It's Justin....time

The Liberal Party of Canada has not had much luck with its leadership choices since the glory days of Jean Chrétien.

Paul Martin came next as leader and he was just too wishy-washy.

Then came Stéphane Dion, a convention compromise, and characterized as "not a leader."

Next Michael Ignatieff was literally shipped in, and he was "just visiting."

Each of these men led the party to lower and lower popular vote counts: Martin got 36.7% in 2004, then 30.1% in 2006, Dion 26.2% in 2008, and Ignatieff 18.9% in 2011. Down and down they went, from being the minority government, through to loyal opposition, then to a back bench third place finish for a once great political force. The current interim leader Bob Rae, a refugee from the socialist NDP, has already read the tea leaves, and will not run for permanent leader.

The stage has been set for the second coming of a saviour for the Liberals and by extension Canada, and this boy was born on Christmas Day too!

Yes, it's Justin Trudeau, eldest scion of the charismatic Pierre who led Canada to larger and ever more bloated government. Trudeau the father took office in 1968 when Canada's debt was 24% of GDP, by the time he left office in 1984, the debt was 46% of GDP, an increase of 83%. But of course the rest of the Western Democracies, did precisely the same thing during that time and it has become much worse. The evidence in Europe, America and Canada clearly shows bloated governments don't work.

How does the younger Trudeau - just Justin, thank you - propose to fix the country? I think he gets it right, sort of, lets reinvigorate the middle class. Here is a part of his leadership entry speech:

"A thriving middle class provides realistic hope and a ladder of opportunity for the less fortunate. A robust market for our businesses. And a sense of common interest for all.
The great economic success stories of the recent past are really stories of middle class growth. China, India, South Korea and Brazil, to name a few, are growing rapidly because they have added hundreds of millions of people to the global middle class.
The news on that front is not so good at home; I don’t need to tell you that. You, like our fellow Canadians all over the country, live it every day. Canadian families have seen their incomes stagnate, their costs go up, and their debts explode over the past 30 years.
What’s the response from the NDP? To sow regional resentment and blame the successful. The Conservative answer? Privilege one sector over others and promise that wealth will trickle down, eventually.
Both are tidy ideological answers to complex and difficult questions. The only thing they have in common is that they are both, equally, wrong.
We need to get it right. We need to open our minds to new solutions, to listen to Canadians, to trust them.
And as we face these challenges, the only ideology that must guide us is evidence. Hard, scientific facts and data. It may seem revolutionary in today's Ottawa, but instead of inventing the facts to justify the policies, we will create policy based on facts. Solutions can come from the left or the right, all that matters is that they work. That they help us live - and thrive - true to our values.
Because middle class growth is much more than an economic imperative."

So, Justin and the Liberals should eschew ideology, except where it is supported by evidence and hard scientific facts. Maybe that has been part of the problem with the Liberals, no principles, nothing but the ideology de jour, or as I heard this morning, there is no there, there. 

I don't know where Justin gets his facts, but it seems to me, he and the Liberals have absorbed the prevailing collectivist ideology so they don't even recognize that they have one. If putting a larger and larger tax burden on the middle class, then saddling it with huge debt, is not evidence for why the middle class is struggling, then I'm not sure what is. Maybe Justin should consider unburdening the middle class and stop trying to fix it. That is a second coming I can get behind.

Here is Justin telling the internet he is going to share his greatness with us:

    

Omar Khadr comes "home"

 Khadr in a video 2002....

The hue and cry over the last few days among conservatives in the Canadian media has been deafening.

Why? Omar Khadr has finally been shipped from GITMO to a Canadian prison, 10 years after he was captured by US troops in Ayub Kheyl, Afghanistan.

In October 2010, Khadr pled guilty to war crimes as stipulated here. In Canada the entire story has had wide exposure.

For me this story has not yet warranted a mention in any of my postings. The very idea of a "war on terror"  like most government crusades (good word here), leaves me apathetic to the cause, yawning, except that it is yet another way government wastes lives and money by maladministration. The one thing governments should be doing, protecting our rights, protecting our freedoms, ensuring our safety from violence, they manage screw up by inappropriate international interventions. Does anyone in the West feel safer now that the war on terror has entered its second decade? I doubt it.

