the way things are going, subsidize them they will in the form of health care, social security, food stamps, etc.

Overall, I can get behind the general thrust of this proposal. Forcing people to save who wouldn't otherwise is smart so that others don't need to pick up their irresponsible slack. I know that simply allowing them to reap what they sow may seem appealing in order to change people's bad habits. Unfortunately, Canada's culture has generally decided that its people deserve a minimum standard of living which will need to be paid for somehow. Allowing people to just go broke and fall into degenerate poverty because they were irresponsible will wind up costing society more and will be paid for by those who were responsible and still have money. Social security nets need to be maintained by forcing people not to excessively take advantage of them.

This isn't the first alteration to the CPP in the last while. In 2012, there were several changes. One was that people who started collecting at 60 instead of 65 would receive a larger penalty to their benefits. Now, for each month of early retirement before 65, there would be a 0.5% reduction in benefits received. Someone retiring at 60 would annually get 30% less than someone retiring at 65.

This was the case for later retirement too with a 0.5% bonus to benefits for every month worked after 65. As of 2013, this bonus to benefits was increased to an additional 42% if you work until 70. Also changed was the number of low-paying years that could be ignored in the pension calculations. Previously, your 7 worst-paying years were ignored leading to greater benefits. This has been raised to 8 years.

There were also a couple of changes to account for the fact that many people who are basically retired haven't completely stopped working yet. One was dropping the work cessation period, a pointless two months before being allowed to collect your CPP where your income had to be very low to show you were finished working. The other is the addition of Post-Retirement Benefits. If you do work until you're 65 but are already drawing your pension, you can choose to have it so that you and your employer both continue contributing. This will lead to larger benefit payments starting the next year. It's essentially a way to start collecting while still having your employer pitch in a share to boosting your future pension earnings.

Still, these previous changes are small potatoes compared to the idea of expanding CPP to be roughly twice as important for people's retirement. So is the situation actually bad enough to justify the paternalistic notion of having government force people to save? If it is, the CPP is not a bad way to do it. It is fiscally sound and able to cover it obligations for the next 75 years with no changes if the value of its assets continues to grow 4% annually after inflation. Last year saw growth of 6.6% so no problems there for the time being.

At the same time, it's important to note that CPP contributions, unlike other investments, die with whoever paid for them. The CPP is more like insurance for a guaranteed minimum standard of living than traditional wealth. This means deaths can cause problems and leave one spouse in a bad fiscal situation if their partner suddenly croaks.

Some change is necessary though because the current situation does seem troubling. Canadians are only saving 4% of their income for retirement in RRSPs and TFSAs. In 2011, only 24% of those eligible made any contribution at all to their RRSPs. Manitobans actually had the lowest average RRSP contributions in 2011 out of all the provinces and territories. A recent survey found that 46% of Boomers are unsure they will be financially okay upon retiring. 60% of Canadian workers are without a work-based pension.

As of 2013, you need to be 67 to collect Old Age Security and the average monthly OAS payment is $514.56. For every dollar of income over $70,954, the government claws back 15% of your OAS. To get the secondary income topper, the Guaranteed Income Supplement, you need to be approved for OAS. The maximum benefit for GIS is $8,788 annually for single seniors and $11,655 for senior couples. You lose roughly 50 cents of GIS for every $1 of other income other than OAS. The first $3,500 of employment income is exempt and every dollar of capital gains from investments only costs you 25 cents. Overall, the cutoff will be roughly $22,849 for singles and $34,610 for couples.

The problem is that the expenditure on these are $36 billion a year. This number comes straight from government taxpayer revenue and is expected to triple in the next couple decades due to this lack of savings as more and more people fall below the threshold and begin collecting these. Additional assets in real estate and businesses mean the situation is a bit less grim than presented here but some kind of action makes sense, especially with the Canadian housing bubble gradually deflating and reducing the net worth of many homeowners.

Is this plan the right way to do it though? Finance Minister Jim Flaherty argues that, "I can see it being good in the long run for Canadians, at the right time. But I would want to see significantly more economic growth than we have now before we imposed an additional burden on Canadian employers and employees."

The Canadian Federation for Independent Businesses is also against it and have started a campaign in opposition to the proposal. One study they did estimated that: "700,000 “person years of employment” would be lost over the reform’s first 20 years." Quite possibly an exaggeration but worth noting.
 
On the other side, the Canadian Association of Retired Persons has come out in favor as have most of the provincial finance ministers who are now generally warming to the idea. A recent poll found 53% of Canadians want it expanded while 34% do not.

