Canada - Economic Stagnation Nation?

BOOMERS - Wealth Concentration and Stagnation

In reading Sotheby’s report on Real-estate trends in luxury properties the excerpt below spurred some thought, 9.6 million people (boomers), 80% of high net worth Canadians, are over 55 years of age and 58% of those are retired – and more are soon to be retired; this reality is rested juxtaposed against the provision of many FREE services to this same cohort, of most significance of course are medical services. While this “age group” is larger than ever before, they are healthier than ever before which may defer to some degree their taxing the free services, but tax services they will. There is a another affect on economy as well, they cost more to keep and they generate less income, once more however, the capital they have they are conservative in investing – less apt to take chance on disruptive, innovation or risk prone investments, often the type of investments that stimulate the economy.

In the forest management people refer to a stand of timber becoming decadent, that is to say, that in its maturity the old growth precludes new forest, and the old growth is well established and living thereby precluding giving living space to new forest – this is a point of stagnation, the increase in fiber volume is limited. This contrasts to a circumstance after a fire perhaps, where several species are taking hold, there is age class variance as the forest species move through life cycles – there is dynamism here – annual increase in fiber volume is greater here. The population profile of Canada, much of the western world is in a state of decadence due to this reality, which parallels the aged forest reality.

Japan, given its racial homogeneity and the resulting resistance to immigration was the first example of this pernicious reality taking hold – some two decades of low growth and a monetary policy at war with deflation ensued. Could this fate be awaiting us in Canada or the wider western economy? There are indications that there are factors seemingly suppressing inflation, Central Bank policy has been simulative in the extreme since the 2008 downturn, with little indication the tide is turning. It seems that the economy is never really hitting it’s stride, never any pressure on price due to capacity restraints, just more or less – sideways. It would be unwise to suggest that a single cohort is to blame, or a single demographic element – it is, however, certainly a single and significant contributing factor. 

The combination of the increased use of free government services, the withdrawal from vocation and resulting income contraction and the ongoing conservative management of capital on the part of this cohort is sure to challenge us.

The situation seems to cry out for some means to incent this cohort to put its money to work more aggressively. There may be reward to government coffers in policy that mitigates risk in the areas of investment that most improves our economy.  There is requirement for infrastructure spending, capital that is more or less latent or invested at no real rate of return – the government could engage in 3P processes that include partial payment of infrastructure thereby reducing “cost” and improving return. A municipal bond program could be brought in to play, so local communities could go to their citizens to raise capital for City infrastructure and enjoy the support of upper level governments, via a tax credit of some kind. Recent attempts at infrastructure spending seem somewhat muted, in the post stimulus spending time frame we are now in, there seems very little infrastructure spending on the horizon. The joy of infrastructure spending is, it gives an immediate boost the economy now – in much the same way a healthy house market does, AND then it is the gift that keeps giving as it makes the future economy more efficient.

The process of government sweetening the pot for investors in government infrastructure is aggressive in that it is a form of quantitative easing, it is quantitative easing that puts enhanced return in a place that rewards presently “latent” capital AND directs benefit to the middle class, rather than the institutions that caused the downturn in the first place. Quantitative easing in other jurisdictions had the government issuing a $1000 bond at a cost of $900 – this is a simplification for illustration, the point is financial institutions got “free” money. Sweetening the pot for “Boomers” who have capital directed in a manner that is less advantageous now, who then move investments to a place that moves the economy in an immediate way, is likely to provide several benefits; including the funds to government coffers on the boomers capital gains taxes.

One would have to put pencil to paper to see the degree that is appropriate for government to participate; however, when one tallies the quantifiable benefits of infrastructure, increased revenues from capital gains – (offsetting to some degree the initial investment by government) AND the multiplier effect of the actual work – one would guess supplementing infrastructure bonds and or municipal bonds to the tune of 5% would be very viable – I suspect even a better return could be offered. Here we have a several wins; the public gets better return on capital, the public invests in the infrastructure it needs (the hospitals the boomers are going to be filling, the road and rail that support commerce, the city transportation networks the improve commerce and the environment, the much needed education system reconfiguration – the list is endless) AND the people who have wrongly paid to repair the damages of a financial industry gone a rye, get a little back.