The Khadr story has been a political football in Canada. Conservatives see it as a cause célèbre for the fight against terrorism, collectivists (left liberals and socialists including the mainstream media) see it as an injustice verging on abuse, done to an innocent child. The collectivists have a point.

Khadr was 15 years old when the incident occurred. Canadian fifteen-year-olds don't arrange to travel 11,000 km (6800 miles) to Afghanistan to get into a firefight with American soldiers. Canadian fifteen-year-olds don't arrange for weapons and explosives training while in Afghanistan. Canadian fifteen-year-olds generally don't appear in al Qaeda videos with weapons in the background. These events are due to the actions of parents, and not parents that mean well. What kind of parent would bring their child to the centre of a military conflict? What kind of parent would put their child into the path of mortal danger? Certainly these actions would be considered abusive and we may never know what Omar the child's wishes were back then. Ten years at GITMO will change you, no doubt.

Which brings me to the prevailing conservative position in the Khadr case. Conservatives are often the first to stand up for abused children in a variety of situations. Why not Omar? Omar Khadr was a child by any definition used in Canada when these events occurred, yet he is vilified amongst conservatives as being beyond redemption, a traitor, and a murderer. Lets just throw away the key. Is that a reasonable well thought out position? Do the sins of one's father transfer to the child?

Sure, Khadr has made statements and confessions while in GITMO, but he may not have felt free to speak. How would anyone act if they were held captive in such a hostile situation?

So now what? Its hard to believe that Khadr has been rehabilitated (or will ever be) by being in a prison with older terrorist operatives. I doubt that in that time they have come to love America, the West and all that it stands for. Even before GITMO, Khadr's family saw to it that he was indoctrinated with the antihuman distortions of a fundamentalist Muslim upbringing. Any religious indoctrination in my view is abusive, this one was way beyond that. All of this was sanctioned and encouraged by his family, they didn't care. Why should we?

The Islamic traditions that Khadr's family cultivates are not going to blend readily into the so-called multicultural traditions of Canada. The lies that defend multiculturalism and relativism in Canadian society will stop right here. The very idea of Sharia, the moral code of Islam, is in many ways inimical to life in a free and culturally pluralistic society such as we have in Canada. I'm concerned that the story of this conflict has just begun.

The Innocence of YouTube

An incomprehensible YouTube posting called the Innocence of Muslims has created a furor in the Islamic world, I'm sure you are aware. This incident and previous such provocations show that it doesn't take much to incite violent protests in that part of the world. So when I first heard of the posting and the reaction, all I could think of was 'here we go again.'

I tried to watch all of this 14 minute video, but couldn't make it through without fast-forwarding to different scenes just to see if it got any better. It didn't. Is it an insult to a religion, Islam? I suppose it is, but the reaction that ensued is an insult to humanity that makes the video's purpose (if there was one) pale by comparison.

Our humanity, the central thing that makes us human, is our ability to use reason, and in many ways all religion is an insult to humanity. Humans have the capacity to reject blind faith (the foundation of all religions), to control their violent emotions, to act in their own rational self interest. The reactions to this video, are so much more damaging than the video itself, yet those protesting see themselves as defenders of the faith. It's a head shaker.

But worst of all were the calls to squelch the video, pleas to both Google and YouTube to remove or review it. Those calls came from some people sworn to defend freedom, but of course the freedom to speak out, to disagree, needs to be most safeguarded in times of turmoil. Sadly that reminder too often needs repeating.
Here is ReasonTV's take on YouTube freedom.

Why American Pizza tastes better...

I know that's a generalization, and of course it may not always be true. But that has been my experience when visiting my relatives in New Jersey over the past almost 40 years.

The pizza seems richer, more flavourful, definitely cheesier! I never understood or thought about why until now, and I have theory.

This week the CBC ran a story where members of the Niagara Regional Police Service will be charged for smuggling large amounts of mozzarella brick cheese across the US-Canada border.

Cheese smuggling!! Why would anyone smuggle cheese across the "NAFTA free-trade border" between two of the largest trading nations on Earth? Good question.