Overall, it seems that the momentum is behind expanding the plan. Although Canadian seniors are doing quite well at the moment with only 5% falling below the poverty line, the 4th best in the world, the situation won't last. As the BBs retire, the choice has been forced of either making people pay for themselves through forced savings or having others pay for them later through taxes. The answer seems to be forced savings. Don't allow your citizens to be flakes who save nothing. The big question is how to do it without royally screwing five main groups who have done nothing to deserve it.

The first is self-employed people who will be sorely taxed by the need to pay both the employer and employee share of their contributions.This one should be easily remedied by simply allowing self-employed individuals to negate paying their employer share. They won't wind up with the same safety net but that is a risk they accept by being self-employed. In any case, they should have other assets through their business that can get them through retirement.

The second is businesses in general who will need to increase their contributions for their employees. This will likely lead to reduced staff levels and a greater emphasis on contract work where they are not forced to contribute at all. This one is harder to deal with. Although the employer contribution will only be roughly an additional 1.5 percent, it will be treated as a payroll tax hike that will be factored into decisions regarding the off-shoring of manufacturing and exportable-service jobs. In addition, employers may take it as an excuse to stop providing pensions altogether in the same way companies in the US are using Obamacare as an excuse to cut hours and benefits.

I don't really have an answer to this. On one hand, it will move wealth from large, cash-flush, Canadian-stranded companies to consumers. Since large companies don't generally keep on more people than they need, there shouldn't be many layoffs and this will lead to greater customer demand and a healthier economy.

On the other, smaller and medium businesses with thin profit margins may have trouble competing and either have to lay off staff or close. In addition, jobs that can move to places with cheaper labor may do so. The only options are to either not force employers to match this larger contribution or to hope it turns out like in the 90s when a CPP premium hike did not slow economic expansion. If we wanted to play it safe, we could make it an employee contribution increase only. Although it wouldn't be as strong a solution, this might be the most logical answer if the problem is that people aren't saving enough because it forces them and them alone to do so.

The third group is those who save and invest enough of their funds so that they will not require OAS and GIS. They should be allowed to seek greater returns by putting their money into whatever they want instead of having it cautiously invested by the government. The easy solution here is allow people to opt out of the additional contribution if they can prove that they are fiscally solvent and will never need OAS and GIS.

The fourth group is the taxpayers as a whole that would be responsible for matching the contributions of public-sector employees who already have, on average, much better pensions than the private sector. Defined benefit plans are becoming almost non-existent outside of the public sector because it puts so much of the risk on the employer. The solution here is simple. Don't have the government contribute anything extra towards public-sector employee CPP. Allow government workers to pay more themselves if they'd like but the public sector already has good pensions, they are not the group we are worried about here.

The fifth group is the young. Their numbers aren't large enough to maintain the high standards of living the massive Boomer population is used to and birthrates aren't high enough to guarantee these social safety nets will still be around by the time they need them. Immigration helps but will likely not be able to cover the difference. Social security has traditionally been designed like a pyramid scheme; it relies on a steady increase of people participating.

Of course, this baby-making slowdown isn't necessarily a bad thing. The survival of the human race requires our population to reach some kind of equilibrium and this fortunately seems be happening as developing nations become developed and developed nations naturally trend towards smaller families.

Honestly, I don't know what to do about this. We will have to constantly adjust benefit and contribution rates in order to maintain a safety net. With slowing population growth, there will simply be less people taking care of more people. All we can really do is hope that technology and our political leadership will have brought us to a place where we can survive and be happy with the resources available.

So, in conclusion, there is a group of people that need to save more themselves so that the rest of society doesn't have to take care of their negligent asses through OAS and GIS. Since the Baby Boomers don't have time for this to take effect before they retire, society will just have to dig into its pockets and pay them enough to have a minimal standard of living.

Fortunately, the next generation will have been legally forced to handle their finances better since apparently we don't know how teach financial literacy no good.

AS

Read more at http://www.brainyquote.com/quotes/keywords/baby_boomers.html#67yhoCfFFjqOsO2Q.99

The baby boomers are getting older, and will stay older for longer. And they will run right into the dementia firing range. How will a society cope? Especially a society that can't so readily rely on those stable family relationships that traditionally provided the backbone of care?
Terry Pratchett
Read more at http://www.brainyquote.com/quotes/keywords/baby_boomers.html#67yhoCfFFjqOsO2Q.99

The baby boomers are getting older, and will stay older for longer. And they will run right into the dementia firing range. How will a society cope? Especially a society that can't so readily rely on those stable family relationships that traditionally provided the backbone of care?
Terry Pratchett
Read more at http://www.brainyquote.com/quotes/keywords/baby_boomers.html#67yhoCfFFjqOsO2Q.99

The baby boomers are getting older, and will stay older for longer. And they will run right into the dementia firing range. How will a society cope? Especially a society that can't so readily rely on those stable family relationships that traditionally provided the backbone of care?
Terry Pratchett
Read more at http://www.brainyquote.com/quotes/keywords/baby_boomers.html#67yhoCfFFjqOsO2Q.99

We are All Voyeurs

“I’ve changed the culture down here. You don’t hear about the scandals anymore… I mean, a money scandal.”
-Rob Ford

I'll admit it. I'm a sleazy voyeur. Apparently I am completely incapable of getting enough of this train-wreck of depravity. Fortunately, it seems that many others are in the same boat I am.

