10 most indebted nations

[Disgruntled70sHab]

The world markets have been focusing on mostly Greece recently. Here's the list of the ten most indebted nations on the planet as of today. Not sure where Canada sits, but if anyone finds out please post it here.

Cheers.

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10 most indebted nations
By Andrew Beattie, Investopedia.com

There are many different ways to measure debt as a factor in a nation's economic health. In fact, there are so many that we can sometimes lose the meaning of any one measure. In this article, we'll look at two different measures of debt and how they change the landscape of the most indebted nations.

Debt Compared to Cash Coming In

One of the most popular, measures is debt as a percentage of GDP. This tells you how likely it is that a nation is going to be able to pay its bills. In this sense, GDP is income, so the more GDP you have, the more debt you can service.

As far as measuring which nations are struggling, the debt to GDP is an excellent measure. The public debt to GDP listing, compiled in the CIA World Factbook, is reassuring in this sense. It's top 10, based on 2009-2010 data includes:

1. Zimbabwe 234.10%
2. Japan 197.50%
3. Saint Kitts and Nevis 185.00%
4. Greece 142.80%
5. Lebanon 133.80%
6. Jamaica 126.50%
7. Iceland 126.10%
8. Italy 119.10%
9. Singapore 105.80%
10. Barbados 102.10%

The United States is far down the list at number 32. The U.S. has the highest GDP for a single nation, in other words, excluding the E.U.. The U.S. GDP hasn't come in under $14,000 billion since it broke that level in 2007, so the debt situation of the U.S. isn't as bad in this context, when compared to Japan. Japan has a GDP of around $5,459 billion and public debt over $10,000 billion.

The reason that Japan hasn't folded, is that over half of all Japanese debt is held domestically. This gives Japan the advantage of relatively friendly hands holding its IOUs. There is also another economic advantage that economists see in the Japanese situation: most of the interest payments on the debt, make citizens wealthier and more likely to buy things domestically. This makes some sense, but the theoretical domestic buying boom either hasn't yet hit its stride in Japan, or the debt situation has grown beyond the point where this beneficial side-effect is noticeable.

Japan's woes aside, the debt picture shifts quite noticeably when, instead of looking at debt-to-GDP, we focus on external debt.

Measuring External Debt

External debt is a measure of the public and private debt, that is owed to non-residents. This list, also compiled by the CIA, gives a different top 10.

1. United States $13,980 billion
2. European Union $13,720 billion
3. United Kingdom $8,981 billion
4. Germany $4,713 billion
5. France $4,698 billion
6. Japan $2,441 billion
7. Ireland $2,253 billion
8. Norway $2,232 billion
9. Italy $2,223 billion
10. Spain $2,166 billion

Now, there is no reason to panic, despite the U.S. taking over the top spot. The foreign holdings of treasuries total about $4,500 billion, so this is not all public debt, by any stretch. Unlike domestically held treasuries, however, the external ones are making interest for non-citizens, making it less likely that the money will be put back into the economy in any way. In the end, external debt just means interest and principle payments that are going abroad and adding to another country's GDP.

How Did We Get Here?

The U.S. has a lot of external debt, true. There are two ways of looking at it, one is the debtor nation view, where the more external debt a nation has, the more likely it is giving away its future, in the form of interest payments to foreigners. The second way is the investment destination view, where so many foreigners are looking to lend and invest in the debts of U.S. citizens, companies and the government, that the low interest loans can be used to build more economic capacity, to produce more capital to pay off these cheap loans.

The truth is that the U.S. is a bit in between the two scenarios. It's strong GDP numbers make it one of the most attractive investments compared to other struggling nations, but this huge foreign debt load has passed the healthy level and is edging up to dangerous levels. Just because other nations are willing to lend cheap, and the U.S. is willing to spend, doesn't mean there aren't long term consequences.

The Bottom Line

Debt is a matter of perspective. The health of a nation is not so different from the health of a business. If a nation is borrowing to build infrastructure that will pay off in the future, then having a lot isn't necessarily bad. If, however, the money is being poured into areas with little or no return, then the burden on the economy to pay those debts will eventually lead to more economic hardship in the future. A fair assessment would involve tracking what each dollar of private and public debt, goes towards purchasing. Some studies exist on this subject, but it is best left for another day, perhaps Christmas.

cnews.canoe.ca/CNEWS/Features/2011/11/01/18909546.html (link)

[Skilly]

According to Wikipedia, using the same source, (The World Factbook, United States Central Intelligence Agency. Accessed on the 29th of June 2011. ) Canada ranks 13th in external debt.

*changes to the original list as in bold*

1. United States $14,825 billion
2. European Union $13,720 billion
3. United Kingdom $8,981 billion
4. Germany $4,713 billion
5. France $4,698 billion
6. Japan $2,441 billion
7. Spain $2.166 billion
8. Luxembourg $1.892
9. Italy $1.800 billion
10. Belgium $1.241 billion
11. Switzerland $1.200 billion
12. Austrailia $1. 169 billion
13. Canada $1.009 billion


LINK

In the Rankings, it has Ireland ranked 7th with an external debt of $0.115 billion ... and the Netherlands is in 5th with $0.371 billion. Not sure what that is all about?

As a percentage of GDP the list looks total different though. The list on Wikipedia, referenced as being taken from the CIA, the Work Bank and the IMF lists the US at 35th and Canada at 64th (64% of GDP).

The top ten there are:

1. Luxembourg - 3443%
2. Liberia - 590%
3. UK - 400%
4. Sao Tome and Principe - 349%
5. Hong Kong - 334%
6. Belgium - 266%
7. Monaco - 260%
8. Guinea-Bissau - 259%
9. Switzerland - 229%
10. Portugal - 217%

[Disgruntled70sHab]

Thanks Skilly. I only had time enough to post the article before work started.

I was in Cuba only a few weeks ago and I was able to talk to a couple of Germans who were vacationing at the resort, about Greece. They started out calm enough but as the discussion kept going they became a lot more passionate. Like many Germans, they didn't like the influx of cash their country gave Greece mainly because they felt Greece had lied to Germany. I can't remember all of the conversation (gin and tonics with excellent Cuban cigars might have something to do with it) but they were all for cutting off any funds earmarked for Greece based on this. Again, I can't recall specifics.

What I didn't understand is how a small country like that going bankrupt can bring down the world markets. Then I found the article I posted earlier and it became much clearer. Greece is still part of the EU and as such they're just behind the USA in quantity of external debt.

I also just read that the Greek PM has called a referendum to vote on whether or not the people of Greece should accept the latest bailout monies. I'm very interested in hearing the outcome of the visit.

Cheers.

[Cranky]

It isn't that Greece is such a big country and it's bringing down the Euro, it's because it's exposing the soft underbelly of the Euro. Reality is that Germany dominating, rich exporting nation and the the Mediterranean countries are not and never will be. So what is happening is that Greece is first to expose this disparity.

Right now, Germany and France are hardballing Greeece as a lesson to the rest of those "fat" countries. It's not gong to work. The Greek, Spanish, Italian, Irish and Portuguese economies can not cut enough social services to match the wealthy Germans. Basically, the German economy is rich enough to pay for the services that they want everybody else to cut. They want Greece to cut their minimum wage to sub living standards. How many in here can live on $200 a week? The cost of living is MORE expensive there then here so basically, that is not even equivalent to $150 a week. They want hundreds of thousands of people to be fired and there is simply no jobs for them......other then to immigrate to Germany. Why not? Greek white workers are more gentle then those pesky Muslim immigrants. On the other hand, Germany wants Greece to "go green" with German solar and wind turbines. They want Greece to sell their assets at fire sale prices....that German companies and banks will conveniently pick up. This does nothing but turn Greece into a vassal state.