I have written about this before (here), Canadians pay a premium for dairy products because of a monopoly granted to dairy farmers in Canada, which is outside of the NAFTA agreement. This distortion in the dairy market occurs because the federal government allows farmers to collude on the price of raw milk by agreeing to limit production to allotted quotas. The government also creates a tariff wall that effectively prevents cheaper foreign dairy products from competing in the Canadian market. If milk is pricey, cheese will be too. What does this have to do with pizza?

Apparently after removing labour costs, 80% of the price of Canadian pizza is due to the mozzarella cheese. Who knew? Of course getting cheaper cheese allows the local pizza shop to either use more cheese or make more profit, or both. That is my theory, that is why those New Jersey pizzas are so much cheesier. Unlike their Canadian counterparts, Americans can be generous with their cheese without hurting their bottom line.  This story from Niagara Falls Ontario explains some of the cost realities involved. A pizza shop in Ohio spends $90 on cheese every day, a similar shop in Niagara Falls Ontario spends $290 for the same type, quality and roughly the same amount of cheese. Starting to see why there is a cheese smuggling racket?

Again the unintended consequences of government intervention in an economic area, has spawned a black market criminal class of cheese smugglers, the "mozzarella mafia." According to the CBC, a cheese smuggler can earn up to $2000 per shipment, so it's not as lucrative as drug smuggling, but neither are the penalties as onerous. This story has received wide publicity in the US and Canada, here is a report from NPR in the US.

When will things change? Only when Canadians become cheesed-off enough with how they are treated by their various governments.

How to create farming jobs by spending more of your money.

Or else.....

"If every one of our families were to spend $10 more every week on Ontario foods, that would have a $2.4 billion impact on the economy and create 10,000 jobs." That sort of brilliant reasoning can only come from the mind of an overbearing politician. Most elected politicians have the view that YOUR money is theirs to spend anyway. And they justify that position because this is how they can create jobs.

The quote above comes from the Premier of Ontario Dalton McGuinty, but the rest of what he said is more ominous:

"So we've got a new bill that we will shortly be introducing, the Local Food Act....We're buying the food anyway right now, for example, in our public institutions. It's just a matter of ensuring that we're using our purchasing power to support local agriculture."

You don't have to be a mathematician to realize that $10 more per week adds over $500 to the annual family budget, which would be fine if it were your choice to do that or not. There is nothing wrong with supporting local industry if you think it helps the economy. Typically it does not, and the extra money spent often means that other parts of the economy will suffer. The ominous part is that a Local Food Act, prepared with the help of a lobby group, to "encourage" people to buy locally, well, that sounds like a tax of sorts. It's the kind of thing that hurts the poor the most, because any additional cost subtracts from their meagre discretionary income the most. There are almost 5 million family households in Ontario, and at $500 a family, you can see where McGuinty gets his figures in the first paragraph. 

In Canada we already have a system that forces citizens to buy locally grown produce at additional costs for eggs, poultry and dairy products, its called supply management. I've already discussed this here and here. 

You might wonder how Canadians feel about paying more for local produce, wonder no longer. Despite  the "politically correct" comments that you may hear from your neighbours, the fact is Canadians are voting with their feet in greater and greater numbers to avoid uncompetitive food prices. Check out this article from Jesse Kline in the National Post.

The bad news is this type of legislation is likely to pass because of the composition of the legislature, there is no good news.   

Authoritarianism evolves suppressing internet freedom

Traditionally the "soapbox" was the tool used to promulgate radical socialist ideas in societies that were not socialist. The physical box acted as a raised platform for the individual activist to be heard above the crowd ranting revolutionary thoughts in places like London's Hyde Park.

Things have changed. The new and improved soapbox is the internet, and the rants of activists of all stripes can now potentially reach all corners of the world. That is a problem for local governments that wish to control the flow of information to their citizens.

Immediately places like North Korea or Cuba may come to mind as jurisdictions that wish to control the flow of information to their citizens. The poverty of those people is likely the most effective filter. China is another place where information is filtered, but the burgeoning middle-class there is becoming an issue for the authorities and they are evolving to deal with it.

How safe are we from arbitrary filtering of information? Maybe not as safe as you might like. A new book about that is discussed on ReasonTV.

A memorial to other people's money...

Tomorrow is Sept. 11, understandably a traumatic day for all New Yorkers and all the relatives of those who died in 2001.