I'm talking, of course, about Toronto Mayor Rob Ford's horrific meltdown as a politician and as a human being. It's like watching a Jerry Springer episode except way funnier because it's not staged. And like Jerry Springer, it makes the viewer feel bad about themselves.

I'm not gonna lie. I am taking satisfaction in watching this law-and-order champion get exposed as a crack-smoking, drunk-driving hypocrite. The German's call it Schadenfreude and it refers to the pleasure one takes in watching another's misfortune. It's not a good thing for the soul and I hate myself for it. But, I also don't think I'm going to stop feeling it until he's off the front pages and I don't think that's gonna happen until this train has finished cartwheeling off the bridge, over the cliff, and into the red-hot magma core at the center of the earth.

First, let's take a quick look at who Ford is and how he came to be mayor of the fifth most populous city in North America. It's probably worth noting that I'm just stealing this basic background of Ford from Wikipedia so if any of it is incorrect, please feel free not to give them any money during their next donation-drive.

In 1969, Robert Ford was born in Etobicoke, a wealthy area of Toronto, Ontario. He was the youngest of four children and his parents had founded Deco Labels and Tags, a grocery packaging company with annual sales estimated at $100 mil. Ford would become a football enthusiast and his parents would send him to train at the camp of the Washington Redskins and at the University of Notre Dame. He would then go to Carleton University where he made the football team and studied political science. Unfortunately, he would not play any games and went back to Toronto without getting his degree.

Ford would then get a sales job at his parent's company and get married to high school sweetheart Renata Brejniak in 2000. He would continue being involved with football by coaching at Newtonbrook Secondary School in 2001 until he was dismissed for a dispute with a player. He would then coach at Don Bosco Catholic Secondary School until earlier this year when an interview, unrelated to his current scandals, got him dismissed. Essentially, he was saying that many of the Eagles players, the team he coached, are from broken homes and gangs and only go to school thanks to football.

In 2000, Ford would get elected to city councillor of Etobicoke North, ironically with the endorsement of his later arch-nemesis, The Toronto Star. He had lived in this ward, with a 53% immigrant population and a reputation for gang violence, until his marriage in 2000. He would go on to hold that ward convincingly with 80% of the vote in 2003 and 66% of the vote in 2006. In 2010, he would run for mayor and be elected with 47% of the vote.

His political platform the whole way along has been strongly fiscally conservative with an emphasis on reducing taxes, beating back public-sector unions, law-and-order, and minimizing government while making it more responsive. He would often attack his fellow councillors on their spending habits and was not well liked by the political establishment. To demonstrate that he was different, he reduced his councillor office's spending to basically zero and would respond rapidly to the public's complaints and even give out his personal phone number to constituents. He was essentially swept into office on a wave of resentment aimed at government-employee privilege with his primary plan of "ending the gravy train."

As mayor, Ford has stated that "I've saved a billion dollars." Quite a claim to be sure. Is it true? Well, not completely although he has certainly honestly attempted to cut costs where he could. Taxes were cut by $200 million in the form of getting rid of a license registration fee. This isn't technically saving money since it's cutting revenue instead of spending but it does fit with his promises of less taxes. However, he contradicts himself when he then adds a savings of $24 million via increased user fees which is a tax increase. It's understandable that he wants the sound bite of being able to say he saved a billion dollars but you can't really have it both ways.

Regardless, reaching a billion is just an arbitrary goal anyway. Any sensible savings are good for a city in the red. He cut $6.4 million from councillor and mayoral office spending. Over seven years, he hopes to have saved $78 million by contracting out garbage collection. He will have saved $89 million from renegotiated public-sector contracts and $606 million from random "efficiencies" found. While columnists have dissected this and demonstrated his numbers are fairly exaggerated, he has been the necessary swinging pendulum that forces the efficacy of programs and spending to be re-evaluated. This rebuilds the faith in the city's politicians which was obviously lacking since they, ya know, elected Rob Ford.

