Christmas Letter 2020

 

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Post Covid 19 Policy - A successful restart means smart investment and avoiding spending

We have been faced with a horrific event; we are reeling to a degree. I believe that most people in government are seeking to help. The road to hell is often paved with good intentions; however, that is why I am compelled at this time to offer suggestions to the government on a way forward.

Whenever one begins any endeavour, as Mr Covey taught us, it is wise, to begin with the end in mind. Then one needs to strip clean all the entrenched interests and the politics and design a solution. Once the solution is developed then one needs to look at the landscape as it is and fit the solution in place. The process of fitting the solution in place then involves addressing the interests of affected parties; a process that is most often under-addressed – think NAFTA, we heard a lot from the 11,000 people put out of work and nothing from the 100s of thousands put to work.  To effect change in the face of entrenched interests, it is critical that you commit to seeing to those whose interests are negatively impacted – this should be done as a humanitarian imperative – but if that is too ultraistic a cause, know this – people with entrenched interests are going to fight you every step of the way absent a mitigating offering.

I have spent a good deal of my life now, thinking about how to make Canada better, more than better, the best. How to address the issues of the “left”, like inequality, like poverty, like discrimination of all sorts – the progressive agenda as it is commonly perceived. I have thought about fixing these problems from the perspective of someone who believes that we need evolution as opposed to revolution, I believe that we are living in the solution, we need only tweak what we have in Canada. Please let me remind the reader that we live here and now at the pinnacle of human existence – no collection of people have ever had it better.

The first step toward finding solutions is to look back, see what has helped and what has harmed – take an objective look at history. Through the seventies in Canada we ran up massive debt, we stimulated the economy and there were inherent realities that drove our economy to capacity – I think it would be fair to say the inflation we experienced in the seventies was about half fiat currency and about half capacity. What we know for sure is, if you increase the money supply, you get inflation, John Law showed us how that worked in France. Moreover, building up large debt is the heroin of public policy, feels good until paying it back takes food from the mouths of children. The government should INVEST, the government should never spend.

Inequality is bad, as it builds a group of people who are the have nots, justifiably frustrated at the absence of opportunity. It is the inherent reality of capital that it attracts capital. A market economy is a well-oiled machine and excels at the distribution of goods and services – we have to avoid letting the behaviour of capital rob us of the source of our prosperity – the market economy.  The inequality in our society is in sharp relief, the people negatively impacted by it look to solutions that seem to fix inequality but in time impoverish us all.  If I have $10 million, Bill Gates having $60 billion is no bother, however, if I am Sally, a single Mom, working two jobs, watering down the milk for my kid's cereal in the morning – the $10 million guys are as bad as Bill – Sally is resentful, to her “they” are a bunch of greedy capitalists. She has a right to be resentful, she is playing by the rules, she needs opportunity and a path to success. If you give her a path to success, you have a friend to the free market and prosperous policy, if you turn your back on her, or worse, find new and creative ways to exploit her, you have someone who will throw in with people who peddle equality as the solution rather than inequality be the challenge – from there comes the quagmire of crippling policy “solutions” known as "redistributive policy".

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CLICK HERE - WHY MINIMUM INCOME MAKES SENSE

To the redistributionist I say this, it is bad policy for a whole bunch of reasons, and here is one, a big one. In case you’ve never noticed, people hate it when someone takes something they view as theirs and they love to be prosperous and secure – so rather than threaten to take from the successful what they have earned and accumulated for themselves and their families – tie the interests of those negatively impacted by inequality to the interests of the people who have resources – think win-win.

When designing policy, wherever possible, the most important thing you can do is to FUND PEOPLE, never institutions. When you fund people, you empower them and institutions respond to them. When you fund institutions the institutions become insular, the holders of power and oftentimes turn their back on the interests of the people they are there to serve. This truth is rarely uttered in halls of power because it threatens so many entrenched interests. We need institutional reform in Canada, funding institutions feeds institutional inertia and the hardening of problems, rather than feeding the solutions.

If the market is functioning as it should and people have access to the resources to enter the market, most of the progressive agenda is taken care of.  When a market works correctly, there is a demand for a good or a service and there is someone who seeks to provide the solution. If price drives the purchasing decision – then whether the service provider is female, black, white, smart, challenged, mentally ill, young or old – if they can provide the product or service then they get the benefit. The thing that corrupts this process are regulations that prevent fair access to markets. The only thing that inhibits participation in markets is the absence of resources at critical mass to access the market.

We have at this time in Canada one of the largest pools of wealth in the form of boomer wealth accumulation and the wealth they have inherited from their parents. They are presently investing that money via traditional investment modalities, some doing okay, some not – this pool of capital is in effect latent from the perspective of getting capital to young people starting out in life, or people with innovation, people starting a new business – the kind of people who need resources and find little or no support from traditional lenders and capitalization modalities.

