Unrest Is Spreading

The day before things went to hell in London, I had a conversation with my sister Marie in the UK. We predicated that the unrest in North Africa, the Middle East, and some European countries like Greece, would continue to spread around the world. Why? The underlying cause of the unrest is economic, not political.

A dictator's power depends on keeping the population content. Dictators make sure the trains are always on time. They keep the cost of food low, because once the people are going hungry, they have nothing left to lose. That is a breeding ground for revolution.

Democratic governments keep the population content by spending money on it. Government belt-tightening always affects the population negatively. If you cut enough social programs, you will eventually have a lot of bored youth. If you have high unemployment, you have a lot of bored youth with no money. This is not a good combination.

The conditions that created these hooligans, are only going to get worse, so I do not see the unrest in the UK magically resolving itself any time soon, just as it continues in Egypt and elsewhere. And as it has happened elsewhere, eventually the military will be sent in. Even in the UK.

Because, once the population is no longer content, suppression is the final option for all governments.

Household Debt

There are increasing concerns about household debt in Canada. There's a saying, "When you point a finger, there's three fingers pointing back at your." The banks, via their analysts and economist, are figuratively pointing the finger at the consumers for borrowing more than they can afford. Um, sorry, but who exactly is lending consumers more than they can afford? It wouldn't by any chance be... the banks, would it?

Here's an idea, if someone is living beyond their means, the banks should stop giving them credit. But that would never happen, because while the banks metaphorically wring their hands over the problem, they are raking in the interest from the balances on all those credit cards and making record profits.

And perhaps, if the other corporations sold their goods at less profit and paid their employees better wages, consumers would be able pay cash for things again. But corporation exist solely to make profit and nothing else, they won't do anything either. Meanwhile everyone will continue to point at the consumer as the who is the problem. Bad, bad consumer!

Recession Tales

Imagine finally getting your dream job and then having it fall apart when the economy collapses. Unfortunately that is exactly what happen to a mechanical engineer that I was chatting with today. On the other hand, his previous job was in the automotive industry, so he might not have been any safer there. 2009 is a year that many of us would like to forget.

Oh Canada Movie

I just watched Oh Canada! Our Bought and Sold Out Land, a satirical movie that examines the economy, explains why it is intentionally broken, and who benefits from having it that way. It was funny watching politicians squirm when asked questions which would never get asked by the main stream media. The solution to fixing the economic system is actually very simple but would never happen because it would require governments to actually serve the people as they are supposed to do. The movie is two hours long so give yourself sometime if you decide to watch it.

Forecasting

Here is a BBC article describing how the the IMF's forecasts got the downturn all wrong. What I'm wondering is if they examined their forecasting models to see if they can be improved.

Somehow I doubt it. More likely everyone just threw up their hands and said "Oops, we goofed," and just continued with same assumptions as before. Economics isn't a scientific or technical field so there is no need to prove your ideas are correct. You only have to convince enough people to follow you. Sounds more like religion, actually,

Greed Is Back Baby!

According to this article, it seems any hopes for real changes to the world's economy are dash as everyone is jumping back on the get rich quick bandwagon, also known as the stock market. The article even claims people are spending again. I think some people are actually believing the smoke and mirrors. I have nagging feeling that this recession isn't over yet, but it seems that some people are already betting the other way.

Smoke And Mirrors

It seems every time there's an increase in a particular sales statistic, the experts will point and gleefully announce that it is a sign the economy is improving. In reality, one data point is not a trend, so all they are doing is using the data to apply reverse psychology to make sure people don't panic. People have to keep spending since domestic consumption is all that is keeping the economy going, with exports so dependent on the U.S. economy.

China's economy supposedly grew because off an increase their domestic consuption, even as their exports continued to decrease. The caveat is that China uses very different methods to report gross domestic product compared to the Western nations, this growth is likely just smoke and mirrors. In other words, they are doing exactly what we are doing, just on a grander scale. And as always, there will be reckoning later.

It's Over! It's Not!

Even as there are declarations that the recession in canada has hit bottom, the job losses are still climbing. The stupid thing is the jobless rate stayed the same, because it only includes people who are actively looking for work. The people who have given up searching for a job, are therefore not officially unemployed. So what are they then? Sounds like creative accounting to me.

Economic Report

The get together with my friends yesterday was a kind of report on the state of the economy. Paul has been out of work for two weeks since Cinebyte, a small digital processing company, went out of business. Alan was laid off at Revlon but then got rehired on a short term contract because there are too many projects with no staff to complete it all. All of Barry's staff at Lavalife are gone so he is expecting the axe in the next few months.

Looks like typical recession blood letting to me. It's just a little closer home than usual.