Now to be honest, I like everything about Rob Ford that I've written so far. His love of coaching speaks well of him, even if he was sometimes leaving work early to do it, and his smaller-government mentality was exactly what was needed to combat the massive deficits the city was running. However, his lack of education and wealthy, somewhat entitled upbringing would hurt him later on with some bizarre statements that really polarized people.

In 2006, Ford was angry about the city spending $1.5 million preventing the spread of AIDS. At one point he said: “It is very preventable. If you are not doing needles and you are not gay, you wouldn’t get AIDS probably, that’s bottom line.”

However, the UN's statistics have demonstrated that the majority of people who get the disease are actually heterosexual, non-drug users. When told it was primarily women who get it, he responded: “How are women getting it? Maybe they are sleeping with bi-sexual men.”

Not a great response. It seems to be something someone would say who has heard about the issue but personally knows nothing about it beyond stereotypes. And honestly, if you don't understand an issue, you shouldn't be spouting stuff about something so serious until you've done some research.

In 2008, Ford would stick his foot in his mouth again with this gem: “Those Oriental people work like dogs. They work their hearts out. They are workers non-stop. They sleep beside their machines. That’s why they’re successful in life. I went to Seoul, South Korea, I went to Taipei, Taiwan. I went to Tokyo, Japan. That’s why these people are so hard workers (sic). I’m telling you, the Oriental people, they’re slowly taking over.”

Clearly meant as a compliment but obviously has some problematic racist overtones that most people recognize instinctively. Concerningly, Ford didn't.

And I guess that's the problem. Ford's ideology was what was necessary for the time but I don't think he was necessarily the person to deliver it. He was a rich kid who dropped out of school to get a job at his parent's company. He grew up in a bit of a bubble where actions didn't have consequences. There was a piece in The Globe and Mail that investigated the youthful antics of Rob and his siblings and found that the groups they ran with were prone to the types of drug and wealth-fueled recklessness that is usually associated with George W. Bush and Lindsay Lohan.

Rob's brother, Toronto City Councillor Doug Ford, has been identified by old acquaintances as a bulk-hashish dealer in his youth. He and his friends would refer to themselves as the RY Drifters after the Royal York Plaza strip mall they would regularly hang out at. Troublingly, sources have suggested that this group did more than the typical teenage drug experimentation with at least ten of these Drifters winding up as heroin addicts and some even engaging in burglaries to feed their habit.

Rob's other brother, Randy Ford, was also a known dealer and would later get arrested for beating and kidnapping lower-level dealer Marco Orlando for outstanding drug debts. Randy and friends tried to ransom Marco to his parents for the money owed but instead got busted when the parents called the cops. Randy was charged but it is not on record how the case was resolved. A cash settlement is possible since no jail time was given.

Rob's sister Kathy also has some troubling history. In 2012, her long-time boyfriend Scott MacIntyre, a convicted cocaine dealer, was charged with threatening to kill Rob. In 2005, Scott and another guy were accused of shooting her in the face during an altercation in her parent's basement. They got her to the hospital and Scott fled in his mom's Jaguar. Scott wasn't charged although the other guy got in a little trouble for having the handgun. Seven years before that, Kathy was with a white supremacist named Michael Kiklas who was shot and killed by her drug-addicted ex-husband Ennio Stirpe. She was also friends with several other white supremacists, one of whom, Gary MacFarlane, helped start the short-lived Canadian branch of the KKK.

Now no one is suggesting Rob Ford is engaged in drug dealing or linked to white supremacy but it does show a troubling trend in the types of people he grew up with and what he thinks of as normal. Also worth noting is that none of the family ever really got in trouble for their antics. Is this due to the privilege of wealth or simply that they didn't deserve to be in trouble? Hard to tell. However, this all goes a ways to explain why Rob was still involved with hard drugs and reckless partying even after entering politics. Although things have gotten truly nuts since he became mayor, a year prior to being elected councillor, Ford was charged with DUI and marijuana possession in Miami. In 2008, Ford was charged with domestic assault although the charges were dropped due to 'inconsistencies' in his wife's story.

Since then, he has smoked crack with Somali drug-dealers who tried to sell the evidence to a newspaper. Two of those dealers were murdered although that is probably unrelated to Ford. His sometimes driver and suspected drug-dealer Alexander Lisi is being charged with extortion in trying to get the video back. He has admitted to buying illegal drugs, drinking and driving, and often being in drunken stupors like in this video that went viral. His own staff accuse him of hanging out with prostitutes, yelling racist gibberish at a taxi driver, snorting blow, popping oxycontin while partying, and telling a female staffer he would perform oral sex on her. 