It appears that Germany lost the war with guns.....but they will do it with banks.

What SHOULD happen is that Germany should leave the Euro and "benefit" from the mark. Let's see how that works out when the mark starts to inflate to exporting wreaking levels. The KNOW this and that is why they will do whatever they have to "save" the Euro. Meanwhile, to the rest of the sheep and talking heads, the going mantra is that it's big fat Greece spending like a crack whore.....

I am a fiscal conservative, probably more then most. However, this is not just a matter of Greek economic stupidly. There is a fundamental flaw in the inequality of economic abilities within the Euro that is not going away. At this point, the Germans dominate and benefit from it and they will do so until the poorer ones wake up and smell the inequality and dominance.



THIS is what it's all about....

German exports surge to record

www.ft.com/cms/s/0/23098d0a-7a21-11e0-bc74-00144feabdc0.html#axzz1cfFR40mv

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Top 15 Countries for German Exports in 2005

France ... US$99 billion (10.2% of total German exports)
U.S. ... $85.5 billion (8.8%)
U.K. ... $76.7 billion (7.9%)
Italy ... $67 billion (6.9%)
Netherlands ... $59.2 billion (6.1%)
Belgium ... $54.4 billion (5.6%)
Austria ... $52.4 billion (5.4%)
Spain ... $49.5 billion (5.1%)
Switzerland ... $36.9 billion (3.8%)
China ... $31.1 billion (3.2%)
Poland ... $25.3 billion (2.6%)
Czech Republic ... $23.3 billion (2.4%)
Sweden ... $21.4 billion (2.2%)
Russia ... $19.4 billion (2.0%)
Japan ... $16.5 billion (1.7%)

Germany is a net exporter with ALL European countries other then Netherlands.

[Disgruntled70sHab]

Nov 3, 2011 12:31:45 GMT -5 Cranky said:

It isn't that Greece is such a big country and it's bringing down the Euro, it's because it's exposing the soft underbelly of the Euro. Reality is that Germany dominating, rich exporting nation and the the Mediterranean countries are not and never will be. So what is happening is that Greece is first to expose this disparity.

Right now, Germany and France are hardballing Greeece as a lesson to the rest of those "fat" countries. It's not gong to work. The Greek, Spanish, Italian, Irish and Portuguese economies can not cut enough social services to match the wealthy Germans. Basically, the German economy is rich enough to pay for the services that they want everybody else to cut. They want Greece to cut their minimum wage to sub living standards. How many in here can live on $200 a week? The cost of living is MORE expensive there then here so basically, that is not even equivalent to $150 a week. They want hundreds of thousands of people to be fired and there is simply no jobs for them......other then to immigrate to Germany. Why not? Greek white workers are more gentle then those pesky Muslim immigrants. On the other hand, Germany wants Greece to "go green" with German solar and wind turbines. They want Greece to sell their assets at fire sale prices....that German companies and banks will conveniently pick up. This does nothing but turn Greece into a vassal state.

It appears that Germany lost the war with guns.....but they will do it with banks.

What SHOULD happen is that Germany should leave the Euro and "benefit" from the mark. Let's see how that works out when the mark starts to inflate to exporting wreaking levels. The KNOW this and that is why they will do whatever they have to "save" the Euro. Meanwhile, to the rest of the sheep and talking heads, the going mantra is that it's big fat Greece spending like a crack whore.....

I am a fiscal conservative, probably more then most. However, this is not just a matter of Greek economic stupidly. There is a fundamental flaw in the inequality of economic abilities within the Euro that is not going away. At this point, the Germans dominate and benefit from it and they will do so until the poorer ones wake up and smell the inequality and dominance.



THIS is what it's all about....