I know what you're thinking, this is like a remake of the Keynesian “Roosevelt New Deal”, and there is nothing new here. The concept of the new deal is here, the implementation is different.  The Keynesians purpose in all policy is to increase aggregate demand, they rarely care how that is done, government spends – I mean SPENDS – to increase aggregate demand. This is different, this is government “seeding the economy”, by providing an avenue for all levels of government AND it could be easily adapted for small and medium business as well in the same spirit as the British Columbia Venture Capital Program,  an avenue that lets infrastructure that is in REAL demand be build. The “New Deal” was a top down, centralized effort, the same sort of effort that had quantitative easing enriching the very people who created the financial downturn in the first place. This is a hybridization of quantitative easing, municipal & government bond programs, directed at a group of people who require secure returns and whose capital we need.

        

Canada is a long way from the Japan scenario, we have immigration, we are a resource economy and we have a generally more vibrant demographic picture. We do however, need to be mindful that the “idle boomers”, their ageing and their “idle capital” could be a drag at the very least, and push us into a period of stagnation at worst. With a small amount of incentive, we can generate a big result, and if it is managed properly, rather than saddling future generations with debt, we enhance future generations’ operational reality and enrich them.           

More Thoughts On the Issue

Thoughts on - Counter Cyclical Spending

Senate - Government Financial Monitor?

Government Resource Revenue Dependence

Government - Ensuring Optimum Size

Senate Spending & Restructuring

Government Scale & Accountability
Government - Budgeting Accountability

CLICK HERE - My Professional Website

Government Funding Accountability Mechanisms

Every time a finance minister deliberates over a pair of shoes, what to buy to express their view of the country’s best way forward, I am hopeful, hopeful that just once, there will be an extended discourse on accountability mechanisms – you know, monitoring and reporting – I am always left with my hopes dashed. To be fair, the last conservative government at least attempted with the Accountability Act to give voice to the issue, the challenge is that substantive change to government operations has seen very little evolution. There is a massive requirement for real accountability, accountability that has ANY government policy subjected to a public mission statement, metrics and indicators that measure whether the mission statement has been met AND, MOST IMPORTANTLY, an independent assessment and reporting entity. I have lobbied the government repeatedly to deliver this type of accountability, we focus attention on Senator miss-spending or other “nickel and dime” issues, “nickel and dime” compared to the billions of dollars government eats in wasted spending because, present reporting mechanisms have such a long and winding, ambiguous accountability cycle – there is just no resolution to the efficacy of spending for the public.

In business we have a “dashboard” to guide use, firstly, there is always the bottom line as a gross measure of performance – there is just no hiding from that. Secondly, in business, we have key metrics and accompanying indicators that we use to measure performance. We also benchmark our performance relative to the norm or our peers, indicators like market share, gross margin, internal rate of return, and return on assets – a nearly endless list of ratios and measures are used to ensure our decision-making is taking us on the right path. The quality of a decision can only be assessed if it is measured, if you can't measure you can't manage it. We need a dashboard for the Canadian public, so they have an objective measure of governance; presently we have no clear dashboard or clear communication of governmental performance.   

There needs to be a government entity that is at arm’s length from the government that firstly has a narrow mandate analogous to The Bank of Canada, to at least, publish, or preferably, limit government spending to an agreed ratio with GDP or some other metric – the key being to maintain government size and spending at optimum. Secondly, this entity would report to the Canadian public on the efficacy of government spending against a fully declared policy mission, metrics and indicators and reporting in a clear and standardized manner.

The primary impediment to this dream coming true is; that any incumbent government that institutes a measure such as this incurs a disadvantage, because of the variance of accountability relative to past accountability mechanisms. The best means for implementation are nonpartisan development and deferred implementation – participants are always better at developing policy absent immediate effect.