Just for fun, let's throw out a few of his quotes:

“I do not use crack cocaine, nor am I an addict of crack cocaine. As for a video, I cannot comment on a video that I have never seen or does not exist.” May. 24/13

 "Yes, I have smoked crack cocaine. But do I? Am I an addict? No. Have I tried it? Probably in one of my drunken stupors, probably approximately about a year ago." Nov. 5/13

“I’ve had a come-to-Jesus moment.”

“I cannot support taxing the taxpayer.”

“I don’t understand. Number one, I don’t understand a transgender. I don’t understand. Is it a guy dressed up like a girl, or a girl dressed up like a guy? And we’re funding this for – I don’t know, what does it say here – we’re giving them $3,210?”

“I made mistakes, I drank too much, I smoked some crack some time. What can I say? I made a mistake, I’m human.”

 “This is an insult to my constituents to even think about having a (homeless) shelter in my ward!”

“No, I’m not in any alcohol treatment program, I’m not in any drug treatment program. I have a weight issues. I’ve been training every day.”

“Say your son or daughter just got killed in a car accident and you’re plastered out of your mind at three in the morning. Are you going to be able to handle that?”
-Responding to a question of whether a mayor should be getting black-out drunk.

“My question is, I urinated in a parking lot. What does that have to do with anything?”

“I am a role model.” 

Good stuff. In fairness, this is a democracy. The ability to elect a nincompoop is the right of voters. I don't even think he is a bad guy for all the stuff written here. People say stupid stuff. I know people who have drank and driven and have done and dealt hard drugs. I may not respect that aspect of their lives but most are still decent people and if their ideas were good, I would still vote for them.

The problem here is his lies and hypocrisy. Supporting a tough on crime stances while being a criminal is hypocritical. Being for personal responsibility and then lying through your teeth about your actions is also hypocritical. Considering the support that stayed with Ford even as the scandal unraveled, it is hard to imagine he would not have been much better served by being honest about his failings early on instead of playing semantic word games. Ford doing this would also have dealt with the main problem, the fact that the mayor opened himself to blackmail from gangsters. Imagine if the drug dealers trying to sell the tape to The Star and Gawker had instead chosen to blackmail Ford? They'd have had him by the short and curlies and the mayor of Toronto would be owned by drug dealers.

At this point in time, Ford has had his powers stripped by the city council after an overwhelming majority voted to do so. They have been transferred to Deputy Mayor Norm Kelly for the time being. Some people have been arguing that this is illegal or a coup d'etat, that the democratically elected mayor has had his powers stolen in an undemocratic fashion. Ford himself has threatened to sue. In reality, the city councillors were elected democratically and have the power to do this. A poll for last week has 76% of Torontonians wanting him to resign. His attempt at a TV show was pulled after one episode. He is running on fumes.

Most people understand that he needs to go, that this behavior is insane to allow in an elected official who has so much authority. Having him still there makes doing business impossible. Those still desperate to defend the man and keep him because he bugs the 'lefties' are not doing anyone any favors. They are basically saying that "I want a crackhead criminal for a mayor because some people I don't like think it's a stupid idea." It's bad for everyone and is simply divisive for no purpose.

That Toronto elected his views was the correct thing to do. That they elected him to personify them, apparently not so much now that we know about his issues. At this point, he can deal with his addictions and attempt reelection once he gets his nose clean or he can sit it out and let somebody else champion his brand of fiscal conservatism. Currently, by trying to hold on come hell and high water, all he is doing is discrediting his allies and hurting his ideology by association.

In any case, you've been a breath of strange and concerning air Rob Ford. For the good you have tried to do, here's hoping that rock bottom is softer than they say.

AS

Quick Shout Out

My friend Andi Sharma has written an excellent paper outlining the advantages of co-locating or clustering amongst social enterprises and non-profits. New research has been showing that the advantages are far more than just reducing building costs.

http://ccednet-rcdec.ca/en/node/12830

Take a look, I suspect you won't regret it.

Privatizing Parts

"Privatization came on slowly. When something very big happens, like privatization, historians and economists like to think you must have had very big causes. That is not how it happened."
-Kenneth Baker

Transforming public assets into private ones sounds like something most moral parents would agree with, doesn't it? Like you are doing something to make the world more chaste and wholesome? Alas, the sad truth is that privatizing public assets has literally nothing to do with puritanical notions of butt-covering. Which I agree makes it far less interesting but maybe just as important.

In reality, deciding how goods and services will be provided, either by the public collectively or by people in their role as autonomous citizens seeking profit, is what a lot of human conflict has been about since the industrial revolution. It is the essential dichotomy that drove the Cold War, the fight between free-market capitalism and state-centered communism.

