Yes, it would be tragic if someone other than Ontario paid more than its fair share to maintain the Confederation.

Having friends in high places has propelled me to the #19 spot and so I was delighted to see that Lorne Gunter has responded to Alan over at the National Post:

The share of the green taxes he wishes to impose on Alberta and Saskatchewan would work out to nearly $1,500 per capita, or $6,000 per family. In the rest of the country, the load would be just $325 per person or $1,300 a family.

And it’s not as though Albertans, in particular, aren’t making a disproportionate contribution to federal finances already.

In addition to fuelling the federal budget surplus, Albertans contribute about $4,000 more per person to federal finances than they receive back in federal program spending. By comparison, the fiscal deficit Ontario Premier Dalton McGuinty frequently speaks of for his province is just over $1,500 per person per year, and Green Shift wouldn’t raise that to $2,000. national post

Trust me Alan, if Dion is elected and tries to pull this stunt the anger out here is going to make NEP I look timid. And this time there is a real capacity to go it alone.

1. After many months of crappy headlines and no shortage of bad luck, the polls reveal that Dion’s Liberals and Harper’s Tories are still… tied, mostly. It’s a fair question to ask: if all of Dion’s critics are right, then why is Dion still competitive? Because voters - particularly female voters - still have a lot of a reluctance about penciling an “X” beside the Conservative candidates’ name. In politics, it’s always good to be underestimated by your opponent. The polls say [the Tory] team is underestimating Dion. Big time.

There are lots of reasons but the fact is that Harper has not been able to open up even a tiny gap.

3. Dion is no dummy. He knows the Tories want to run a campaign about “leadership” - they’ve been telegraphing that for months. So Dion need only do what Chrétien did in similar circumstances in 1993: step back a bit and emphasize plan and team. And he’s got a Hell of team: Hall-Finlay, Rae, Dryden, Ignatieff, Kennedy, and so many others. It is a powerful front bench, one with a lot of name recognition. Can the Tories say the same thing?

Even if Harper was a half decent Leader, which he is only relative to Dion and Layton, the team theme can work. Quick, name a federal cabinet minister who could take over if PMSH was hit by a bus.

4. The Tories have a message deficit. They can’t run an “outsider” campaign - they’re the incumbents. They can’t run a “scandal” campaign, thanks to Mr. Mulroney. So they will run a campaign about “leadership” - but leadership is an exceedingly woolly concept. Voters like meat and potatoes platforms (which is why Harper won in 2006, by the way). If I were Dion, I’d do a campaign on government services - making ‘em better, and not just eliminating them, the way Tories always do. Mix in some environment, some fiscal federalism, and voilà!

Yup. The problem with running a message free operation is that, well, there is no message. Dion can campaign on whatever he likes, Harper seems to be committed to campaigning on thin air.

Say what you like about PMSH, he is certainly in no danger of being called a “conservative”. He is in no danger of being called a “socon” or a libertarian. So what is he, exactly? What has he delivered? His Finance Minister has been bright enough not to derail the Martinite fiscal policy which makes Canada the envy of the OECD. Other than that, name a policy or a position which the CPC has adopted which could not have been adopted by the Grits.

9.The media remain distinctly less-than-friendly with the Harper folks. They may not love Stéphane Dion, but – during the campaign – you can expect to see them cuddling with him more than once, if only to get back at Harper’s PMO. It’ll be ugly, as love triangles always are. But Dion will benefit.

It is one thing to put the media in their place, it is quite another to run a press operation which antagonizes the media without running the other side, the end run, which marginalizes them. Harper showed willing to put the boots to the dullards in the Parliamentary Press Gallery; but he failed entirely to make the moves - on the net and in the non-MSM - which would have marginalized them. Bad advice and a very limited capacity to think outside the box.

The liar Kinsella expends some pixels on Jim Flaherty’s fight with McGuinty. It is probably important because the Harper folks think they might win a few more Ontario seats and they probably won’t as a result of this. However, the smartest thing Harper can do is to write off TO and enviorns and look to Quebec and the rest of Canada for his majority. Sadly he seems entirely incapable of ignoring “vote-rich” Ontario.