But when comments in the New York Times are critical of the gross overspending by various levels of government to rebuild the World Trade Center and honour the dead, well, you know it must be bad.

Here is ReasonTV's take on the matter:

Election by stealth

One of the biggest lies that elected politicians foist on citizens is their call to vote during an election. When they say "go vote," they really mean "only if you are a supporter." The fact is, they do everything in their power to minimize the turnout of the opposing side while maximizing their own support. That is understandable of course, but it makes their appeal to voters totally disingenuous.

This week, elections in Quebec and Ontario demonstrated just how duplicitous elected politicians can be and still almost succeed.

In Quebec a general election was called in the dog-days of August and set for September 4th, the day after Labour Day. In Ontario two important by-elections were called within a fews days of the Quebec call, and set for September 6th. In both cases the idea was to sneak the election past the electorate, and it almost worked.

The Liberal government in Quebec has been under public scrutiny for charges of corruption, protests from hordes of disaffected students, and for being a bit long-in-the-tooth for a Quebec government. You would think they would be solidly trounced as the pollsters and pundits had predicted. But that's not what happened. The actual difference between the elected PQ and the ousted Liberals was just 0.7% of the popular vote, not exactly a rout, and that's the point.

Similar events happened in Ontario. The Liberal government here (where I live), was in a minority situation according to the Westminster rules, just one seat short of an effective majority government and thereby in jeopardy of losing a vote of confidence at any time.

In the spring of 2012, the government Leader, Dalton McGuinty, offered a plum job to a sitting member of the opposition. She accepted the offer, resigned her seat and that necessitated a by-election to replace the member. That was delayed for months, until a representative of the government conveniently resigned his seat in early August. Just days later, two by-elections were announced to fill the vacancies. As in Quebec, the campaigns occurred in the depths of summer and the actual voting took place during one of the busiest weeks of the year, the first week of school and work after the summer. One could imagine that few voters would be interested or involved, and few would be voting. That's exactly what happened in Ontario. In the riding (Kitchener-Waterloo) where the sitting member was bribed out of her seat, there was some anger that translated to a staggering 47% voter turnout, down a bit from 50.5% just six months earlier in the general election. The anger resulted in a socialist, or should I say 'more socialist than the others' being elected. In the riding where the government member resigned (Vaughan) there was total apathy; just 26% of eligible voters bothered to vote, down from 41.1% in October 2011, likely because everyone thought the government would hold the seat, and it did.

That didn't happen in Quebec, voter turnout was significantly higher (nearly 75%) than in previous elections. But Quebecer's wear their politics like a badge, and in this country they come closest to exemplifying Frederic Bastiat's famous line: "Government is the great fiction through which everybody endeavors to live at the expense of everybody else." Quebec has the highest tax rates, gets the most in equalization transfer payments, and in many ways they have the most repressive laws of any province in the country. They certainly are distinct, but not in a good way.

Now both the Ontario and Quebec governments are in minority positions, more elections will follow, maybe soon. What was accomplished by these elections? Even more cynicism. How is freedom or democracy served by manipulating the timing of important events like elections? They are not.

Putting Teachers First....

"Its just for a couple of years, we're doing it in a way that protects teaching jobs." That is Dalton McGuinty speaking on the first day of school about the wage freeze being imposed on Ontario's teachers this week.

I believe him, in that moment he is actually speaking the truth, without spin. The goal and purpose of the wage freeze is to help wrestle down the huge budget deficit and stop the  monstrous debt from increasing. McGuinty has largely created both over the last nine years. This freeze saves almost half a billion dollars this year alone. Of course that's not how he is spinning it, he is calling it "PUTTING STUDENTS FIRST," but the statement at the top is really closer to the truth.

School is not about the students, it's really about the teachers. Ontario has 115,000 teachers and administrators. That represents a good chunk of voters, and does not even count auxiliary staff and families. It's a hefty voting block dispersed over the entire province. McGuinty wants to placate them, and assure them this is temporary....he hopes.

Will it work? It has worked up until now because it is a well lubricated machine, lubricated with money and there to appease the public sector unions that are in cahoots with the government. Thats not just true in Ontario, the video below from ReasonTV illustrates that the Machine behind teacher's unions is widespread throughout North America, and works in much the same way, for the benefit of teachers:

Labour Day: who is exploiting whom?

