Post by Georgina on Feb 14, 2009 23:36:48 GMT -5
Whether I agree entirely with what Wente has to say or not, she always delivers a plain-language and slightly amusing presentation of some, sometimes, complex ideas.
MARGARET WENTE
From Saturday's Globe and Mail
February 14, 2009 at 12:00 AM EST
My cousin lost his job last week because of the recession. It was a pretty crummy job, but it paid the rent. Now he cleans out people's basements at 50 bucks a pop.
I sure hope Mark Carney, our Bank of Canada Governor, is right. Just suck it up this year, he promises, and by next year everything will be fine.
Well, maybe. But it sure doesn't feel that way.
Paul Volcker was in Toronto the other night to have dinner with a bunch of well-heeled people who hung on his every word. Everyone looks up to the former U.S. central banker, because he whipped inflation in the ‘80s and also because he's over six and a half feet tall. He genially admitted that the old system is finished. “Finance doesn't work without some sense of trust and confidence,” he said.
But all the trust and confidence are gone. The smartest people in the world thought that financial markets obeyed mathematical laws. They believed that people, in the aggregate, acted rationally. It turns out that they don't. The markets are only human after all. And so are people.
Will Barack Obama's giant bailout package do the trick? No one knows because it all depends on trust and confidence. If you believe that it will do some good, then you might spend money instead of putting it in a sock. The pundits don't believe in it, although they disagree as to why. It's either too little, too timid, too vague and too late, or else it's just another swindle of the taxpayers. In any event, after less than three weeks, they have declared his presidency an utter failure.
The only thing we know for sure is that all those billions are just the first instalment. According to Mr. Volcker, fixing the banks will cost several trillion dollars. The hardest part, if I understand the business terminology correctly, is to exorcise the voodoo loans from the zombie banks. In other words, what Mr. Obama really needs is a good witch doctor.
If only the witch doctor would arrive in time to drive out the evil spirits from my neighbourhood. But I'm afraid he won't. It has always been a hotbed of hopeful entrepreneurship. Every year a bunch of new businesses open up, and every year – generally after the January clearance sales – a few go bust. This year is worse than usual. Just last month, one brave soul (a woman, I suspect) opened a lovely little store that sells exquisite home accessories. I imagine she's been planning it for years. Every time I pass by the freshly painted storefront, I whisper to her: “Don't do it! Don't do it!” The world of retail has become ruthlessly Darwinian, and good people will get wiped out.
The voodoo bank loans aren't the only problem. Because of the recession, ordinary loans are going sour too. In the United States, everything has collapsed at once – house prices, home sales, car sales, jobs. Coming soon are widespread defaults on credit-card debt. Cities and school districts across the country will run out of money because their pension funds invested in zombie assets and their credit is no good. Florida and California are flat broke. No one has a clue what will happen next, but it's safe to guess it won't be pleasant.
“You guys in the Toronto media are spreading too much doom and gloom,” said a friend of mine who lives in Winnipeg. I admitted that it's easy to feel gloomy, especially when being in the newspaper business feels a bit like working for GM. On the other hand, we're not the only ones who are contemplating a diminished future. The other day I ran into someone who owns a service business that has survived through thick and thin.
“How's it going?” I asked. “I'm laying off half my staff tomorrow,” she told me. “I'm thinking that maybe I should close up shop.”
I am truly, truly proud, as are we all, that poky, conservative Canada has turned out to be a pillar of financial rectitude amidst the smoking ruins. Not too many cowboys here, unless you count the shooters at the Quebec pension fund, who managed to lose a staggering $38-billion last year. “Don't feel bad,” I consoled a girlfriend whose RSP went down 24 per cent. “Those big shots did even worse than you did.”
Who ever would have guessed that Canada's boring old banks would be the model for the new world financial system? If only anybody had a clue how to build it. Meantime, we'll be borrowing from ourselves for years and years, then paying it back for years after that. I'm thinking that we'll have a long, long time to learn to live on less.
If only bailouts were like Tinker Bell, it would all be so much easier. Mr. Obama could say, “Clap, clap if you believe in my bailout plan!”, and we'd all clap like mad, and the economy would magically spring back to life. Faith saved Tink, and only faith will save us all. Failing that, there's not much that you or I can do, except renovate our houses and apply for a tax rebate. Personally, I'm willing to try anything. I don't need a deck, but I'll build one anyway. I'll build two. I'll ask the contractor to hire my cousin. He needs a job.
www.theglobeandmail.com/servlet/story/RTGAM.20090214.wcowent14/BNStory/specialComment/home
MARGARET WENTE
From Saturday's Globe and Mail
February 14, 2009 at 12:00 AM EST
My cousin lost his job last week because of the recession. It was a pretty crummy job, but it paid the rent. Now he cleans out people's basements at 50 bucks a pop.