Dion, despite being possibly the worst leader the Liberals have ever foisted themselves with, could quite easily maintain the status quo and, with a couple of breaks, shift a few seats and form a government. This will not be a Dion win, it will be a Harper and CPC loss.

People like Jim Kunstler can barely contain their glee. After all, the potential collapse of the American financial system just proved that George Bush, the suburbs, greedy Wall Streeters and sleazy mortgage merchants are just as bad as Kunstler has been saying they are. Throw in the rising price of oil and the falling dollar and the end of economic life as we know it - at least in America - is just around the corner.

Now, as it happens, I don’t live in America and from where I am sitting the “marking to market” of the sub-prime mortgage market, assorted bundled credit card debt and mounds of leveraged buyout corporate paper seems both necessary and manageable. The decline of the American dollar - given the US trade deficit and ongoing budget deficit - is also necessary and can be controlled to a degree. A decade and a half of capital export has to be paid for and that payment will take the form of a significant reduction in Americans standards of living.

How big a reduction and how it is distributed is, at the moment, unknown. However, to take a simple example, if the American dollar continues to decline the price of oil in dollars will continue to rise (although there is an awful lot of speculative froth in the oil market). Gas will go to $5.00 a gallon and this will take a chunk out of people’s disposable income. Similarly, consumer goods made overseas will rise in price.

On the other hand, things like houses and rent are likely to fall and fall fast. Not good if you own a house with a big mortgage, but encouraging if you are renting and hoping to buy.

The real question is how quickly this all happens. If it occurs over a few years the dislocations will be painful but possible. However, if it occurs in a matter of months the foundations of the American economy will be threatened.

At this point the Federal Reserve is pumping money into the system to try and extend the adjustment period. The worry is that that extension may be purchased with bad decisions and that those decisions will further erode the currency:

Paper dollars are technically Federal Reserve Notes, which means they are liabilities of the Fed. When it puts newly minted notes into circulation it does so by buying assets, usually U.S. treasuries, which it then holds on its balance sheet to offset that liability. By swapping treasuries for mortgages, the Fed effectively alters the compilation of its balance sheet and the backing of its notes.

However, backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation. Assignats, which were first issued in 1790 to help finance the French revolution, were backed by mortgages on confiscated church properties. Although the stolen underlying collateral did have some value, the revolutionaries saw no reason to limit how many Assignats were printed, which resulted in massive depreciation. Within three years, price controls were introduced and failure to accept Assignats, initially an offence subject to six years in prison, was made a capital crime. By 1799 the currency was completely worthless. 321gold.com

Central bankers know this stuff. To a degree the Fed is willing to run the risk of holding potentially worthless collateral in order to preserve the overall system. As a “one off” the Bear Stearns loan is not completely idiotic; however, as a pattern such loans could sink the value of the dollar in a matter of months.

Canada is in an odd position in all this. Our banks, while they took on some sub-prime exposure, have not been lending recklessly. Our governments, federal and some provincial, have a decade and a half of zero deficits and, in many cases budget surpluses. We have relatively low inflation. We have a huge endowment of ever more valuable oil and gas.

While we are, of course, exposed to the economy of our largest trading partner, our economy has been decoupling from the American economy for years. Which can be seen in our dollar’s strength relative to the USD. There is no reason to believe that the pain in the US will cross the border.

The US is undergoing a reality check. It’s political and financial systems have to re-align themselves so that budget and trade deficits are first reduced and then eliminated. Lending into bubbles will cause trillions of dollars to simply be flushed from the system. However, at the end of this process America will still have a huge economy and a vast capacity to invent, manufacture, design, distribute and market high value goods and services. If America can get its financial and political house in order there is every reason to believe it can beat the bears and emerge as an economic, scientific and cultural powerhouse.

With intelligent, realistic, decisions the contraction and re-emergence could take a couple of unpleasant years. With the wrong decisions, or, worse, no decisions or panic, a decade could be wasted.

Update: blazingcatfur notes that JP Morgan has just bought Bear Stearns for $2.00 per share. It closed Friday at $30.00 per share. Marked to market indeed.