Sign in Toronto Labour Day Parade 2012....

Labour day was never my favourite holiday. Since schools, of one sort or another, were always part of my life, first as a student, then as a teacher, well, I'm sure you get it.

Labour Day is primarily a labour union holiday commemorating significant events in the labour history of both Canada and the USA. The big difference in the holiday between the two countries is that a "u" is found in the Canadian holiday name. And there are more than twice as many unionized employees (as a percentage of workers) in Canada versus the USA.

Once upon a time there was good reason for labour unions. In the past workers in North America felt exploited by their employers and needed a remedy that provided them with leverage to rectify their grievances. The right to associate peacefully is fundamental to the freedoms in both countries, and unions played a major role in improving the safety, wages and benefits of their members.

However, in most of the States and Provinces the "remedy" aspect of union function has been usurped by government regulation and adjudication. In Ontario, for example, the Ontario Labour Relations Board (OLRB) says this: "The OLRB's mandate is to provide, as an independent tribunal, excellence in administrative justice through the effective resolution of labour and employment disputes."

So whats left for the unions? Well, wages and benefits primarily, and that's part of the problem.

Trade across the planet is now less constrained and more widespread than ever. Competition has forced large corporations to seek out the cheapest labour world wide while maintaining quality. As a result private sector manufacturing done by unions is shrinking rapidly in places like Canada and the USA. Their past union agreements cannot compete with present day offshore workers, so they have priced themselves out of the market. They may yet recover, but they will need to face the new reality, increase their productivity or do something else.  

Over the same time span as labour unionists became more powerful, governments in Canada and the USA grew by usurping more and more responsibilities from their citizens. The growth of government translated to increases in the number of government employees and the unionists formed huge, powerful, public sector unions. In most cases in Canada the public sector unions are closed shops, meaning, in order to be employed workers must join the union and pay dues. That aspect has been rapidly changing in the USA with the advance of "right-to-work" legislation in various States. But not in Canada, at least not yet.

In the past and especially in recent years, the government of Ontario has pandered to the public sector unions. That shortsightedness backfired and created the massive deficits and debt today, and worse still, there are unfundable liabilities in the future, to meet those previous obligations.

Recently Ontario teachers unions were told by the government that their salaries and benefits will be frozen through emergency legislation to help control the deficit (never mind the debt). Some of the smaller teacher unions actually acceded, but the major unions did not. Strangely, not that long ago, these same unions were supporters of the government, now they have turned, and are vehemently apposed the government's action.

Given the current state of affairs in Ontario, something must change or the Provincial financial situation will get far worse. Recently, their have been downgrades in Ontario's debt by two ratings agencies. The sad truth is that politicians can NEVER be truly held accountable for errors in judgment made 10, 20 or 30 years ago; errors that we must all now live with cannot be adequately punished, memories are too short.

Public sector workers have a high degree of job security, a well supplied union war-chest for media ads and potential strikes, a monopoly agreement with the government eliminating non-union replacement workers, excellent benefits like defined benefit pension plans, ample sick leave, medical and dental insurance, and on-and-on. Should they also have the right to be in unions that can hold an entire province hostage if they choose to strike? I don't think so. I think the public sector unions are adequately protected by agencies like the OLRB, and that they should NOT be free to strike, nor should they have the right to prevent non-union staff from competing for their jobs.

While exploitation of workers has happened in the past, the shoe is now on the other foot. We, the citizens of Ontario are being exploited by the public sector unions, and it has to stop.

RNC shuts out Ron Paul

Probably the most "balanced" news from the Republican National Convention this past week, was from the Daily Show with Jon Stewart. Yes, thats right, truth in comedy.

But even they missed the back-room shenanigans that involved fundamental changes in the rules of the convention, preferring instead to focus on things like Clint Eastwood's appearance with an empty chair.

Canadians may view Jon Stewart's last report from the RNC here. If you are reading this from a US location, you will have to see that episode here. Aside from being funny, Stewart does what he is expert at, and for that you will have to watch.