I sure hope Mark Carney, our Bank of Canada Governor, is right. Just suck it up this year, he promises, and by next year everything will be fine.
Well, maybe. But it sure doesn't feel that way.
Paul Volcker was in Toronto the other night to have dinner with a bunch of well-heeled people who hung on his every word. Everyone looks up to the former U.S. central banker, because he whipped inflation in the ‘80s and also because he's over six and a half feet tall. He genially admitted that the old system is finished. “Finance doesn't work without some sense of trust and confidence,” he said.
But all the trust and confidence are gone. The smartest people in the world thought that financial markets obeyed mathematical laws. They believed that people, in the aggregate, acted rationally. It turns out that they don't. The markets are only human after all. And so are people.
Will Barack Obama's giant bailout package do the trick? No one knows because it all depends on trust and confidence. If you believe that it will do some good, then you might spend money instead of putting it in a sock. The pundits don't believe in it, although they disagree as to why. It's either too little, too timid, too vague and too late, or else it's just another swindle of the taxpayers. In any event, after less than three weeks, they have declared his presidency an utter failure.
The only thing we know for sure is that all those billions are just the first instalment. According to Mr. Volcker, fixing the banks will cost several trillion dollars. The hardest part, if I understand the business terminology correctly, is to exorcise the voodoo loans from the zombie banks. In other words, what Mr. Obama really needs is a good witch doctor.
If only the witch doctor would arrive in time to drive out the evil spirits from my neighbourhood. But I'm afraid he won't. It has always been a hotbed of hopeful entrepreneurship. Every year a bunch of new businesses open up, and every year – generally after the January clearance sales – a few go bust. This year is worse than usual. Just last month, one brave soul (a woman, I suspect) opened a lovely little store that sells exquisite home accessories. I imagine she's been planning it for years. Every time I pass by the freshly painted storefront, I whisper to her: “Don't do it! Don't do it!” The world of retail has become ruthlessly Darwinian, and good people will get wiped out.
The voodoo bank loans aren't the only problem. Because of the recession, ordinary loans are going sour too. In the United States, everything has collapsed at once – house prices, home sales, car sales, jobs. Coming soon are widespread defaults on credit-card debt. Cities and school districts across the country will run out of money because their pension funds invested in zombie assets and their credit is no good. Florida and California are flat broke. No one has a clue what will happen next, but it's safe to guess it won't be pleasant.
“You guys in the Toronto media are spreading too much doom and gloom,” said a friend of mine who lives in Winnipeg. I admitted that it's easy to feel gloomy, especially when being in the newspaper business feels a bit like working for GM. On the other hand, we're not the only ones who are contemplating a diminished future. The other day I ran into someone who owns a service business that has survived through thick and thin.
“How's it going?” I asked. “I'm laying off half my staff tomorrow,” she told me. “I'm thinking that maybe I should close up shop.”
I am truly, truly proud, as are we all, that poky, conservative Canada has turned out to be a pillar of financial rectitude amidst the smoking ruins. Not too many cowboys here, unless you count the shooters at the Quebec pension fund, who managed to lose a staggering $38-billion last year. “Don't feel bad,” I consoled a girlfriend whose RSP went down 24 per cent. “Those big shots did even worse than you did.”
Who ever would have guessed that Canada's boring old banks would be the model for the new world financial system? If only anybody had a clue how to build it. Meantime, we'll be borrowing from ourselves for years and years, then paying it back for years after that. I'm thinking that we'll have a long, long time to learn to live on less.
If only bailouts were like Tinker Bell, it would all be so much easier. Mr. Obama could say, “Clap, clap if you believe in my bailout plan!”, and we'd all clap like mad, and the economy would magically spring back to life. Faith saved Tink, and only faith will save us all. Failing that, there's not much that you or I can do, except renovate our houses and apply for a tax rebate. Personally, I'm willing to try anything. I don't need a deck, but I'll build one anyway. I'll build two. I'll ask the contractor to hire my cousin. He needs a job.
www.theglobeandmail.com/servlet/story/RTGAM.20090214.wcowent14/BNStory/specialComment/home