German exports surge to record

www.ft.com/cms/s/0/23098d0a-7a21-11e0-bc74-00144feabdc0.html#axzz1cfFR40mv

~~~~~~~

Top 15 Countries for German Exports in 2005

France ... US$99 billion (10.2% of total German exports)
U.S. ... $85.5 billion (8.8%)
U.K. ... $76.7 billion (7.9%)
Italy ... $67 billion (6.9%)
Netherlands ... $59.2 billion (6.1%)
Belgium ... $54.4 billion (5.6%)
Austria ... $52.4 billion (5.4%)
Spain ... $49.5 billion (5.1%)
Switzerland ... $36.9 billion (3.8%)
China ... $31.1 billion (3.2%)
Poland ... $25.3 billion (2.6%)
Czech Republic ... $23.3 billion (2.4%)
Sweden ... $21.4 billion (2.2%)
Russia ... $19.4 billion (2.0%)
Japan ... $16.5 billion (1.7%)

Germany is a net exporter with ALL European countries other then Netherlands.

This is an excellent read insomuch as, it gives me a different perspective, HA. Thank you.

I don't have the time to respond right now, but based on what I was reading elsewhere (will post later tonight) is it possible that Germany (and France?) are asking Greece to make cuts in the wrong areas?

Like I said, I don't have the time to respond properly right now, so I'll log on later tonight. Have a good one.

Cheers.

[Cranky]

Dis, these days, as a person who was born in Greece, I feel like wearing a bag over my head to hide my shame. BUT, like a lot of things in life, there is more to the story then meets the eye. When one starts digging deeper, into the root causes, self interest and greed of Germany (and a bit for France) starts to make the entire thing smell like a dog pile.

Imagine if we didn't have any transfer payment in Canada, Quebec went deeper and deeper into debt to sustain itself, perhaps a bit too lavishly, but still to sustain itself, had no real income and Alberta said that if they want help, they have to follow crushing social policies. How do you think Quebecois (or any other province) would react? Then when they are at the time of their greatest need and they wanted to let the public decide if they wanted even more social pain or default, Alberta give them an ultimatum.

This is what is happening in the EU.

[Cranky]

In an effort to avoid a financial catastrophe, Europe’s leaders persuaded Athens late Thursday to back away from a referendum, but the result, which involved threats to expel Greece from the euro zone, has destroyed any sense of democratic solidarity uniting them.

This probably staved off a devastating run on the euro that could have brought down the Italian and Spanish economies and placed France’s stability in peril.

But it also ended the principle of unity among the 17 countries that share the euro: It is now possible for the wealthier members to override the democratic systems of the poorer ones.

It was self-defeating victory. In order to win passage of the bailout package, the leaders had to assert that theirs was not a common currency at all, but one in which the wealthier export-led nations held precedence over poorer, import-dependent, debtor nations.

The ideal of a union of equal nations suffered a lethal blow, and the once-radical concept of a “two-speed Europe,” almost a colonial relationship, instantly became a tangible reality.

The need for monetary stability has come into stark conflict with the electoral demands of citizens battered by austerity as world leaders gather in Cannes, France, for a G20 summit.

That tension was amply apparent on Thursday night, when French President Nicolas Sarkozy spoke 24 hours after he and German Chancellor Angela Merkel had teamed up to threaten Greece with expulsion from the currency union, and the loss of a crucial $8-billion emergency-loan instalment, if it let voters decide on a trillion-euro bailout package.

Mr. Sarkozy boasted confidently that their gambit had succeeded: The Greeks had backed away from a public vote, though possibly at the cost of Prime Minister George Papandreou’s government.

While speaking loftily of democracy, Mr. Sarkozy concluded by acknowledging that the stability of the monetary union took precedence.

“We are prepared to help – that is the foundation of European solidarity,” he said. “But that also means that Greece fulfills its obligations. We will not allow the euro to be destroyed. We must protect the money of our taxpayers.”

But look closer, and the conflict between democracy and stability stretched much further across the summit. For Mr. Sarkozy’s remarks, and his tough approach to Greece, were all prefigured by his own battle between the two principles.

France, the host of this G20 summit and an indebted and import-dominated nation itself – albeit a wealthy one – teeters on the verge of a debt-rating downgrade that would wound its economy. If such a downgrade happened, it would hurt Mr. Sarkozy’s prospects for re-election in next year’s presidential ballot. For France to avoid such a downgrade, Mr. Sarkozy desperately needs to keep bondholding investors confident in the euro’s stability.

This urgent position has forced Mr. Sarkozy into a strictly dependent relationship with Ms. Merkel, the leader of the only economically prosperous and export-wealthy country in the euro zone – and the only nation with the resources to finance a large-scale rescue plan.

If he shows any disagreement with her message or discord over rescue plans, French government officials say, Mr. Sarkozy would create a perception of uncertainty and run the risk of a downgrade. So his own electoral fate is equally tied up with accepting stability at any cost.

Furthermore, Ms. Merkel herself sits atop a teetering conflict between stability and German democracy – one whose stakes are arguably at the root of this week’s Greek-bailout crisis.

Most analysts believe the trillion-euro package should have been deployed a year ago, when the scope of the Greek debt crisis became fully apparent. Ms. Merkel, though, was forced to avoid the issue because her party faced crucial elections earlier this year, and any mention of spending taxpayer money on the wider European crisis, and especially on Greece, was considered politically suicidal.

As a result, the German government was forced to abandon the larger goal of monetary stability for the more immediate one of political victory – and this week has forced Greece to make the opposite choice.

French and German officials told reporters at the summit that Europe could not afford the consequences of Greece’s democratic gamble, in which Mr. Papandreou had hoped to win a mandate from voters who have already faced two years of devastating austerity measures, and would face even worse ones under the new package.

“We respect their democratic traditions, but a referendum – or even the delay caused by holding a referendum – would unleash hell on the markets, and that would destroy Greece and Italy and possibly Spain as well,” said a German government finance official.

That seemed to be the consensus. Prime Minister Stephen Harper acknowledged as much in his remarks to reporters.

“This is obviously a decision the Greeks have to make,” he said, “but I think the strong preference of everybody around the G20 table would be for progress to be made toward the package the European Union put together last week,” rather than a referendum. “I think that’s a strong preference.”

Mr. Sarkozy’s momentary victory was tainted by the dark stain the conflict left on a G20 summit that he had hoped to use to advance his own, electorally friendly agenda: Pushing China to revalue its currency, pressing leaders to adopt a financial-transaction tax, and taking steps toward alleviating world poverty. At this point, those goals have been pushed far away from the headlines, if not from the summit agenda.

“For the moment, Europe appears to have wiped the agenda of any other business,” Mr. Sarkozy acknowledged, “and wouldn’t you think there is other pressing business for the world’s top club to deal with? You would not think so here – it is a measure of just how critical for the rest of the planet Europe’s woes have become.”

[Disgruntled70sHab]

Nov 3, 2011 22:05:09 GMT -5 Cranky said:

Dis, these days, as a person who was born in Greece, I feel like wearing a bag over my head to hide my shame. BUT, like a lot of things in life, there is more to the story then meets the eye. When one starts digging deeper, into the root causes, self interest and greed of Germany (and a bit for France) starts to make the entire thing smell like a dog pile.

Imagine if we didn't have any transfer payment in Canada, Quebec went deeper and deeper into debt to sustain itself, perhaps a bit too lavishly, but still to sustain itself, had no real income and Alberta said that if they want help, they have to follow crushing social policies. How do you think Quebecois (or any other province) would react? Then when they are at the time of their greatest need and they wanted to let the public decide if they wanted even more social pain or default, Alberta give them an ultimatum.