Update:

JPMorgan today agreed to buy Bear Stearns, the second- biggest underwriter of U.S. mortgage securities, for $240 million, less than a 10th of its value last week. In order to strike a deal before the opening of Tokyo trading, the Fed agreed to help JPMorgan finance up to $30 billion of Bear Stearns “less liquid assets.” bloomberg

Finance for grown ups. The “sub-prime mess” is a convenient shorthand for “Bankers gone Wild”. Understanding that will make what is coming rather easier to comprehend if not actually enjoy. The weird part being that the sub-prime issue is a really rather small part of the whole. Sort of like the fat girl taking off her bra; ugly but hardly the main event.

Cheap debt does not cause losses. Being on the wrong side of information asymmetry does. When structures are complex, falling back to a careful look at incentives often is the best (and only) behavioral prediction mechanism. going private

Information asymmetry may be inherent in a particular transaction; however, across a bundle of transactions a bit of work should be able to bring information into rough balance. But not if the focus is on deal flow rather than deal quality.

The golden crumbs approach leads directly to deal flow. One piece of financial paper looks very much like another, the covenants are, more or less identical - quality? Well there were the four hundred appraisals but those are pro forma. Or are they. At the moment there are a lot of empty house with their pipes cracking in the frost which strongly suggest that appraisals and risk analysis are not just pro forma. They are what bankers do and if they don’t the information asymmetry bites them in the ass.

Yup!

I can’t imagine why he has only the two 50″ plasma tvs.

(ht. the prof)

My father, who is doing about 50K RPM in his grave, was a banker of the really old school. He didn’t believe in credit cards. I supect he would be enjoying watching the quant jocks “mark to market”.

“So, Bob, what are those mortgages worth if we were to sell them like right now?”

“.076548 on the dollar, Sir.”

“Cool Bob. Jump out that window Bob. I laid off the risk of my jumping to a fund you invested in. Happy landings buddy.”

Like carbon offsets, derivatives are useful to a point. Securitizing a bundle of A+ mortgages or property backed corporate paper makes a good deal of sense; lending money to a gal in SoCal in a slum ling on Social Security, not so much.

Real banks are going to have the capital to suck it up. Fake ones are screwed. What I want to see is huge reserve set asides to deal with Tier 3 stuff which is, essentially junk. the Canadian banks seem to be doing this.

Dad would be proud…and then he would fire the SOBs who placed returns ahead of prudence.

So perhaps it is time for conservatives and market liberals to have a little rethink. The strategy of throwing their lot in with the Conservatives has been tried, and failed — failed, not in the sense that Conservative parties have been unable to win power, but that they win power, if they do, at the expense of conservatism. andrew coyne

Kathy, over at Relapsed Catholic, can’t resist a shot at the conservative blogosphere,

Just don’t look to the timid careerists of the male Canadian “conservative” blogosphere for inspiration there. relapsed catholic

Being rather more of a libertarian than a conservative and having no political aspirations in the “careerist” sense, and being a bit older, I’ll take the bait. What would a real conservative party’s platform look like?

- a pledge to reduce government spending by a real 3% per year (No BS about “as a percentage of GDP, real spending with real year over year cuts.) until a real cut of 25% has been achieved

- a pledge to apply all surpluses resulting from the 3% spending reduction program to retire the National Debt and only then to cut taxes

- the creation of a fully equipped, rapid deployment, special forces brigade in the Canadian Forces

- a statement that Canada will support democracy and oppose non-democratic and failed regimes (and that the criteria for democracy would be set at or near the levels of freedom - including freedom of speech and association - enjoyed by Canadians)

- a pledge to immediately halt immigration from non-democratic states and to scrutinize the bona fides of landed immigrants from such nations with the intention of deporting any landed immigrants who pose a threat to the security or the culture of Canada

- a pledge to eliminate family class immigration from all nations (but with generous visitors visas provided that the visitor had family in Canada prepared to put up a bond to cover medical and other costs)

- a suspension of the refugee claimant program until the problems with that program have been addressed

- a one strike and you’re out policy for refugee claimants and landed immigrants who are convicted of serious criminal activity - and yes drug trafficking is serious (see below)

- the development of strongly pro-natalist programs and policies

- the withdrawal of the Federal government from as many areas of shared federal provincial responsibility as possible

- Abolition of the Senate (it looks beyond reformation and really contributes nothing that a few think tanks couldn’t do better, faster and cheaper)

- a reduction of 3% per year in the total amount of money available for equalization with the intention of eliminating all but two year “emergency” grants over 15 years.