This is in no way left or right issue, this is an issue of universal concern; regardless of what size you believe government should be, or the degree of spending you want the government to do – we should all want to know government funds are used wisely – we have no idea now.      

More Thoughts On the Issue

Thoughts on - Counter Cyclical Spending

Senate - Government Financial Monitor?

Government Resource Revenue Dependence

Government - Ensuring Optimum Size

Senate Spending & Restructuring

Government Scale & Accountability

CLICK HERE - My Professional Website

    

Crown Land - The Waste of Abundance

It is a concern for me that 95% of our province is crown land; land managed in a manner that is isolated from long-term concerns that one would see in a fee simple ownership regime.  The recent Supreme Court decision related to Chilcotin Bands’ claims, further exacerbates the problem, as the court decision has enshrined communal ownership for the band as a whole, precluding the land being used as collateral or being applied to first nation interests with any effectiveness. Worse, the government, in an effort to retain control of land is hesitant to offer tenure regimes for the long term, Forest Tenure is an example.  

There is an area South of Kamloops that I frequent regularly, there is about 100 km sq. that I walk in on a regular basis. I have been observing this piece of country for about 4 years fairly intensively and for over 30 years less intensively. As an individual that has made a living in various ways shepherding land or in some way exercising myself in relation to the land, I’ve developed an eye for land use. The subject property is grossly underutilized or utilized in a manner that fails to access the property's full potential for contribution to the economy, or to really satisfy in a fulsome way the interests of various user groups and to fulfil in a complete way the long term environmental management opportunities.

There are a number of government “tenures” over the land, recreational tenure, agricultural grazing tenure, forestry tenure, provincial park tenure and then interspersed fee simple land. The recreational tenure has a cross country ski club located in the area with several miles of ski trails over the area, on the lake adjacent to the ski trails, there is the occasional use for motorcycle ice races. Logging is done in the non-park areas in the same manner as it would be done in a less intensively used, or in a more remote area. Grazing is done by a local rancher – the grazing resources are managed in a very “extensive” (non-intensive) way. When I walk there I always think, you know, if the government gave me the list of interests there to manage, extended tenure and then a free hand to manage, I could do much better – better address interests, better utilization of the land, more land generated revenue, more taxes to the government and management with a time horizon that was intergenerational in nature. I know I can do better, what is impairing the government from accessing the full potential of crown land – the fact that there is no final authority over a manageable area, there is no “vested interest” – those managing the land are detached from the outcomes of their decisions. To a person, the people I know in government in the land management space are well educated, people of conscience and eager to do a good job – the maze of competing interests for jurisdiction I think precludes the best use of the land.

Any given area of land is best managed holistically with a management horizon that is commensurate with the resources at hand, agricultural crops for 1 to 5 years, soil for 100 years, forest interests for 40 to 100 years, geophysical alterations (mining) 50 to 100 years. The means by which government now manages tenure precludes accessing a management regime that optimizes outcomes over time; we “permit” people to go take things, rather than, providing tenures that encourage the long and productive use of the land. This tenure environment has emerged out of concern by many the crown lands are public resources and as such, access to these lands must be continual – the government has been reluctant to provide tenure regimes that see to the land resource in its entirety or even to optimize the use of a given single resource, like timber.

The subject property that I am basing my thinking on is a case in point, there is opportunity there in all areas of endeavour – from recreation to forestry to agriculture – I wager, if given access to that land to utilize as I saw fit, absent paying a single direct fee to government – stumpage, lease etc. – I could better than double revenues to government by gainfully employing likely as many as 20 people AND generate an overall land management outcome that better serves the land and the people using it.   

I walked through the area last week, I challenge anyone to go look at the recent logging for example. The people logging there met industry standards, you should go look at the material left behind – wood that has no place in the modern milling processes – but – if the right management environment was provided it could be utilized in non-conventionally ways, piled undersized greenwood, clear cut beside a ski run – these things are undesirable at best.