CLICK HERE - ECONOMIC STAGNATION - BOOMER WEALTH

Creative Use of Bonds and Creative Bond Distribution Systems

One can view these solutions as the creative use of bonds that would be analogous to Municipal Bonds; a different but similar structure augmented by varying degrees of return subsidies and tax incentives.

Capital goes to the lowest risk and the highest return – the only way to attract capital is to address one or both of these realities. The people who need capital to enter the market normally represent a higher risk for a number of reasons. The government has engaged in effectively quantitative easing already, the government has effectively “guaranteed” loans already. The challenge for this group of people is that the government has used all the traditional channels – banks, credit unions etc. An entrepreneur is normally impaired rather than helped by these lenders.

Programs like these accelerate the provision of capital to entrepreneurs and/or individuals needing capital to enter the marketplace for any reason. Perhaps most exciting is the government’s partial guarantee and return subsidy, unleashing the now latent “boomer” capital now receiving mediocre returns due to risk considerations.

There is no sector of the economy harder hit than the small business/artisan sector. Aggressive stimulus in the manner suggested here, gives this extremely productive segment of the economy a boost and expands it and if designed properly access to capital will be more or less free of red tape.    

Policy Suggestion 1 – Entrepreneur Bond

The government should develop a bond program for this sector of the economy.  The bonds would be structured with a partial guarantee, a capital gains credit in case of loss and a return subsidy to a certain threshold. The return subsidy could be varied in response to prioritized activities; the return subsidy would be perhaps higher for innovation, or perhaps a regional premium to encourage activity in economically suppressed regions. These provisions for targeted quantitative easing and gets capital to those who are typically rebuffed by traditional lending modalities.

Bond distribution would take the form of an individual posting their intended course of action on a website with their desired market capital requirements. Investors would access the data, interface with the individuals and choose to participate or not. Market Cap would be held to perhaps $10 million.

The Venture Capital Program in British Columbia illustrates how the elevated capital tax credit against capital loss would work.     

Policy Suggestion 2 – Forestry Bond

In the same vein, the government in conjunction with other actors would initiate a forestry bond market. There is a collection of Silviculture practices that when undertaken generate an approximate 7% annual return – they consist of thinning, limbing and other practices. The benefit of doing these practices is the forest is healthier, more productive, and less fire-prone forest and it shortens the harvesting cycle which offers more revenue opportunities – increasing the long-run sustainable yield. The inhibiting factors are funds and the projected return is light. Here a small return subsidy would go a long way to incentivizing various jurisdictions to do the Silviculture that now goes wanting.

The bondholder would purchase a forestry bond issued by the bond seller. The bond seller would be the entity that designed and implemented the Silviculture prescription for a given plot of Forest. The forest performance would be benched marked against historical data – the incremental forest volume benefit would be calculated at harvest. At this point, the government would have the opportunity to “clawback” the subsidy or a portion thereof and the entity that has invested in the Silviculture program and having used funds to bond funds to perform the work, will perhaps generate a premium at harvest – keeping the provisioning entity in hand in this way incents long term stewardship of the resource, an element that is wanting in British Columbia and in other jurisdictions as well. Given the nature of the forest cycle, bonds would likely trade through the course of 50 years as would the relative value structure of the entity doing the Silviculture.

   

This has an obvious climate premium and social premium as well. The climate premium comes from faster carbon sequestration, the social premium is generated by first driving rural economic activity and this type of work offers employment to a stratum of the workforce whose opportunities are shrinking.   

Policy Suggestion 3 – Building Carbon Reduction Bond

It is the case many of the things we want to do in the realm of conservation are challenged by economic realities – the marginal benefit of performing the action fails to return sufficiently to cover the cost of doing the action and offset the opportunity cost of capital involved.

In the same vein as above, a bond system could be put in place, with bond returns tailored to effect incentive for carbon us reduction. 

A person wants to super insolate their home, they access funds through the bond program and returns are augmented by the government so capital is rewarded to the degree needed to incent the work. These types of programs are very simulative and if offered in this way they open the door to several approaches to participants – the work can be done in house or offered at contract.  

More thinking on the Subject

Stagnation Nation - Stimulative Policy - Less Government MoneyWhy the Government Needs to be RationedCounter-Cyclical Spend - Where the smart money goes

Infrastructure

CLICK HERE - SMART INFRASTRUCTURE

CLICK HERE - TRANSPORTATION AND HOUSING BEDFELLOWS

CLICK HERE - My Professional Website

EMERGENCY MEASURES ACT

RE: Emergency Measures Act.