This is what is happening in the EU.

Thanks HA. I think it's important to have all of the perspectives if that's actually possible, that is.

What I'm reading from your posts is that Greece's problems are largely due to the EU's inability to sustain its union. I found an article that suggests both sides of that argument. It suggests that, if Greece is cut loose from the EU, other countries will follow. A cut and paste from today's Financial Post.

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With the Greek government teetering on the edge of collapse and fears a eurozone exit would trigger a domino effect through Spain, Portugal and Italy, Europeans are split on whether Greece should be cut loose.

I was telling you about the German lads I ran into in Cuba. They were concerned over Greece lying about their situation. From the same article:

“Greece got into the euro by being dishonest about their situation and those caught being dishonest should leave. If you ask me, Greece should leave the euro — and as soon as possible,” said Miriam Schoenwalde, 45, a health care worker."

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But later in the article I came across these opinions in the same article:

All but spurned in its quest to join the European Union, Turkey’s booming economy stands in stark contrast to Europe’s financial woes. But it is deeply linked to the 27-member bloc, which buys around half of its exports.

“The sick man of Europe,” read a front-page Daily News headline, with a photo of Papandreou in front of Merkel.

“This crisis has proved that Turkey, with its strong economic indicators, does not need the EU,” said Emre Kopan, 35, who works in the financial sector. “It is for Turkey’s own good to stay out of the EU.”

In Poland, an EU member which has yet to join the single currency, the Greek drama has prompted many to rethink their aspirations of eventually swapping zlotys for euros.

“I am pleased that Poland is not in the eurozone. Should we join? I am not an economist but if you look at the exchange rate right now of the zloty to the euro it is not especially favourable,” said Marlena Sojka, a 57-year-old receptionist.

“I don’t think I would be able to survive on my salary if Poland adopted the euro.”

(link)http://business.financialpost.com/2011/11/05/greek-eurozone-contagion-fears-stalk-europeans/

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Here's a different perspective as well, HA. I read Mike Strobel from time to time. He often gives the lighter side of the issue he's reporting on and his column on the Greek financial crisis is no different.

I made a reference to whether Greece might be making cuts, but in the wrong areas. Here's a cut and past from Strobel's parody. However, I'm not so sure any country can pull off this kind of Utopia:

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(Greece's) bureaucracy is laughably fat and lazy. Civil servants are paid extra for Christmas, Easter, for using a computer, even for getting to work on time. Lumberjacks get an “outdoor” bonus.

A bureaucrat is virtually unfireable, and can retire on pension at 50. If he dies, his unwed daughter can get his pension.

The bosses aren’t much better. There’s a committee for everything. even for the care of a lake that dried up 80 years ago."

(link)http://www.torontosun.com/2011/10/04/greece-in-crisis-wake-me-when-its-over

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Hard to know who is at fault here. The Greeks for lying about their situation, or the EU for its inability to properly look after its member countries. Both maybe?

Cheers.

[Cranky]

There is no doubt that Greece cooked the books. Those cooked books are now a ten year old story and has very little to do with what happened since.

The fundamental problem is that Greece and the rest of the Med can not compete with Germany and to a lesser extent, France. So by being in the Euro, they shot themselves in the foot long term. This doens not mean that Greece should not be part of the European union. They could still be in it with t heir own currency. This THREAT by France and Germany that they will be thrown out of the EU is pure, unadulterated bullcrap. England is part of the EU and has it's own currency.

We need to separate the Euro from the EU. Here is what I'm talking about. The ones in brown are part of the EU with their own currency.



As for why Germany and France is desperate to keep the Euro because it benefits them. The common currency allows them to ship their product and collect monies without going through constant exchanges nor deal with devaluing foreign currencies. If you look at the German and to a lesser extent France, they export to the rest of the EU vassal states. What's not to like if you are German? On the other hand, it's a no brainer that the mark would go through the roof if it was on it's own.

I go to Greece every second or third year. Since my primary goal is to visit my parents, as much as I love them, it's boring. I take my car and travel all over Greece. What I saw when Greece first entered the Euro was a boom in activity, but an even bigger boom in inflation. At the time I wondered how the hell would Greeks pay for this cost of living. Ten years later, ALL the small industries that first popped up are now empty shells, I mean ALL of them. Sure, some industries still holding on in the two major cities but the rest of the country, NOTHING. Because I'm in manufacturing, it's the first thing I notice about 6 years ago, worse 3 years ago and now, complete devastation. Where id it all go? Either to the even poorer members like Bulgaria or to the manufacturing giants of Germany and France. Same thing is happening to Italy, Spain and Portugal.

Greece will be better off if they quit the Euro, tell the banks to take a hike and move on. Right now, with all the measures they have taken, they will have a surplus of 3 billion but then, if you add the loan interest of 19 billion, they fall behind again, and again, and again for even greater and greater social pain and destruction. Basically, they will NEVER be able to get out of that debt. The EU can help by letting Greece write off ALL the debt and supporting it's banks. It would cost a trifling 30 billion and ALL the hoopla is over. Finished. Life goes on. Here the deal though, if the Greeks get over the fear and do it successfully, Italy and company will do the same and plunge the entire Euro into the abyss. So the most prudent, intelligent thing to do for France and Germany is to either support Greece to the hilt IN the Euro, or destroy it's economy completely. Better to keep Greece on the hook regardless of it's social pain, write down the loans over time and kick the fundamental problems down the line....and hope nobody gets smarter.....or better glasses.

Last but not least.....

Best guess. Euro will die in a few years.

[CentreHice]

It would probably be best for everyone if the Euro did indeed say goodbye.

Another line of thinking sees these collapses as engineered into the Euro from Day 1...resulting in more being held by fewer....and a global currency.

And hasn't there been talk of the "Amero", a common North American currency?

Hopefully, we heed what's happening in Europe and don't go down that road.

Wonder what the powers at the IMF, the World Bank, and the National Reserve have in mind.

Wouldn't be anything like a Monopoly game, would it?

[franko]

Forty years ago end times fever was at its height in [evangelical] Christendom pointing to a one world currency, and antiChrist [other than HA], Revelation plagues, and more. this may just bring such discussion to the forefront again.

woe is us

[Disgruntled70sHab]

HA, if I didn't know any better I thought you might have been talking about NFTA.

;D

[CentreHice]

Never thought of the "religion" aspects of it....but where there's money to be made on fear....

Again, it's the despicable side of humanity I'm referring to. There have been countless great deeds done by countless great people under the auspices of, or inspired by, their respective faiths.

[Cranky]

Nov 5, 2011 15:08:11 GMT -5 Disgruntled70sHab said:

HA, if I didn't know any better I thought you might have been talking about NFTA.

;D

Stating the obvious....whenever you have a massive disparity in wages, what always happens is that the jobs migrate to the lower wage area. When there is a boom time, nobody cares or notices, but the moment he economy starts to struggle, it comes to the forefront.