As for grazing, the residual grass in many areas represents overburden and riparian areas get challenged. There is an opportunity for more recreational offerings. The meadows every year have left latent tons of sedge grass that might be harvested and utilized. There are millions of dollars of latent opportunity there, there is an opportunity to enhance the wildlife there – I think we can do better. 

I believe that tenure in conjunction with an extractive management perspective is to blame. Mother earth is a generous provided, you only need to nurture it a little and think in terms of natural cycles and place human use in the mix in a harmonious way. We can do better, and we need to – the latent potential in crown land use is staggering.

More Thinking on the Subject

Click Here - Tenure Reform 

Click Here - Forest Industry 

Click Here - Professional Website 

Agriculture Supply Management - Addicted Folly

Supply Management & the Trans-Pacific Partnership (TPP)

Supply Management is showing as an inhibiting factor in Canada’s participation in the TPP, it has been an inhibiting factor in the DOHA trade talks and it played in our trade talks with the EU and it has been a bane at the WTO. Tallying the overall cost to our economy due to lost trade opportunity is outside the scope of this discourse; however, it is substantive, because the reduction in trade due the presence of Supply Management (SM) in the agriculture sector reaches beyond just agriculture. It is reported, for example, the SM is threatening Canadian participation in the TPP, which represents access to a market of 800 million people. At other international forums, SM has been an inhibiting factor – third world countries want access to our the “rich” West's food market and the West is being stubbornly obstructive; paradoxically, now, the expanding middle class in the “third world” countries is one of Canada’s biggest opportunities.

It is worth noting as well, that if you're unwilling to support the end SM for access to trade internationally, then do it for domestic reasons.  Each Canadian household subsidises the dairy industry in the amount of $260 / year, for most households, this is an imposition, for low-income people it is a burden.  Please also, support the end of SM so that we can have a healthy, vibrant primary food sector that is rationalised to the market and that is accessible to everyone.  The present SM regime in Canada is very obstructive to new entrants, and as such, retards the innovation for the respective sectors.  In the case of the BC Dairy Milk Marketing Board, for example, access to the industry for innovative production, process or new markets is grossly retarded – worse, however, is that the market share for primary dairy products has stagnated and is losing ground against products that are unaffected by SM.  All are better off if the industry operates in response to the market.

There is no question that SM regimes must go, they simply are burdensome to manage, please examine any of the SM regimes. I have examined the Milk SM regime, my conclusion is that, domestically alone, the SM regime is detrimental – TO THE INDUSTRY – as well as the rest of Canadians; it is clear that on the world trade front they are an inhibiting factor and very costly to our economy. The question if SM should go, but, how.

The Government of Canada & the provincial governments have developed, in most cases, a quota system – quota is, in essence, a permit to produce a given amount of product for a predetermined sale price. Quota when originally allotted to producers was allotted for free and was never met to accrue value – of course, the right to access a market garnered value and of course quota began to be traded. Eventually, many boards set up quota exchanges to manage the trade of quota, this was done under a government legislated regime.  There is no argument that quota has value, there is no argument that government has recognised that value and there is no argument that government legislated and by extension, forced participation in the system. Farmers have invested heavily in the system, for many, quota represents more than 50% of their net worth – government has an obligation to ensure that farmers have a transition strategy the recognises this reality.

We have quantified the cost to each household of $260 per household per year to support SM now. We can quantify the degree of benefit we will garner from free trade; we can quantify the net benefit to the taxpayer that flows from fee trade agreements. In that mix is a means to fairly remunerate farmers for relinquishing an asset and facilitating an orderly transition to a free market operation. THIS IS RIGHT AND FAIR, a byproduct of a clearly published policy on the transition that has Quota market value at the heart of it is, farmers will offer less resistance.  Conversely, there needs to be a clearly communicated benefit to the public, that shows how they benefit from the arrangement.

The time for hesitation is through, we need to act, we need the change – let’s get on with it.    