As usual, the correct answer appears to be in the middle since the extremes are both terrible. I don't think there are any attempts at communism that I personally would have liked to be a part of. Maybe they just didn't do it right and it would work some other way and with different leaders but I've pretty much lost faith in any centralized government running an economy and coordinating production without having to resort to sinister totalitarian methods. Cuba, the USSR, Mao's China. Those all sound terrible.

As for going to far the other direction into unrestrained capitalism, what you wind up with can be equally bad. Our form of capitalism is a liberal capitalism and is based on liberty, that is, having freedoms from government which are usually dictated in a constitution or by historical precedent. This is basically the opposite of communism where the government has total control. Liberalized capitalism is what allowed the west to emerge as the strongest bloc of nations in the world, complete with quite decent standards of living for the majority. It did this by harnessing the power of market-capitalism to create wealth while keeping society stable because governments had to be respectful of the voters or be removed.

Of course, it's worth noting that we didn't get the good standards of living for the many by engaging in pure liberalism, what is generally referred to now as libertarianism or neoliberalism. Following the industrial revolution, the situation for workers was atrocious despite all the wealth they were producing. After long, hard battles by labor, we tempered our classical liberalism with some traditional conservatism and socialism until a middle-class emerged for pretty much the first time ever. This is why liberalism today has different connotations than it did in the past when it simply meant total freedom of trade and some basic protections from the arbitrary judgments of the government and nobility.

Just so I don't get criticized for completely equating neoliberalism with libertarianism, I'll do my best to briefly differentiate the two. Neoliberalism is what the US has essentially pushed on the world since the 80s and consists of policies that intended to restore the dominant position of capital over labor, social movements, and voters. It was pushed on other chunks of the world like South America and consists of totally freeing financial flows and forcing everything into market-relations while removing the role of the state as anything but an arbiter for contracts.

The collection of policies it entails are often referred to as the 'Washington Consensus.' Generally, it tries to reduce taxes as low as possible and to get rid of things that are not controlled by market mechanisms such as welfare nets, government-provided services, organized labor, minimum wage, worker's rights, environmental protection, any forms of trade protectionism, etc. 

Neoliberalism is essentially the prescription Grover Norquist demanded when saying, "I'm not in favor of abolishing the government, I just want to shrink it down to the size where we can drown it in the bathtub." The neoconservative movement that dominated the George W. Bush administration essentially came out of neoliberalism. As neoliberalism is about corporate rights, minimizing regulatory power of government, and reducing people's obligations to each other through a total reliance on monetary market-mechanisms, there was very little in neoliberalism to attract people to its tenants since it is fragmentary by nature. That is why the theory was merged with conservative aspects like trying to undo the separation of church and state, emphasising the governing of morality, and empire building via war. As traditional US Republicans already supported these ideas, neoliberalism was able to find a base to support the dominance of capital by throwing them some bones that didn't negatively affect the profitability of transnational businesses.

Libertarianism is similar in some respects. It also believes in a very small government, one that is only able to mediate contracts and ensure people are compensated for damage to their private property. Unlike neoliberalism/neoconservatism, it believes in minimal laws, an isolationist military, and as much freedom from government as possible. This means no drug laws or government intervention when people are only hurting themselves.

People who advocate it claim it that it would truly rely on free-market principles instead of simply a corporations-first agenda. If ever enacted anywhere, it would apparently abolish the market-corrupting special deals that the biggest corporations have with domestic governments and with international governing bodies like the IMF, World Bank, and WTO. The idea would be a truly level playing field.

Personally, although it sounds nice, I have my doubts that libertarianism could ever work. It seems like it would fracture society as we are constantly reminded that we are not our brothers keepers as the bible informs us we are. In addition, the idea of allowing the infinite concentration of capital while keeping government as small as possible seems like a recipe for corruption and oligarchy, the rule of money, since the government would simply not be capable of being a counter-weight.

The US went the farthest in enacting policies that limited government's ability to regulate capital and seems to have a more of a bought-and-paid-for government than any other developed nation. Also, with such weak regulatory systems, how could libertarianism do anything to protect our environment, prevent the exploitation of people, or moderate destabilizing swings in the business cycle? Market mechanisms don't seem like they will be able to do it, at least not quickly enough. As for those few hard-core libertarians and anarchists who believe in no government, I would suggest living in Somalia for a while and seeing how much fun it is.

Capitalism is like a horse. Although it may be putting out a lot of energy as it bucks around unbroken and untethered, it's not actually doing any good until its calmed and its efforts put to work for the good of people. Regulations are necessary for this or else the powerful horse kicks the world in the face through unbridled greed like during the 2008 financial collapse. Before that, there was the Gilded Age of the Robber Barons and the severe inequality and stock-market gambling that led into the Great Depression. All examples of capitalism allowed to go wild that were terrible for the masses. After the Great Depression, regulations like Glass-Steagall were added that limited the freedom of banks to gamble with other people's money and the system would work quite well until these regulations were removed.