It's utterly delusional to think that we can have open borders to everyone's products and we could still keep our manufacturing jobs. Utterly delusional. Every time I hear some talking head spout it, I feel the need to introduce him to a spiked 2x4. When NAFTA was the American and us, we had economic and social parity relative to our populations. So the smartest and the best manufacturer won, rather the the cheapest. Once we let in Mexico and open the floodgates to China, it was all over. Now, the only real, long term saving grace is to value add our resources and introduce managed trade.

On the other hand, managed trade is anathema to large corporations. They would have to invest trillions to bring back the manufacturing and they rather not. It's far easier and more profitable to simply warehouse and sell product to us they buy, err squeeze from anywhere in the world. Good for them, okay for the population as far as prices but not very good for employment. Much like Greece, the simple, logical, self evident solution does not suit those who have vested interest. Thus the scaremongering.

We are heading for stormy economic seas....

[Cranky]

Nov 5, 2011 13:53:42 GMT -5 CentreHice said:

It would probably be best for everyone if the Euro did indeed say goodbye.

Another line of thinking sees these collapses as engineered into the Euro from Day 1...resulting in more being held by fewer....and a global currency.

And hasn't there been talk of the "Amero", a common North American currency?

Hopefully, we heed what's happening in Europe and don't go down that road.

Wonder what the powers at the IMF, the World Bank, and the National Reserve have in mind.

Wouldn't be anything like a Monopoly game, would it?

The Amero makes absolutely no sense to anyone other then massive corporations....or Americans. Any and all discussion about it, any justification of it is simply sales propaganda for the sheep.

I don't want to speak Spanish, I don't want obami as my overlord and I don't care to give away Canadian resources to build Mexico and America. If anything, I like higher, sturdier fences and smaller piles of shipping containers.

[Cranky]

Right now I'm piping in Greek news from the net. They make our very worst, our most power hungry politicians look like angels. If my antiChrist horns worked properly (instead of hiding my receding hairline), I would bless them all.....with flesh eating disease.

[franko]

Nov 6, 2011 2:25:25 GMT -5 Cranky said:

I don't want to speak Spanish, I don't want obami as my overlord and I don't care to give away Canadian resources to build Mexico and America. If anything, I like higher, sturdier fences and smaller piles of shipping containers.

funny how so many people are anti-globalization/want the jobs to stay in North America, want higher wages for everybody but prices to stay Chinese-low. another topic sort of, I know, and yet builds on this: smaller piles of shipping containers = higher prices which people won't pay, which is why WalMart does so well in spite of the whining about it.

[Disgruntled70sHab]

Nov 6, 2011 2:17:26 GMT -5 Cranky said:

It's utterly delusional to think that we can have open borders to everyone's products and we could still keep our manufacturing jobs. Utterly delusional. Every time I hear some talking head spout it, I feel the need to introduce him to a spiked 2x4. When NAFTA was the American and us, we had economic and social parity relative to our populations. So the smartest and the best manufacturer won, rather the the cheapest. Once we let in Mexico and open the floodgates to China, it was all over. Now, the only real, long term saving grace is to value add our resources and introduce managed trade.

It's far easier and more profitable to simply warehouse and sell product to us they buy, err squeeze from anywhere in the world. Good for them, okay for the population as far as prices but not very good for employment. Much like Greece, the simple, logical, self evident solution does not suit those who have vested interest. Thus the scaremongering.

Excellent synopsis, friend! This might also explain why Germany is, and wants to remain, in the driver's seat, so to speak.

Speaking of the Mexican influence: Smith's Falls is a small Ottawa Valley town approximately halfway between Ottawa and Kingston. It's not too far from other villages and towns, and it's main source of employment was the Hershey Chocolate Factory. Hershey wasn't only a well-known, popular Ottawa Valley tourist attraction, it also employed approximately 500 locals as well. I remember it always being a stop along the way to Kingston, or Ottawa depending which way we were going. However, the powers that be deemed that it was more cost-effective to move the whole kit-and-kabootle to Mexico (2008). Despite transport costs from Mexico, Hershey realized that they only had to pay each employee approximately $400 a month, benefits included. This made good business sense when you consider there were some employees in Smith's Falls who had been there for many, many years, decades in some cases, with excellent wages and decent benefits. (honestly don't know if pensions came into the mix).

That said, I don't have to tell you what removing 500 jobs will do to a community of slightly under 9,000 (Wikipedia) residents. The factory was resold to a company but it was quickly back up for sale a short time later. A tease for the community.

Now, I can't be sure of my facts here, but on the surface anyway, it looks like the closure of the Hershey factory might be due to Mexico's involvement in NFTA.

And you know something else? I'm thinking there's business potential in Greece similar to that in Mexico. That said, I'm pretty sure Germany would be in there with both feet if that potential is a reality.

Cheers.

[Cranky]

Nov 6, 2011 13:33:40 GMT -5 Disgruntled70sHab said:

And you know something else? I'm thinking there's business potential in Greece similar to that in Mexico. That said, I'm pretty sure Germany would be in there with both feet if that potential is a reality.

Cheers.

Funny you should say that.....they were. At the time I was there, there was a throng of German businessman accompanied by some high German official. It was nothing more then a dog and pony show as to how Greece would "prosper" with more open rules....and dog food wages. Or is it cat food? Which is cheaper? The German government is DEMANDING Greece drop it's minimum wage to less then 500 Euro a month as part of the condition's of the bailout. In works out on a 42 hour hour week to $3.74 an hour. In a country that is MORE expensive to live in then here.

Cat food or dog food?

To a German businessman.....wouldn't it be great if Greece had few regulations, dog food wages, still in the EU, could consume within and ship to all those those pesky Muslim countries around them?

Tell me again about the "generosity" of Germans and to a lesser extent, the French? Tell me again who will benefit?

You know the difference between ethical businessman and one with out any? One goes to a town/city/province/country, looks at the situation and decides if it doesn't make business sense, walks away. The other one wants to "create" the economic conditions that suit him. Since the fundamental reason for a business to exist is to profit, more often then not, "creating" those conditions means someone else is going to pay or lose.

You know the difference between an ethical country helping another (Canada) and one that looks after it's interest first at any cost? Look at Euro dik'tators.....Merkel...."The euro must not fail and it will not fail".

What the hell....I'm actually sympathizing with people who were too stupid and greedy to run their own country. On the other hand, those that are "helping them" have nice big, twisting horns.

[Cranky]

Nov 6, 2011 9:15:34 GMT -5 franko said:

Nov 6, 2011 2:25:25 GMT -5 Cranky said:

I don't want to speak Spanish, I don't want obami as my overlord and I don't care to give away Canadian resources to build Mexico and America. If anything, I like higher, sturdier fences and smaller piles of shipping containers.

funny how so many people are anti-globalization/want the jobs to stay in North America, want higher wages for everybody but prices to stay Chinese-low. another topic sort of, I know, and yet builds on this: smaller piles of shipping containers = higher prices which people won't pay, which is why WalMart does so well in spite of the whining about it.

The problem is that there is no one occupying WalMart customers. Those village idiots who babble on about the "inequality of capitalism" need to take their signs to WalMart shoppers, the enablers of said capitalism.

You want cheap? You are out of a job and here is your unemployment check. Spend wisely.

I use to be a card carrying Liberal and a lefty, then I got a brain and became a well off righty. Now I can spit on BOTH sides of my mouth. Or maybe, I'm just drooling......

[franko]

interesting, isn't it . . . the "occupiers" want a minimum $20 an hour wage, a trillion dollars for poverty programming, a trillion dollars to pay for education . . . and corporations to pay for it.