More thoughts on the subject  

Supply Management - Transition

Supply Management - Minister of International Trade

Experiences & Overview of the BC Milk Marketing System

Inverine Consultancy

Internet Freedom - Say NO to Censorship

There is a beauty in the fact, that every person now can effect their ripple of influence in the ocean of human activity, the digital revolution is affecting the democratization of the people in an unprecedented way, as there is less opportunity now to withhold, shape or obstruct information flow to the masses by the established. We have moved from Walter Cronkite to the flash mob, from bastions of credibility to authority in question, from Lord Beaverbrook to the personal website - this transformation in media, in the same way, that life imitates art and life gives birth to art - is disrupting the entire social construct. No other event in history has fragmented the meta-narrative so rapidly - it has replaced the idol rockstar with the rebirthed travelling mistral, it has given rise to the digital artisan, it has given wings to the traditional artisans, it has given the individual access to the masses. 

This powerful dynamic, the dynamic that has made every person a National Network, is threatened, however. There is a trend emerging that has greater control being placed on the internet by governments and by consolidation in influence by key corporate players. Google, by way of example, has been as a whole a liberating force in the internet space, its company creed it to distribute and share information. Google has interests that find expression by its functionality, these interests will be served because Google has critical mass in the space. I am an enthusiastic user of Google’s services on the internet, I appreciate what the company offers and understand that in exchange for their services I share my search data and get exposed to relevant materials, and for the most part this is a good thing.

This information is directed to me by artificial intelligence, so no human perusal of my habits is made, no judgement past – just like data begets like data – or one anonymous entity directing data to another anonymous entity. The Challenge comes when I, my person, am attached to data and a profile emerges with a name attached to it – from there, there is no longer metadata, this is me and my personal data, private information. Governments increasingly want to access this data and or control this data. The consolidation of influence and the interests innate in internet service providers in facilitating the confluence of data related to my person with government scrutiny and scrutiny by other third parties. That is to say, the natural process in any human interface (market) to have influence consolidate is conspiring to concentrate data related to the individual. 

 

When I was first exposed to the internet, I used Net Scape as my interface with the World Wide Web. When I typed in a search, I would get to pertinent data instantly, really substantive data on a given subject. I am finding now that I am getting a lot of “non-information” and or misinformation, or that commercial data is obviating my ability to get at “source data” or perhaps critical data. I am an ardent promoter of free-market actions, and I want the internet to be a place that facilitates enterprise, there is a paradox evolving, however, that have dominant players in effect choking out access to all data with what seems to be an exponential force. The internet is still greatly superior to the old media environment and is facilitating entrepreneurship – I am referring to this in the context of an emerging trend. My mention of Google here as a point of consolidation is in the context of the evolution of influence, we can be grateful that Google has taken many steps to ensure individual net liberty, Open Source operating systems and the like – the challenge is the consolidation of influence and the resulting capacity for governments to access and or take control of personal data.  

The internet is a reflection of humanity at large; if what you find there is offensive, it is us you’re looking at. The full spectrum of humanity is represented there, and tolerance is required. The prospect of the government choosing what is moral or immoral on my behalf is a grossly offensive prospect. At what point does government stop this sort of intervention into the private lives of the populace; it may be “pornography” today and depictions of gluttony tomorrow, a sin, after all, is a sin, noone is enthusiastic about a child eating themselves to obesity. These sorts of technical interventions have proven dangerous, China’s persecution of Fallen Gong for example. Once an institution starts down the path of dropping a blanket of judgment over the populace at large, the society becomes a dull and indistinguishable place of being. Cultural or life modality variance, is healthy; government is very ineffective at managing the personal lives of people; information is what defines people.

We do have the obligation to keep the PUBLIC SQUARE as influence natural as possible, I should be able to walk down the street with my child and have them arrive at the other end unaffected morally; they should remain in the state of morality I, as a parent, have provided.  The family is the only appropriate mechanism for the delivery of moral concern or organizations that parents voluntarily choose to expose their children to.  

The presence of adult content available for access at one’s own discretion is only accessed as an act of free will, parents have the option to exercise that free will in the interests of their children. For the government to intervene in that process in a manner that forces one to identify themself, puts information in the hands of a government that could in some way subject these individuals to discrimination or be accessed illegitimately as a filter for other societal endeavours. By way of example, Safeway in the US once sold pharmaceutical data to insurance companies absent the knowledge of the person’s concerned; there are thousands of examples of data abuse, not the least of which was the recent breach of Revenue Canada’s data.