This has turned into a bit of an incoherent rant that has little to do with my starting premise. Which is fine. Basically, my point is that smart societies rely on the huge power inherent in private citizens interacting for their personal benefit while using government to prevent the worst excesses.


Essentially, I feel there are some things that government should provide and some that it shouldn't. The fact is that governments tend to be less efficient than the private sector as they are not forced to compete to survive. They are natural monopolies when they want to be. This means they should stick to things that cannot be safely or cost-efficiently provided by the private-sector for whatever reason. In addition, the government should provide services that society as a whole should take responsibility for like justice and a minimum level of welfare. Governments should be responsible for providing defense, police/fire services, water/road/power infrastructure, justice, a minimal level of healthcare, basic welfare, and regulatory agencies to police private-sector standards. The government should also have influence in key industries like agriculture and telecommunications while not actually running them.

As for resource extraction, personally, I believe governments should actually take a more active role in extracting and selling resources ourselves since they belong to all Canadians, not just the energy companies that control them, too many of whom are foreign-owned and wind up filtering Canadian resource-wealth away from the people who have natural right to it. Although the government would no-doubt be less efficient in running them than the private sector, considering the very limited royalties we receive and the large amount that leaves the country without helping the economy by being spent here, it seems that we would still make more money as a country even with the inefficiencies and higher wages we'd likely pay. The fact that Alberta was running big deficits even when oil prices were at record high shows that we are getting a bum deal.

However, this would likely be politically impossible as the oil industry has huge influence and the Americans would be extremely displeased with any move towards nationalizing aspects of the energy sector. I'm not even sure we could do so under NAFTA and a protectionist showdown with the US would likely result in Canada losing badly. A better idea would probably just be to have our provinces stop competing for corporate investment in a royalties race to the bottom. Our country's federal debt belongs to us all and we have transfer payments between provinces which means we share our wealth. Bargaining as a bloc to get the best return on non-renewable resources from the energy industry seems obvious and in no way violates the tenants of free trade.

The main issue is that having the private-sector provide any of the truly essential services means there are dangerous conflicts of interest that create incentives to work against the public good. Private prisons have meant corporations lobbying to change laws to fill these prisons. This has corrupted the justice system, resulting in lengthier sentences which has created a larger tax-burden with less available tax-payers. Privatized healthcare in the US resulted in expensive care, insurers trying to get out of providing services owed, huge numbers of uninsured and untreated, a lack of preventative medicine, and a generally bad system compared to countries where the point of medicine isn't profit. Obamacare doesn't change this much and is unlikely to fix things. In addition, the overly large influence of private weapons manufacturers in the US has lead to an extremely aggressive foreign policy that produces huge profits for certain companies. Ike Eisenhower, probably the last principled Republican elected president, would warn about the power and influence of this "military-industrial complex" in his farewell speech.

Privatizing key services also means losing democratic control of them. In Bolivia, Aguas del Tunari was granted a contract to provide water and waster services to Cochabama. Rates were promised to be raised by only 35% in order to expand operations and services when in reality, people's bills as much as tripled for no reason and with no regard for how little money many of the citizens had to live on. A referendum had 96% of the people wanting out of the water-privatization contract but the government refused to cancel it. It took massive protests with several deaths in order to return things to normal. Still, Boliva is being sued for $25 million for breach of contract despite the supplier lying regarding what the rates would be and being generally negligent.

Of course, sometimes it's the opposite and publicly-owned things should be privatized. My home city of Winnipeg has 12 public golf courses owned by the city that are running yearly deficits of $850,000. It seems to me that privatizing these is a no-brainer. Having everybody pay for golf courses is ridiculous and is subsidizing people who already have the money to play the fairly expensive sport. It's true golf courses may help make Winnipeg more attractive to golf-enthusiasts planning to move here. However, the private sector should be providing non-essentials like these. If the demand isn't there for the private sector to make a buck than we can do away with some of them and use the land for other things. Unfortunately, city council recently voted against leasing out four of the courses for a profit.

These are just general rules however. In cases where the government has proven itself capable of running a business properly, it is generally advantageous to leave it in in the hands of the public as it cuts out middlemen and supplies needed funds to pay for government services. When they start failing and need new blood and leadership, then it may be time to privatize as long as this doesn't create any major conflicts of interest and the selling of public assets is done in good faith.