What has happened across Canada, is an ad-hoc approach to the encroachment civil rights - some Mayor arbitrarily decides to get heavy-handed and instructs the local police force to shut people in their homes. There are numerous examples of arbitrary application of laws, that is to say, laws applied for reasons they were never intended. IE. using Park's legislation to shut down parks to manage social distancing for disease control. There is a multitude of similar civil rights breaches and infringements that have occurred in this way - and with a multitude of bad precedents. Had the Emergency Measures Act been activated it would be a matter of public record as to why and its purposes, it would have been subordinated to the Charter and subject oversight by parliament, thus providing a legal umbrella to administer the law under; specifically the Emergency Measures Act. and then the law generally. In this way, social distancing and other measures, such as restricting the right to assembly would have been exercised under the EM act - rather than arbitrarily as they were. This process would have provided a clear statutory point of delineation - "date x" civil rights were intruded on and on "date b" it is now over. Further, and as concerning, in allowing the provinces to do this absent federal authority clearly given, federal paramountcy is weakened. 

The Myth that Growth is BAD and the Earth is Limited

One realizes there are serious environmental issues and that attention to said issues is critical to long term wellbeing of humanity. When there is an environmental issue, look to environmental solutions. A market economy is value neural; an unfettered market distributes goods and services in an extremely efficient manner. It cares not about the environment, it cares not about inequality – it does one thing, it manages the distribution of goods and services between parties under the rubric of supply and demand.  So stop blaming the market economy for social and environmental problems, especially when you look around the world and see the countries with a market economy, rule of law and property rights represent the healthiest and most prosperous in human history.

Growth is a good thing. An expanding economy provides an opportunity for young people and the disadvantaged.  A FREE MARKET permits participation influenced completely by one's ability to bring a good or service to market in a competitive way. A FREE MARKET is colour blind and is blind to sexuality - there is a product, there is a demand, fill the demand and you derive benefit. This is an overriding truth - a FREE MARKET is value-neutral. When you see racial discrimination, sexual inequality or inequality generally, look to what's causing the problem as opposed to blaming the market. 

There is no rational connection between environmental degradation and economic growth. In the 1980's the US economy decoupled from fossil fuels - prior, the consumption of fossil fuel climbed in lockstep with the economy. The reason this transpired is, the economy moved toward an intellectual economy, growth is now coming from services and development of intellectual property in the form of advanced technologies - in the new economy, growth is taking us away from fossil fuel consumption.

The Malthusian proposition is just stupid. This is the belief that the earth's resources are finite and people are going to consume themselves out of existence, it is unfounded. The Malthusian proposition emerges from 1778 and the experience of some island dwellers, it is completely ineffectual as a metaphor for the entire universe. As Churchill once said, "mother earth is a generous provider". The easiest thing to sell to humanity, especially those who have been unjustly treated, is scarcity. Scarcity is lodged in our brains because over our evolution we've had little or no capacity to pull away from it.

The fact is, the universe is limitless, the fact is that we have plenty of resources, food and materials for a generalised state of prosperity. The solution to seeing a generalized state of prosperity lies in seeding opportunity to people and advocating taking things from people only serves to retard progress. I have never understood why in the face of overwhelming evidence, people persist in biting the hand that feeds them.

Dear Canadians – If nothing else, unto thyself be true – know where your bread is buttered.

Canada, a once fledgeling nation, had a competitor, The United States of America. We had on our side the British Empire. The one thing that our founding fathers and the British Empire wanted to avoid was the vision of the US leadership that was expressed as Manifest Destany – a single North American Country. This reality gave rise to the need to propagandize against The US and so came into being – Anti Americanism. To this day, Canadian leadership persist with fomenting a series of negative perceptions of the US in the interests of cultural differentiation. I am a proud Canadian, proud of my Scottish / Anglo heritage and proud of my and my family’s extended relationship with the British Empire. That being said, I find few things more inspiring than the US constitution and the extraordinary success the United States of America has become.

So I ask those spewing Anti America rhetoric, what are you objecting to? Is it human rights? Is the right to life, liberty and the pursuit of happiness – or security of the person in Canada’s case? The United States was born out of enlightenment values – freedom of religion, speech, association, - are we wanting to throw these things away? Would you throw away the Westminster parliamentary system, common law, the independent judiciary or the three pillars of government? Would you dismiss the separation of church and state? Thomas Jefferson said, in the pursuit of democratic/secular values “if a man neither picks my pocket nor breaks my leg, what do I care if he has one or a hundred gods”. The comment neither excludes nor enhances my pursuit of a monotheistic faith; it is recognition that another’s truth can be as valid as my own – I dare say, that few would have the courage to make this statement today.