Oh, and a chicken in every pot/60" LED TV on every wall, paid for by "the government".

[CentreHice]

Nov 6, 2011 14:42:40 GMT -5 Cranky said:

The problem is that there is no one occupying WalMart customers. Those village idiots who babble on about the "inequality of capitalism" need to take their signs to WalMart shoppers, the enablers of said capitalism.

You want cheap? You are out of a job and here is your unemployment check. Spend wisely.

I wouldn't be so fast to blame the consumer outright. I think one can point a finger at everybody here.

To me, two things are a given.

1. Companies are in business to make as much of a profit margin as they can.

2. Consumers, by and large, will gladly jump at the cheapest products they can get. Not much critical economic thinking going on with the masses, other than, "Wow, this is a great deal!" I'll bet for every person that won't step foot in Wal-Mart, for example, there's a parking lot full who are only too happy to do so.

Either our North American wages lowered that profit margin to a point where it wasn't viable to keep the manufacturing jobs here....or the cheap labour in other countries was just too good to pass up. Likely a mix of both. Either way, once the ball started rolling, you have to compete. And there go the jobs.

You've mentioned managed trade several times. Any examples of that working right now?

BTW, has anyone seen the documentary on Wal-Mart: "The High Cost of Low Prices"? Worth the viewing. You can find it on YouTube, in 10 segments.

[Cranky]

Nov 6, 2011 22:03:01 GMT -5 CentreHice said:

You've mentioned managed trade several times. Any examples of that working right now?

.

The Asian countries are doing it......and eating our lunch while they are at it.

In China, foreigners can't own more then 49% of any company. In Korea, until recently, foreighn cars were taxed to the hilt.

What we can do to manage trade.....

Oil from the oil sands to be refined in Canada. Oil companies make a huge percentage of their profits from refineries. They need to do that here to create jobs and tax their big fat profits.

"Handling charges" on all containers at any port of entry. Since they need to use our ports, rails or roads, a $1,000 charge on every container other then food or pharmaceuticals. That will start to hurt all bulk item shipments real fast.

"Handling charges" on unrefined ores depending on their value.

Increase corporate tax rates and then give them very fast write downs on manufacturing equipment and manufacturing labour "training". The more they make here, the more money they can write off.

Any country that artificially keeps it's money down, offset it by taxing the spread. See China.

Make Canada a right to work state.

Declare the semi-conductor industry as vital to national security and impose a 3% tax on all electronic goods.

Call any and all of them "green charges" for all I care. As long as the money goes into the public kitty and not into some moronic green projects.

If I spend a couple of hours on it, I can probably find dozens if not hundred of ways to "manage" trade.

Last but not least....make me Emperor. It's inherited in my genes to avoid paying taxes....and extracting money from others.

[Cranky]

Nov 6, 2011 16:47:31 GMT -5 franko said:

interesting, isn't it . . . the "occupiers" want a minimum $20 an hour wage, a trillion dollars for poverty programming, a trillion dollars to pay for education . . . and corporations to pay for it.

Oh, and a chicken in every pot/60" LED TV on every wall, paid for by "the government".

I like to send the Flea Baggers to Greece. There they can be part of REAL economic misery and REAL riots. As for the Mohawk "warriors", I bet ten minutes of Greek cop and riot clashes will cure them of their bravado.

These are the "katharistes" or "cleaners". Basically really, really big cops with really, really nasty attitudes. How long will it take these cops to clear a park?



BTW...at the end of the video, the guy with the mike is screaming that we are thousands and they are just a few. Notice that NOBODY wants to get anywhere near those cops. When I was down there, I saw them and...I'm glad they weren't around in '73. Back then, I had a fighting chance because at 5'10" and 235 pounds, I was bigger and faster then 98% of the cops. Now, these guys are all in the 6' 1"-6'6" range and well north of 200 pounds.

Umm......I wonder if they can skate?

[The New Guy]

The problem with looking at amount of debt or for that matter debt as a percentage of GDP is that it fails to examine the system as a whole. With that additional perspective it is very difficult to come to grips with the very interesting nature of our great global finance system.

Lets look at the USA, because everyone goes on and one about how in debt the American government is. Now don't me wrong - it is badly in debt and that needs to be addressed, but the debt the Americans carry is more a function of the economic ideologies that the Americans (and consequently the rest of the western world) have adhered to since the mid to late seventies (around the time Carter switched over to Regan really). Under that ideology debt is not a bad thing in and of itself, so long as you can keep the bill collectors at bay. And right now there is little risk of the bill collectors coming to call on America's doorstep. Will companies stop shipping things to the US? No. Not unless they want to shoot themselves in the foot. The USA is the land of the great consumer and if you're not in that market you're not making enough money. Will sovereign nations use military force against the USA? Not a chance. There is no nation in the world that can stand up to American military power. Nothing on this planet bigger than a small fishing boat moves without the knowledge and implied consent of the US Navy. Yes, the conflicts in Iraq and Afghanistan have been detrimental to the economy of the USA, but it has been devastating to the economies of the Iraq and Afghanistan. No nation on earth can risk pushing the USA in that way. It would be the end of them.

In truth the American economy is not that bad. If you look at the number the current crisis is much lighter than the 1980 crisis (which we will see the likes of again in 2030 or thereabouts). The difference is now instead of hearing it once a night on the evening news we hear it on loop 24/7 on a plethora of news channels. And, as a species, there's nothing humans love more than to panic. Fear motivates us like nothing else.

But how bad is it in reality? This 99% that are occupying our park spaces - are they starving? Are they freezing in their homes? Or do they have computers to write on and iPhones to text on?

This so-called crisis is nothing more than a market correction - the economic equivalent of Darwinism - which is weeding out the weak and sickly companies. In a couple of years it'll be gone and forgotten, replaced by a new fear of the week (if you're a betting man I'd suggesting betting on either the collapse of the Chinese economy or the renewed efforts by Russia to establish an Empire in Eastern Europe, the Caucasus and the Balkans).

[Disgruntled70sHab]

Nov 8, 2011 13:15:33 GMT -5 The New Guy said:

In a couple of years it'll be gone and forgotten, replaced by a new fear of the week (if you're a betting man I'd suggesting betting on either the collapse of the Chinese economy or the renewed efforts by Russia to establish an Empire in Eastern Europe, the Caucasus and the Balkans).

BRIC

Don't have a lot of time here at work. Check this out when you have the time.

Cheers.

[Cranky]

This is what I wrote a couple of weeks ago....

Nov 3, 2011 12:31:45 GMT -5 Cranky said:

Right now, Germany and France are hardballing Greeece as a lesson to the rest of those "fat" countries. It's not gong to work. The Greek, Spanish, Italian, Irish and Portuguese economies can not cut enough social services to match the wealthy Germans. Basically, the German economy is rich enough to pay for the services that they want everybody else to cut. They want Greece to cut their minimum wage to sub living standards. How many in here can live on $200 a week? The cost of living is MORE expensive there then here so basically, that is not even equivalent to $150 a week. They want hundreds of thousands of people to be fired and there is simply no jobs for them......other then to immigrate to Germany. Why not? Greek white workers are more gentle then those pesky Muslim immigrants. On the other hand, Germany wants Greece to "go green" with German solar and wind turbines. They want Greece to sell their assets at fire sale prices....that German companies and banks will conveniently pick up. This does nothing but turn Greece into a vassal state.

If anyone doubt my observations or think that I'm too reactive or radical.....