There are elements of widely held taboo, child pornography is illegal and is wholly offensive. The subjection of a child to sexual abuse has clear harm, physically and mentally, and the full weight of government, of all of us, must come to bear on protecting children. Prior to the internet this element of society was embedded and dispersed. As a result of the Internet, the perpetrators of this type of conduct congregated and gave authorities a means by which to detect and locate them. Had the system blocked the traffic related to this subject matter, this despicable element of society would have remained undetectable. As a Toronto policeman said, “I can’t walk down the street and ask someone if they are a pedophile, but I can on the internet.” The Toronto Police were able to identify groups of pedophiles the world over and were able to safeguard  children as a result. As grossly offensive as this subject matter is, it offered a resolution to the challenge for police and provided an observable target. Clearly, child pornography is a scourge, to know its point of origin we need to know its there.

Adult content is at the discretion of adults to access. As adults, we need to protect our childrens' innocence so they can grow into adults with the full spectrum of choices in life modalities. When the government puts a blanket filler on adult content and forces one to identify themselves to access it, is a breach of their personal liberty for reasons stated above and no different than forcing me to give my name to access the United Church website. The only practical means to filter content is at the point of consumption. The government should be working on provisioning tools for parents to filter content on personal devices, and the government should invest in the enabling parents to control minors' access to content.  

Recently, the UK government is wanting to take steps to restrict control of adult content by forcing people to identify themselves in order to access sites the government has “blocked” general access to. The government offers as justification for this the protection of children from premature exposure to adult content. Of course, we all share their concern; exposure to many types of Adult content can “corrupt” a young mind. When I say “corrupt”, I mean providing access to unhealthy sexuality, as opposed to sexuality that is an extension of human love. I offer this to clarify, to make distinct from religious concern, that mine is other than a puritanical concern, but rather a protective concern to ensure an appropriate introduction to a healthy view of human sexuality.  While I share the need to direct children’s access to the web, and by extension adult content – I vehemently oppose the methods proposed by the government and the forced association of individuals with data that is judged harshly from a puritanical perspective.  It is safer and healthier to have the point of control for this data in the hands of parents at the device level – to control access to adult content by government perusal brings government into a place that is highly intimate and by extension provisions functionality that allows the government to peruse other data as well.     

The world of entertainment is full of the depiction of evil, by seeing evil we become acquainted with it – we come to understand it. Only by exposure to it can we gain the insight we need to wage war against it. There are just too many instances where the government has been the evil, or religious institutions have burnt people at the stake for “adult content”. There is no clear distinction between censorship and good old-fashioned book burning; curtailing information in any way curtails progress. Evil has always been with us, it raises its head as often at the hands of the ostensibly righteous as it does the clearly sinister; the only thing that has ever stopped evil is the good judgment of an enlightened individual.  

The exploitation of women is a concern, to attach exploitation of women to adult content, in general, is an errant path of thought, it carries inherent in it 2000 years of distortion around the perception of female sexuality and the dumping of a distorted perception of virtue in women’s laps. We are all eager to protect women in vulnerable circumstances from exploitation.  It is my sense that the physiological coupling of violence and sexuality is a dangerous path. I believe violent depictions of adult activity are most often associated with female exploitation, if women are being forced into these circumstances it requires functionality on the ground to address it, internet censorship has no means to determine the presence or absence of coercion. To presume a woman is being exploited because she is shown in adult entertainment is a product of a prevalent bias, a bias I believe feminists are fighting to eradicate.

My personal use of the internet and the content and information I garner as a resource there, no one could have imagined just a few years ago. The openness of the information highway has facilitated the distribution of information to so many and has democratized almost every element of modern life. There is both promise and peril in openness, openness regardless of the risks is the only path to enlightenment and may the enlightenment continue.