One such idea that has been floating around Canada is to remove the monopoly possessed by the government in most provinces on selling hard liquor. Alberta did this 20 years ago and has seen a huge boom in the number of stores, the variety of alcohol available, and has enjoyed longer store hours. However, it has come at a cost. Alberta is one of the few provinces where government revenue from alcohol sales has been falling despite drinking levels remaining stable. In addition, Albertans tend to pay higher prices for hooch although the occasional sale means that sometimes they can pay considerably less than the country average.

In 2002, BC began closing some government stores and opening private ones that could sell hard liquor. What was noticed was the private stores would charge between ten and thirty-five percent more than their publicly-owned counterparts. Not surprisingly, in both Alberta and BC, they are having more problems with private stores selling to minors. In addition, wages are only about half in the private sector of what they are for unionized government LC employees. Higher wages are generally desirable in the private sector to maintain a strong consumer base while lower ones are desirable in the public sector to avoid government debt. Reducing wages for government employees working in liquor stores might be something worth mimicking in these deficit times and would allow the greater profitability to justify keeping the stores publicly-owned.

This is an interesting conundrum within the private-public debate. If the government can run an industry at a strong profit and manage it in ways that are superior to how the private-sector can do it, does that mean they should do it? Even if it is not a necessary service? It seems this way for liquor, at least for the moment, since alcohol is such an easy cash cow. Ontario was able to bring in $1.63 billion from booze sales in 2011 alone, not including the taxes on them. Considering the governments of most western nations are running deficits, it seems that bringing in more cash is more important than neoliberalism's desire to be rid of anything government-run.

An interesting example of a government operation being able to be as effective as the private sector was during the Thatcher years in the UK. Thatcher was Ronald Reagan's point-woman during the neoliberal 80s and was just as big into privatizing friggin' everything. Her opponents referred to her actions as "selling the family silver." One ironic twist was that British Energy, the largest state-owned power company in the UK, was privatized so as to be hopefully run more efficiently and cheaply. The joke is that it was purchased by Electricité de France, a French state-owned power company. In addition, French state-owned Areva now makes and controls the UK's nuclear power stations. Essentially, the energy industry that Thatcher privatized was renationalizd by their neighbors who now get to reap the profits. This seems a good lesson if anyone ever considers privatizing Manitoba Hydro.

There is also a concern about choices to privatize being made via special interest lobbying. In the last few years, there have been several cases where public assets have been sold off stupidly cheap in what were likely crooked deals. Again in the UK, they have recently sold off the Royal Mail service. While 67% of British people were against the sale and even Margaret Thatcher had thought it was too historically important to sell, the deed was finally done. The main problem was how intentionally undervalued it was when sold. The shares jumped by 38% on the first day of conditional trading which means the citizens brutally lost out on the sale. When sold, all of the Royal Mail's real estate was valued at 787 million pounds even though a single one of its depots in London has been estimated at 1 billion pounds. And there were 44 other sites. Now the Royal Mail is selling 8 of its 45 sites by 2016 and the profits are all going to the new, private owners. Even worse, the private investors left the pension fund liabilities, estimated at 37.5 billion pounds, with the public!

Of course some people made money off of this. They had promised that only 'responsible, long-term institutional investors' would be allowed to purchase shares. Lansdowne Partners was allowed to purchase a large stake and its co-head of developed market strategies, Peter Davies, was best man at UK Chancellor George Osborne's wedding. This likely explains why they were allowed to purchase shares. Lansdowne made 18 million pounds the first day of Royal Mail share trading. In addition, the horrible people at Goldman Sachs made 21.7 million in fees for advising the sale of a company that the British public didn't want sold. If people think that this will save them money in the long run, it might be worth remembering that Britain's privatized rail companies received about four times the government subsidies given to the publicly-owned British Rail.

So in conclusion, knowing what to privatize and what not to can be a tricky subject. As a rule, you don't want people's profits directly tied to society doing badly like with private prisons, private healthcare, and private weapons production. In those cases, incentives are created to make people into criminals, keep people unhealthy, and create conflicts where guns and bombs are needed.

If you want real innovation, the private sector will generally always be superior although government regulations must be in place to protect workers, protect the environment, and keep things like gambling by financial institutions under control. When privatization must occur because government bureaucracy has built itself up to an unsustainable level, make sure the process of selling is not simply cronyism and a chance to rip off the citizens.

Pragmatism needs to ultimately triumph over ideology. Communism lost and neoliberalism is showing itself to be unsustainable as it turns out that both government and corporations are dangerous when left unopposed. A middle way is needed that spreads the power around, something like what the Germans and the Scandinavian countries have. A decentralized capitalism with a hefty dose of socialism appears to be the best hope the west has.

AS