I hear the “post-capitalism” crowd slamming the American dream as a fraud. While the British Empire languished under the yoke of decadence from the mid-1800s onward, the American Dream gave the US the eye of the tiger, the US raced to world dominance and the British Empire crumbled and disintegrated. The US is the Constantinople equivalent to the British Empire – the successful offspring. The people slamming the US are doing so having gained unparalleled prosperity under US hegemony. In many ways, the US and its modalities of governance are the very best expression of British governance. No single entity, with all its foibles, has contributed more to the cause of freedom than the United States of America.

   

I live in fear when I witness widespread relinquishment of core values within the US. I live in fear when I witness full-scale attacks on the United States’ key elements of prosperity and freedom by political, national and international actors. I have no challenge reconciling my being Canadian, having evolved out of the British Empire to a member a secular society and extending unwavering support for the cause of freedom as expressed by the core values in the United States Constitution – the same core values expressed in our own Charter of Rights and Freedoms. In Canada, at this moment in time, we live at the pinnacle of human existence, the most prosperous people ever, that has happened under United States hegemony and much of our prosperity is bought and paid for by the US. To those that cheer at US misfortune, the insecure/sour grapes brigade, be very careful what you wish for or lockdown may end up being your permeant reality. I for one, attempt to be a secure Canadian, to take pride in our humanity, and at once, support the US to do as it has done and to evolve as they always have done.

State Paternalism - The balance between the collective and the individual & Covid 19

State paternalism is problematic for a number of reasons, it obstructs people from helping themselves, it creates dependence rather than independence, it encroaches on personal choice and it kills initiative. The state, rather than regulating and controlling people, should educate and facilitate. Of course, there are extreme instances when the state must respond to the common good, emergencies like Covid 19 or a war. However, even in the context of an extreme circumstance, the government should seek to help people help themselves - rather than forcing people to heal.

When we had H1N1, a family member having a precondition which qualified them for early vaccination attended for vaccination. The government solution to vaccinating people was to set up a vaccination centre in a church - 100s people congregated there to get their vaccination; the most vulnerable. We never knew who was presymptomatic, who was an asymptomatic carrier or who was unaffected and neither did the government - yet they did it anyway. It makes no sense, whatsoever, to respond to a contagious disease by congregating people or by bringing them to a central hospital. It makes more sense to maintain social distancing, to isolate people from one another. So why then did the government do such a silly thing and why are they still doing such silly things? Now with Covid 19, they have people reporting to centralized treatment centres, centralized testing centres etc.. 

I think the reason the government would congregate people during a pandemic to vaccinate is so medical professionals can administer the shot. The better solution would be to distribute the vaccination kits to people's homes via a courier or special Canada Post and have people administer the vaccine to themselves. I give myself B6 and B12 injections all the time, I give myself the flu shot every year - there are few simpler tasks than giving an injection - yet the government is willing to put lives at risk - why.

Why does the government insist that I have a prescription from a doctor to get a drug? A smart person would seek the advice of a doctor before starting on to a new drug - I would - yet the government insists that every time I want drugs I have to get a prescription - even ones I've been taken before. In most cases, it is a complete waste fo time and resources. The doctor prescribes medication often absent the knowledge of what other drugs a person is taking - especially now when so many people rely on walk-in clinics and there is little continuity of care. In all my years of attending to pharmacies, I've never had anyone ask about my diet, my other medications or supplements herbal or otherwise. So the "safeguards" that are touted as the reason these regulations are in place, are ineffective. So why have them?

The challenge we face when state paternalism controls our actions is, the solutions are delivered by edict, top-down, a one size fits all solution for the entire population. It is good for the government to provide pertinent information and to coordinate a response; it is bad when the government impairs people's capacity to care for themselves, especially when governments' assumption of generalised incompetence puts people at greater risk. We need to support people in being self-reliant, independent and resilient - if you give people the data and the tools, they are their best keepers. When you allow varied and independent response to challenges, a 1000 flowers bloom and new best practices emerge.

The depth of knowledge that resides in the population, or in the case of Covid 19 with the medical personnel, can never be accessed under a collection of edicts. Is just a fact of life, if I, by myself, list all the green vegetables I can think of, that 10 people will list many more. It is a paradox, that the collective, is best served by individuals acting in harmony to a cause rather than under the thumb of leadership/authority. It is a truth, that the best decisions are made closest to the point of action, that is to say, that people affected by all the immediacies of a given circumstance are best equipped to respond - rather than some centralized authority somewhere. There is a trend toward the infantilisation of the population, it effects control by dependence - it is insidious and one of the greatest risks to our liberty.