~~~~~~~~~

In twist to financial crisis, Germany seeks labour relief from GreeceBERLIN - Prosperous Germany has a surprising message for sinking Greece: Help Wanted.

With a shrinking labour force and buoyant economy, Germany desperately needs skilled workers to keep its industrial engine churning forward. Increasingly, it's seeking them from Greece and other European laggards like Spain and Portugal where unemployment is soaring amid fears of financial implosion.

Germany quickly overcame the financial meltdown that started in 2008 and unemployment is now at a 20-year low of 6.6 per cent. Companies are so desperate to fill skilled labour shortages that the government has taken to organizing matchmaking sessions between German firms and job seekers from crisis-hit countries.

Greek civil engineer Christos Kotanidis moved to Erlangen in southern Germany three months ago and quickly found work with industrial giant Siemens.

The 33-year-old's former company in Saloniki put him on part-time earlier this year because, struck by the financial crisis, it could no longer afford to pay full salaries. It took Kotanidis only six weeks to land a full-time position in Germany.

"I decided to look for a job in Germany because it has a stable economy," Kotanidis said. "In Greece the economic situation is bad now, but the future looks even worse."

Unemployment in Greece is currently at 16.7 per cent, but among young people it is even higher with more than 42 per cent of people under 24 not finding any work. In Spain, overall unemployment hovers at around 20 per cent, and more than 45 per cent of people under the age of 25 are without a job. Portugal, Italy and Ireland, the other countries bearing the brunt of the debt crisis, also have bleak employment pictures.



~~~~~~

Tell me again about Germany's motives?

Banks are obviously better then blitzgkreig......

[Disgruntled70sHab]

I found this article earlier this morning and it reminded me of someone I met on a plane while on the way back from Israel back in '96. I was sitting beside a gentleman who was a financial consultant for the Liberals back then. I asked him just how bad the financial crisis was and he told me (paraphrase), "... imagine everyone in the country owing $20,000 but they only bring in $12,000, which only covers the necessities. The interest on the $20 Gs just keeps accumulating."

That was '96 and he told me while it was getting better, the country was nowhere near getting out of the woods.

===========================================================
cnews.canoe.ca/CNEWS/Politics/2011/11/21/18997606.html (link)

Lessons for U.S. from Canada's 'basket case' moment
How our country transformed from fiscal pariah to fiscal darling

By Randall Palmer and Louise Egan, REUTERS

OTTAWA - Finance officials bit their nails and nervously watched the clock. There were 30 minutes left in a bond auction aimed at funding the deficit and there was not a single bid.

Sounds like today’s Italy or Greece?

No, this was Canada in 1994.

Bids eventually came in, but that close call, along with downgrades and the Wall Street Journal calling Canada “an honorary member of the Third World,” helped the nation’s people and politicians understand how scary its budget problem was.

“There would have been a day when we would have been the Greece of today,” recalled then-prime minister Jean Chretien, a Liberal who ended up chopping cherished social programs in one of the most dramatic fiscal turnarounds ever.

“I knew we were in a bind and we had to do something,” Chretien, 77, told Reuters in a rare interview.


Canada’s shift from pariah to fiscal darling provides lessons for Washington as lawmakers find few easy answers to the huge U.S. deficit and debt burden, and for European countries staggering under their own massive budget problems.

“Everyone wants to know how we did it,” said political economist Brian Lee Crowley, head of the Ottawa-based thinktank Macdonald-Laurier Institute, who has examined the lessons of the 1990s.

But to win its budget wars, Canada first had to realize how dire its situation was and then dramatically shrink the size of government rather than just limit the pace of spending growth.

It would eventually oversee the biggest reduction in Canadian government spending since demobilization after World War Two. The big cuts, and relatively small tax increases, brought a budget surplus within four years.

Canadian debt shrank to 29% of gross domestic product in 2008-09, from a peak of 68% in 1995-96, and the budget was in the black for 11 consecutive years until the 2008-09 recession.

For Canada, the vicious debt circle turned into a virtuous cycle which rescued a currency that had been dubbed the “northern peso.” Canada went from having the second worst fiscal position in the Group of Seven industrialized countries, behind only Italy, to easily the best.

It is far from a coincidence that the recent recession was shorter and shallower here than in the United States. Indeed, by January, Canada had recovered all the jobs lost in the downturn, while the U.S. has hardly been able to dent its high unemployment.

“We used to thank God that Italy was there because we were the second worst in the G7,” said Scott Clark, associate deputy finance minister in the 1990s.

Canada’s experience turned on its head the prevailing wisdom that spending promises were the easiest way to win elections. Politicians of all kinds and at all levels of government learned that austerity could win.

'I WILL DO IT'

The turnaround began with Chretien’s arrival as prime minister in November 1993, when his Liberal Party - in some ways Canada’s equivalent of the Democrats in the U.S. - swept to victory with a strong majority. The new government took one look at the dreadful state of the books and decided to act.

“I said to myself, I will do it. I might be prime minister for only one term, but I will do it,” said Chretien.

A shrewd political strategist, Chretien believed Canadians were on board, after they were shocked and embarrassed a year earlier when Standard & Poor’s downgraded Canadian foreign currency debt to AA plus from AAA.

He wanted history to remember him as the man who rescued Canada from financial ruin and humiliation.

Chretien sat his skeptical cabinet down and laid down the hard truth. He would get rid of the deficit, it would be painful and unpopular and nobody would be spared. There was no choice, no room for negotiation. It had to be done.

The chill in the room was such that newly appointed junior minister for veterans affairs, Lawrence MacAulay, called his wife afterward to say he would soon be out of a job.

“He said, ‘Darling, I will be back home in the next election. I will be defeated, because the prime minister explained to us this morning what he intended to do,”’ according to Chretien’s recollection.

MacAulay, who represents the Prince Edward Island fishing community of Cardigan, has been reelected six times and sits in the House of Commons today. He couldn’t be immediately reached for comment to recall the conversation.

RAISING THE ALARM

Canada’s scrape with disaster had been building for a long time.

Over a decade earlier, top finance department bureaucrats had begun raising the alarm about the problem of rising debt, a hangover from the big government era of the 1970s.

The period before Chretien came to power in Canada is often likened to the situation in the U.S. today. The country was not yet peering over a precipice, but was fast approaching it.

Clark said he and his colleagues sent memos to their bosses in the 1980s explaining “the arithmetic“: growth was low, interest rates were high and it was only a matter of time before Ottawa would not be able to pay interest on its debt.

But successive governments ignored the warnings and wrote budgets that allowed spending to continue to grow.

“It was hugely frustrating,” said Clark. “Every year we put out forecasts showing the deficit going away. We just based every budget on ridiculous assumptions.”

The budget deficit more than doubled between 1980 and 1990, rising to 8% of GDP in 1983 and 1984, before shrinking to a still unsustainable 5.6% just before Chretien took over, and all the time debt was soaring. The debt-to-GDP ratio shot up to 67% in 1993-94 from 29% in 1980.

The numbers aren’t that different to the U.S. today with its deficit of around 9% for 2011, and debt-to-GDP ratio at 74%, up from 40% at the end of 2008.

Drawing a parallel to Washington, Clark said Canadian leaders before Chretien paid lip service to the debt problem but did nothing.

“There are no lights blinking saying you’re at the edge of the cliff,” he said. “The one lesson others can give the U.S. is that the higher that debt-to-GDP ratio goes, the more difficult it’s going to be.”

Canada already faced a gaping current account deficit, a weakening currency and high interest rates, and more misery was inevitable if the debt crisis wasn’t addressed.

The first kick in the teeth from abroad came from the October 1992 S&P downgrade.

Even two decades later, Don Drummond, in charge of the budget at the finance ministry at the time, bristles at the memory, saying that the downgrade should have been “completely irrelevant” because so little of Canada’s debt was in foreign currency. But the damage to public opinion was done.

“We were just mobbed by the media. Here’s some foreign institution that says Canada is a basket case. If we had had a Canadian agency downgrade us, probably nobody would have shown up,” said Drummond.

The politicians had ignored the bureaucrats, but there was no way to sweep international criticism under the rug.

“Fear drives people. It drove us,” said Clark.

'THEY DON’T GET IT'

The Liberals thought their first, rushed budget - delivered in February 1994, three months after taking office, was tough.

It reformed unemployment insurance entitlements, and cut defense and foreign aid, as well as closing some business tax loopholes and ending a C$100,000 lifetime capital gains exemption. The savings totaled C$10 billion over two years.

The government said it would review all programs and predicted a deficit of 3% of GDP in 1996. But program spending was still budgeted to rise slightly, and the budget was widely seen as a failure.

Pete DeVries, who headed the fiscal policy division, remembers overhearing chatter from economists’ and others as he waited for a flight to Toronto just after the budget.

“The mood was so depressed on that plane that I thought we’re never going to get off the ground and if we did get off the ground we’d crash, because it was just doom and gloom,” he said. “Everywhere you heard the words, ‘They don’t get it. They just don’t get it.”’

Voters certainly didn’t get it. People who had canceled vacations or taken a second job to make ends meet in the recession couldn’t understand why Ottawa thought it could live beyond its means.