- the formation of an advisory committee on Global Warming charged with providing to the Canadian people and the Canadian government an objective assessment of the certainty of the science underlying the claim of global warming, man’s contribution to that warming (if any), Canada’s contribution to that human induced warming (if any), and the costs and benefits of alternatives

- the repeal of such sections of the Canada Health Act which preclude private insurance or providers and a requirement that any facility that has been in any manner, directly or indirectly, financed with federal money, make its facilities available to private providers (for a reasonable fee) when those facilities would otherwise not be used.

- the sale of the CBC broken up into a) television licenses sold to the highest bidder on a regional basis, b) radio licences sold to the highest bidder on a regional basis, c) all other assets sold to the highest bidder. The only rules for the auction being that a bidder may not hold more than two radio or television licenses in Canada

- the abolition of the CRTC

- the abolition of the Department of Indian Affairs and a buyout or other settlement of all aboriginal claims of any sort.

- the equalization of the qualifications for EI across the country and a reduction in the premium to bring EI into accord with actual requirements

- the abolition of all farm marketing boards beginning with the Wheat Board.

- the immediate and complete decriminalization of marijuana and its ancillary products

- the provision of heroin, cocaine and other “hard” drugs free to persons registered as addicts

- the complete decriminalization of prostitution and ancillary activities with the age of consent for these activities set at 18

- the elimination of all but essential governmental advertising, sponsorship and grants where essential is defined as essential to the efficient workings of the government (think invitations to tender and legal notices)

- the elimination of the Department of of National Heritage and Multiculturalism (some funding would still continue but would be passed through Treasury Board or Public Works)

- the elimination of SOW (again)

-the replacement of 50% of the Board of the Canada Council with citizens chosen by lot. Similarly, for all grant applications at least one of the referees would be a citizen chosen by lot who would be entitled to veto any application - funding would remain in place but the product would change (Same rules for the National Film Board and Telefilm)

- the elimination of both the Canadian Human Rights Commission and Tribunal - we have the Charter and the Courts

- the elimination of Industry Canada - we have trade associations

- A review of the activities and effectiveness of SSHRC and the NRC

I suspect that implementing that list would pretty much fill up an initial four year mandate.

Now, could anyone be elected running on this sort of platform? Well, people are elected for the NDP all the time and their platform of massive governmental intrusion to make us all better people is far more ambitious. Most of this platform is about eliminating things which annoy people.

The immigration planks would be a tough sell as by stating that we only want people from democracies we eliminate at a stroke most of the Muslim world (but not India) as well as much of the Asian and the African. But here it is a question of values and of placing democracy in the true sense of that word at the top of Canadian priorities. Plus it gives real teeth to our commitment to democracy and that commitment could serve as a guide to our overall foreign policy.

As well, a substantial and growing majority of Canadians want fewer immigrants and immigrants who are willing to change their ways to conform with Canadian norms - requiring a democratic nation of origin will make such change a lot easier.

I’ve no doubt that a substantial and growing minority of Canadians are more than a little skeptical about the GW hysteria and they have been entirely shut out of the politics of Canada.

Fiscal conservatives have been entirely shut out of Canadian politics as have small government advocates so they might find this program attractive

Just about nobody likes the Senate, the CBC or the CRTC.

Eliminating Indian Affairs and doing a direct payout to extinguish the claims against Canada of the status Indian population is a radical suggestion. But given just how pathetic the situation of Indians in Canada is and continues to be it is very clear that the current policy is not working. In fact it may be causing actual harm.

Phasing out equalization will force the have not provinces to restructure their economies and their services. It will tend to encourage Canadians to move from have not province to have provinces thereby reducing the demand for those equalization payments.

——-
This is a program which would revolutionize political thinking in Canada. It is radical but principled. And it is built on the premise that, if offered a real choice many Canadians would be delighted to throw whichever version of the Liberal Party is in office out of office.

