Monday, December 27, 2010

The IMF On Canada

The IMF (International Monetary Fund) released their report on Canada last week. Let's see what it says:

Recent data point to a further weakening in the economic recovery

A jobless recovery is no recovery at all. Of course there is going to be further weakening, throwing money at problems rarely fixes anything.

Recent measures smooth the medium-term fiscal adjustment path.

Fiscal stimulus is never a good idea. Extending it to the end of October 2011 instead of this March is beyond retarded.

Provincial budgets consolidation plans remain on track, with recent fiscal data more favorable than anticipated.

The IMF must have skipped over Ontario. Dwight Duncan has done a terrible job in Ontario, increasing the deficit and landing our total debt to the tune of $220 billion. We're the California of Canada. And California is the Greece of the United States. Greece is the United States of the world. And Ontario relies heavily on the United States market.

On December 7, as widely expected, the Bank of Canada left the overnight rate unchanged at 1 percent for a second consecutive meeting.

The IMF doesn't mention if they agree with this policy or not. I think the change was too timid. Aside from completely abolishing the central bank, I'd like Carney to jack up interest rates. How high? 15% may do it, we may need to go higher though.

Financial markets conditions have remained broadly stable.

Calling our financial markets stable is like sky-driving and falsely believing that you're flying. Eventually it becomes apparent that you're falling and in dire need of a parachute. Some call Government Guarantees our parachute. If that's the case, expect our parachute bag to contain an IOU note.

The Canadian economy emerged from the recession in the second half of 2009

Yeah, okay. I'll give them that, but only because the 08/09 recession was a result from a drop in international exports. When the made-in-Canada recession gets underway (possibly in 2011) then we'll see how well the Canadian economy is doing.

Domestic demand has been buoyant, in part because bank credit continued to flow thanks to a resilient financial system.

And this easy bank credit will be our downfall. Replace the word “resilient” to “lucky” financial system and the picture starts to form itself.

The rapid turnaround of activity and vigorous domestic demand owes much to the government’s rightly-sized and well-targeted macroeconomic stimulus.

I've written in length about the stimulus. Far from making things better, government meddling has made things worse. Much worse.

The labor market has been a relatively bright spot in the recovery

The IMF's own document goes onto say that these bright spots are in household related consumption. Booms always look good on the way up.

However, the recovery is now moderating

That is to say, all the central planning tricks are starting to show signs of failure. I told you this would happen, now things are going to be worse. Much worse.

Despite considerable economic slack, core inflation remains around the middle of the control range.

Despite the State's official numbers, between 2005 to 2009, the M3 has increased exponentially. The CPI is a sham, ignore those numbers.

Canadian banks were resilient to the global crisis

The IMF goes onto say “ government liquidity injections in 2008–2009...helped maintain stability” Bailouts, anyone?

Staff estimates suggest that the Canadian dollar is on the firm side, but there are no signs of a strong overvaluation

Yes, because increasing purchasing power is obviously a bad thing.

The outlook for provinces will depend on the evolution of commodity prices and trade

I can't speak for all provinces, but the outlook for the one I live in – Ontario – will depend on how quickly we can privatize everything. Ontario's problems go far beyond McGuinty's band of criminals. We need a complete overhaul of the system if future generations are going to have any kind of future.

Potential growth would recover gradually to around 2 percent (of GDP)

Why the hell not? The way governments record GDP, they could print up a bunch of money, create a new bureaucracy and hire all the unemployed. Then we'd probably see “growth” far exceed 2 percent.

In addition, Canada’s economic performance has important spillovers for small countries in the Western Hemisphere.

Since American tourists can't visit Cuba, they rely on us and the Europeans. As the Europeans drown themselves in their welfare state, Cuba's economy will rely on Canadians. Of course, this is flawed thinking. Tourist based economies can rely on all the new Chinese consumers looking for a Caribbean holiday (and with Cuba being just as authoritarian as their home country, China has nothing to lose). The point being – unless the smaller countries rely on something distinctly Canadian, other countries in better financial shape will step up to fill the supply.

From an international point of view, Canada’s overall fiscal outlook in the aftermath of the crisis stands out as among the best in the G-20

We haven't had our correction yet, that's why.

The mission noted the significant risks to long-term fiscal sustainability from the budgetary impact of population ageing and health-care inflation

Another reason to privatize health-care. Plus, it's aging, not 'ageing'.

For the longer-run, restraint in health care spending will be an essential ingredient in fiscal stability.

I know it seems like harsh medicine for Canadians unfamiliar with private health-care, but we can't ignore this problem any longer. Privatization is the only answer.

There's much more, and plenty about our housing bubble. Of course, the IMF doesn't call it such, rather they refer to booms and corrections. Perhaps I'll discuss that another day.

As most Canadians ignore the IMF, our politicians will continue to heed their warnings and take their advice. I'm not conspiracy-prone by nature. But you gotta wonder back in the 90's when those New World Order survivalists were talking about World Government, did they have the IMF and World Bank in mind? SDR's, the Bancor, etc.? Are we moving closer to a world government where Canada is merely just a nation-state with politician figureheads with no real power?

I hope not... Then again, our current system isn't much better.

I guess a stateless society is our only alternative now.

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