The upstart Reform Party, then the main national opposition party, had campaigned on “zero-in-three” - balance the budget in three years. “We were always trying to go faster,” said Reform’s leader at the time, Preston Manning.

Three months later, Moody’s Investors Service lowered its rating on Canada’s foreign currency debt, citing the government’s large and growing debt.

In December 1994, Mexico suffered a run on its currency and the following month the Wall Street Journal stung with its “Bankrupt Canada” editorial, lumping Canada with Mexico as a country that might need an International Monetary Fund bailout.

STIFFENING SPINES, AVOIDING CLIFFS

The Liberals were stung by the criticism and, at first reluctantly but then with gusto, they got out the chain saws.

“I think the Moody’s and Wall Street Journal stuff reflected what we knew inside,” said then-industry minister John Manley.

Cutting government spending programs went against the Liberal grain. Contrary to the Reform Party, the Liberals saw a more important role for government.

Paul Martin now has a lasting reputation as the finance minister who slayed Canada’s deficit, but the conversion from spender to cutter was painful. His father, also called Paul, had helped create Medicare, Canada’s publicly funded health care system, and suddenly here was Paul Junior contemplating massive cuts.

Clark remembers riding in a taxi with Martin after meetings in New York.

“He said, ‘I don’t want to do this. I don’t want to do this.’ And I said to him, ‘You don’t have any choice because if we don’t do it that means you won’t be able to keep the programs you’ve already got. We’re going to go over the cliff and we’ll be cutting like you won’t even believe,”’ Clark said.

“We told him you are still a Liberal but you have to be a small ‘c’ fiscal conservative to be a nice good Liberal.”

In the end, Martin famously vowed to tackle the deficit “come hell or high water.”

Chretien and Martin later parted ways bitterly, but they formed a formidable duo during the budget cutting.

At one 1994 cabinet meeting, Martin announced a spending freeze. A minister put forward a project that needed funding but Chretien cut him off, reminding him of Martin’s freeze.

A second minister raised his hand to ask for funding, and a testy Chretien told the cabinet that the next minister to ask for new money would see his whole budget cut by 20%.

Chretien’s scrappiness, which was one result of his upbringing in a working class family in rural Quebec, had already earned him the nickname of “Dr. No” when he was finance minister in the 1970s.

“The prime minister was the man with the steel rod up his spine. He was inflexible,” Manley said.

For ministers it was brutal. Manley lost half his budget as industry minister in the 1994 budget and went from 54 programs down to 11.

“Everyone knew they had to face the music, and they did it,” Chretien said in the interview in his law offices. “They had no choice. There was no great debate. I had made my view very clear.”

MORE SPENDING CUTS THAN TAX HIKES

The ratio of spending cuts to tax hikes was seven-to-one. Asked why, Chretien said simply: “There was more need on one side than the other.”

That contrasts with proposals this year by President Barack Obama and the Democrats to have a much higher proportion of revenue increases in the deficit-tackling mix.

Canadian ministers were told how much they had to cut and then told to come back with a plan on how to do it. Cuts ranged from 5%to 65% of departmental budgets and included controversial cuts in transfers that help provinces pay for health and education, decisions that lengthened medical waiting lists for years to come.

Chretien exempted just a few areas from the cuts, including the Department of Indian and Northern Affairs. He also blocked big changes to benefits for the elderly and made sure tax collectors had enough resources.

In the end, program spending (everything except interest payments on the debt) fell by about 12 percent, or C$14 billion, between 1994-95 and 1998-99. The percentage fall was substantially more after adjusting for inflation.

The gloomy Canadian reaction to the 1994 budget changed to applause in 1995. “People came up to me to say, ‘You guys got it,”’ DeVries said.

The deficit disappeared by 1997 and the debt-to-GDP ratio began a rapid decline - it is now at about 34%.

“The entire political class decided to stop treating this as a matter of political contention and started treating it as a matter of national interest,” said Crowley, the political economist.

After wrestling the deficit to the ground, Canada enjoyed what Crowley calls the payoff decade, outperforming the rest of the G7 on growth, job creation and inward investment. From 1997 to 2007, it averaged 3.3% economic growth. while U.S. growth averaged 2.9%.

The Canadian dollar weakened from around C$1.38 to the U.S. dollar at the time of the 1995 budget to almost C$1.62 in 2002, helping make Canada more competitive. But it has since roared back and now stands close to parity with the greenback.

SHEER DUMB LUCK

Canadians are the first to admit that a lot of their success was the result of good timing that cannot be replicated today. The rosy global economy then contrasts with today’s turmoil. There was no euro zone crisis to worry about. The United States and China were growing fast, demanding Canadian exports. Nobody else was reining in spending.

Canadian interest rates plummeted by more than 1,000 basis points between 1990 and 1994, generating huge savings on debt payments and encouraging business investment.

Clark says the U.S. dollar’s role as the world’s reserve currency may be disguising Washington’s problems and means the critical period could be a ways away.

“There’s no market discipline,” said Clark. “People want to buy U.S. Treasuries and they always know they will get paid.”

The parliamentary political system also helped Chretien, since there is no effective division of powers between the executive and legislative branches as in the United States. A prime minister with a majority in the House of Commons can push through whatever he wants.

And politicians were almost all on board. The opposition Reform Party was screaming for even deeper cuts and public opinion was ahead of the politicians in calling for austerity.

SACRED COWS

Some of Canada’s lessons are applicable elsewhere and Britain’s Liberal Democrats and the Conservatives both cited the Canadian model when peddling their austerity plans to voters in their successful 2010 election campaigns.

Chretien said he had had no qualms in telling Britain’s coalition government that it was wrong to exempt areas such as the National Health Service, regarded as sacred by many in Britain, from the drastic spending cuts.

“I told them they made a mistake,” Chretien said. “I remember talking with a very senior person in health who said to me privately, ‘I’m not very happy that I’m exempt’ ... He needed the same pressure as the others.”

The Canadian mantra was to go big, spreading the pain and sparing no one, to prevent rivalries and resentment.

“You have to take immediate action and it’s got to be primarily on the spending side..., but at the same time everybody has got to come to the market and that really means tax increases as well,” Martin told Reuters in August.

CANADIAN LESSONS

Members of the deficit slaying team have since advised countries as far ranging as Bahrain and Bangladesh. Canada has touted its fiscal record to push for coordinated deficit reduction in the Group of 20 most powerful economies.

Some veterans of Canada’s successful rebound believe the United States needs a value-added tax similar to the Goods and Services Tax (GST), Canada’s Conservatives introduced in 1991.

The Liberals say they were pragmatic, not ideological, on taxes. But they could not boost tax revenues much because Canadians’ top marginal income tax rate was already uncompetitive at around 55% and the unpopular GST was already on the books.

Reform Party’s Manning said the U.S. spending-versus-tax debate does not have to be a question of either/or, but he saw a lesson from the way Ottawa cut its own fat before holding out its hand to taxpayers.

“So you don’t completely rule out tax changes or tax increases in the future, but you make them conditional on achieving a certain degree of financial order now,” he said.

Former bureaucrats also say flat, across-the-board spending cuts are a bad idea, even though it’s more palatable to staff to shave 5% off the top of each program.

Unless whole programs are killed, departments might simply postpone vitally needed capital spending, including such things as maintenance and repair, and have to boost it back to former levels within a few years.

The final lesson is that you can impose painful spending cuts and still win elections. Chretien went on to win two more back-to-back to form majority governments, a rare feat. He argued that a responsible Liberal who believes the state has a role in reducing poverty can only do so by ensuring a financially healthy government.

Drummond, who later moved to the private sector and is now an advisor helping the Ontario provincial government slash its deficit, noted that governments on the right and left in Saskatchewan, Alberta and Ontario won more voter support after their own budget cuts in the 1990s.

“Brutal, brutal fiscal restraint, and all won majority governments right afterward,” he said.

[Habs_fan_in_LA]

Nov 2, 2011 7:44:32 GMT -5 Skilly said:

According to Wikipedia, using the same source, (The World Factbook, United States Central Intelligence Agency. Accessed on the 29th of June 2011. ) Canada ranks 13th in external debt.

*changes to the original list as in bold*

1. United States $14,825 billion
2. European Union $13,720 billion
3. United Kingdom $8,981 billion
4. Germany $4,713 billion
5. France $4,698 billion
6. Japan $2,441 billion
7. Spain $2.166 billion
8. Luxembourg $1.892
9. Italy $1.800 billion
10. Belgium $1.241 billion
11. Switzerland $1.200 billion
12. Austrailia $1. 169 billion
13. Canada $1.009 billion


LINK

In the Rankings, it has Ireland ranked 7th with an external debt of $0.115 billion ... and the Netherlands is in 5th with $0.371 billion. Not sure what that is all about?

As a percentage of GDP the list looks total different though. The list on Wikipedia, referenced as being taken from the CIA, the Work Bank and the IMF lists the US at 35th and Canada at 64th (64% of GDP).

The top ten there are:

1. Luxembourg - 3443%
2. Liberia - 590%
3. UK - 400%
4. Sao Tome and Principe - 349%
5. Hong Kong - 334%
6. Belgium - 266%
7. Monaco - 260%
8. Guinea-Bissau - 259%
9. Switzerland - 229%
10. Portugal - 217%

Note to self:

Cancel planned trips to Sao Tome and Principe & Guinea-Bassau.

[Disgruntled70sHab]

An excellent synopsis by Pat Condell. A very select few countries are actually calling the shots in the EU.