Obviously there would have to be some hard thinking and heavy research on all of these points; but my sense is that there could be a huge, silent, reservoir of support just waiting for someone to dare to raise their voice.

There is literally nothing left. Privatization, tax cuts, tax reform, EI reform, CPP reform, democratic reform: all gone, barely even remembered. Now its subsidies for “the arts” and subsidies for Quebec aerospace firms and restored funding for Status of Women Canada — even money for provincial daycare programs (wasn’t the last election fought over that?) andrew coyne

CPC appologists are out making the blog rounds suggesting that the spending increas is not actually that big looked at from the persepctive of the growth in the GDP. Or that, somehow, this is all a clever strategy to lull the voters into a state of such self satifaction that they will elect a Tory majority and then the real work will begin.

They are wrong and Coyne is right. The CPC has abandoned any pretence of principle. “Heritage sports” get money…Dear Lord take me now.

I find most attempts to paint Harper as George Bush stooge annoying; but it appears that Harper has taken a leaf from Bush’s playbook for electoral success. Spend, spend more, spend all you got and then some.

Essentially harper has reduced federal politics to a simple “it’s us or them” proposition. With this budget it is time to start seriously looking for a “them”. (The problem, of course, being, that the Liberals have lost their mind, the NDP has lost its point and the Greens are still searching for a clue…And the Bloc is not running in Victoria.)

There is a real temptation to run on a single plank: the overall reduction in real dollar terms (none of the flim flam of “as a percentage of GDP) of total Federal spending by 5% a year with a corresponding decrease in taxation.” On a four year basis that would be a real reduction of 20% in all spending and all taxes. I might throw in a second plank that this is after a 3 billion a year paydown of the national Debt and that all “surplus” funds would be applied to that debt.

Simplistic? You bet. Simple and achievable. And verifiable.

Over at SDA the Conservative Street is seething.

Andrew has come to the horrible realization that:

Today’s budget (see: official site) is an embarrassment for those who consider themselves fiscal conservatives (especially those who poured countless hours into helping bring this government to power in order to change how business is done in Ottawa). Aside from a few small measures - including a continued commitment to pay down the national debt and some baby steps towards preventative health care, the budget is an undisciplined mish-mash of high-flying spending and ridiculous wealth redistribution. bound by gravity

The Tiger notes the Budget’s capacity to make virtually everyone look ridiculous:

On the other hand, we, the grassroots supporters of the CPC, look ridiculous for having supported the government with an idea that there would be any sort of fiscal restraint on their part. the tiger in exile

Greg Staples joins the chorus and points out that this Tory government is the highest spending in Canadian history.

And so on…

Harper has morphed into Mulroney; the question is where’s Preston so to have at least one voice in Parliament suggesting that the best thing to do with taxpayers’ money is pay down the debt and cut taxes. Such people may very well exist in the backbenches of the Tory Party but they have been firmly sat on in the run up to the election which, apparently, is not going to happen.

When the BQ is prepared to support you it is a fair bet that you have managed to make the Quebec bribe just big enough:

Within minutes of the release of the budget — which offers Quebec at least $2.3-billion more a year — the separatist Bloc Québécois announced it will back the fiscal plan, giving the Tories enough votes to pass it in the House of Commons. globe and mail

With Dion sinking steadily in the polls there is no particular reason for Harper to pull the trigger quite yet. Assuming that Charest wins in Quebec Harper will be free to concentrate his cynicism on the “much sought after Ontario voter”. For all I know Flaherty will hand deliver a crisp $100.00 to every voter in every marginal riding in the province.

CPC true believers are a tad disappointed by the unbridled pandering of this budget. What of fiscal rectitude, tax reduction, spending cuts? What they are missing is that Harper was elected to get elected with a majority next time out. He is on track. They should hold their real disappointment for when Harper wins his majority and absolutely nothing changes.

My government is committed to the creation of a sustainable energy future for Canada. We are committed to reducing the environmental impact of Canada’s economy. We are committed to curbing air pollution and greenhouse gas emissions.

Today I am tabling a bill in the House of Commons which will achieve those commitments if you, the people of Canada, give us the mandate to accomplish this massive task.

Our goal is nothing less than the elimination of emissions from power generation and the Alberta tar sands as well as a shift in our economy toward a bright green future.

How? Well, frankly, not by sending billions of dollars to the often corrupt governments of third world nations. We have enough to do in Canada.

Our plan is bold, direct and workable.

We propose to use proven, Canadian, technology and resources to generate power.

My government will ask for your approval to undertake an efficient, effective and environmentally sensitive shift away from fossil fuels in industrial applications.

We will be asking for your mandate to construct at least six and possibly as many as twelve CANDU 6 reactors across Canada. As these reactors come online we will decommission current coal and natural gas fired electrical power generating plants. Our goal is to replace the 27% of the energy we generate from burning fossil fuels with nuclear power. We already generate 12% of our electricity from nuclear and we have a long way to go to reach or exceed France’s current 75% nuclear electricity generation capacity. We also plan to largely eliminate burning fossil fuels in order to extract fossil fuels.

In addition, we will be asking for your mandate to build out our wind power generation to the level which can be sustained by our current electricity grid.

We will also create an Energy Research Institute to look at increasing the efficiency of our energy transmission and end use. We also propose to offer prizes for advances in battery storage technology, transmission efficiency, and end use efficiency.

This program will cost money. A great deal of money. A dozen 700Mwe reactors, even with the cost savings implicit in buying in bulk, will run a minimum of 60 billion dollars if we are conservative about the possibilities of cost overruns. Wind energy is estimated to cost another 3-5 billion. The research and prizes will add another 5 billion. At a minimum we believe this programs’ capital costs will be 75 billion dollars.

To put this into perspective, at the moment the current Canadian federal budget is 223 billion dollars and our federal debt is 483 billion dollars.

So, how will we pay for this?

Your government proposes to borrow the money in the form of 30 year Canada Energy Bonds which will be issued in series as the program proceeds. These bonds will bear market interest and have the full backing of the Government of Canada.

While they will be backed by your government they will be paid for with a number of measures.

In 2004 (get current stats) Canadians consumed 40 billion litres of gasoline. We propose a ten cent a litre energy surtax which would raise four billion dollars a year.

In 2005 Canada exported over 2 million barrels of oil per day. We exported 3.9 Tcf of natural gas and a net 10 Bkwh of electricity. We propose to impose a small export tax on all Canadian energy exports. The goal of such an impost will be an additional 4 billion dollars per year.

My government believes that reaching a nuclear fueled sustainable, emission free, energy strategy for Canada is worth a dime a litre. We believe that Canadian and world markets will welcome strong Canadian Energy Bonds.

To be honest I do not believe in Kyoto. I do not believe in Kyoto because Kyoto will not work.

And, to be blunt, my government is not at all convinced that the science of climate change is well enough understood to form a sensible basis for policy.

Which means that we have created this made in Canada bright green strategy because we are convinced it makes economic and environmental sense. It just happens that by following this plan we estimate that we will reduce Canada’s greenhouse gas emissions radically and quickly.

As you know, climate change was not an issue in the last election. We do not have your mandate to embark upon this fundamental and expensive change to the Canadian economy. We need that mandate.

To that end we will be bringing this proposal to the House of Commons for a full and, we hope, productive debate. At the end of that debate, and after incorporating suggestions from Her Majesty’s Loyal Opposition, we will bring this program to a vote in the Commons.

I sincerely hope this measure passes. However, I don’t believe that an election should be called on this matter. Rather, once the House has debated, amended and voted on the proposal I will call on you, the Canadian people, to vote yea or nay on a bright, green, future.

I propose to call a referendum to be held within 60 days of the final vote in the Commons. A simple 50% plus one can pass or defeat the proposal.

If we are confronted with a real crisis then it is imperative that we all work together to ensure Canada makes its contribution to the reducing world’s emissions. However, even if the climate change issue has been exaggerated, your government believes that the measures proposed tonight will be a tremendous economic boost for Canada.

This is your fight as much as it is your Government’s. Read, ask questions, learn: because in the not too distant future you are going to have to decide Canada’s energy and emissions future.

Good Night