For the past year I naively believed that Ron Paul would get to speak at the Republican Convention if he just hung in and followed the rules, but it didn't happen. The rules were changed, and Ron Paul was literally ostracized from the RNC. Ben Swann of WXIX in Cincinnati explains how the RNC rules were changed to ignore the Ron Paul delegation here.

Where will libertarian supporters of Ron Paul cast their vote considering the debacle in Tampa? This report from ReasonTV may shed some light on that.

The necessaries of political sainthood

This past week was the first anniversary of the death of Jack Layton. He died in office as Leader of the Opposition, less than four months after taking his party to a once unimaginable second place finish in a Canadian Federal election. That is an accomplishment worthy of praise if your political bent is toward socialism. So, Mr. Layton and I have very little in common as I suggested here just days after his death.

Certainly I respected him as a politician, but I thought the funeral then, and the memorial just days ago, were a bit over-the-top. I know its inappropriate to speak ill of the dead, but Jack Layton did not plan the funeral or the recent memorial, these were planned by his living family and his political party. Most commentators in the Canadian media avoided any criticism of the recent memorial, I found a couple I could agreed with. Chris Selley in the National Post, said this about Layton and the memorial:

"He wasn’t a hero, wasn’t a saint. He was an uncommonly skilled retail politician who gained respect for practicing a brand of politics that was less greasy and vulgar and off putting than his opponents’. That’s not nothing. It’s quite a lot, really. I don’t begrudge anyone a good vigil. But ringing bells in towers for a nice guy and a very good politician just seems a bit … much."

Some of the media went to great lengths to pay tribute to Layton, in particular the government funded broadcaster CBC. It went a bit overboard in its coverage in my opinion. That did not help dissuade my belief that CBC has an overt leftish bias, for which I continue to resent paying for in any amount. 

Also annoying was the frequently heard "Jack would have wanted it this way" from a variety of interviewees and commentators. Of course he would! This was blatant political opportunism, by a political family with a message to deliver no matter how inappropriate it was on the back of a memorial.  It was nothing less than a political beatification, not unlike was done with Tommy Douglas or Pierre Trudeau or FDR in the States. The difference being those men had made some accomplishments (for good or ill), what exactly did Jack Layton do outside of his tiny political world?

Some at the memorial promised to "finish the work that he started," and some suggested Layton was a beacon of hope. Well, hope is a subjective thing, and the hopes of Layton and the NDP are most emphatically not shared by me. Yes, I'm sure he wanted to make Canada better. So do I. But my vision of the future of this country is diametrically opposed to his.
Here is a excerpt from the Preamble of the  2011 NDP Constitution to show you what I mean:

Did you read that? Let me highlight these lines again:

"That the production and distribution of goods and services shall be directed to meeting the social and individual needs of people within a sustainable environment and economy and not for making profit;

To modify and control the operations of the monopolistic productive and distributive organizations through economic and social planning. Toward these ends and where necessary the extension of the principle of social ownership;"

Is this the work 'they' want to finish? Is this the beacon of hope and optimism that we are to look toward? Is that what it takes to become a political saint in this country? Do those words represent Canada? Not my Canada!

I occasionally agree with Ezra Levant, often not. But here is one place I think he said it best for me: 

Eco-pigheadedness and costly paranoia - DDT

National Post editors will never be accused of being shrinking-violets. The fiftieth anniversary of Rachel Carson's Silent Spring is upon us and the Post pulled no punches marking the occasion in an editorial this week. Wikipedia calls it the book that helped launch the environmental movement.

The Post points out that Carson was correct in that the indiscriminate use of synthetic chemical pesticides is not wise: "spraying large quantities of pesticides can have serious, and sometimes fatal, consequences. Ms. Carson helped sow a degree of caution about synthetic chemicals by showing the ill effects they can have on plant life, animals (Silent Spring focuses on the effects of DDT on birds — the Spring season will be “silent” once they have all been killed off) and, potentially, humans."

But, and it's a big BUT, the editorial continues: "DDT is not nearly as harmful to humans (or birds), in moderate doses, as Ms. Carson suggested. But it is harmful to the mosquitos that transmit deadly malaria and typhus that kill millions every year across the developing world." That's the issue of course, the uses of pesticides and other methods to increase crop yield or protect humans are rarely black or white situations, there are levels of appropriate use.

Its thought that the total ban or at least diminished use of DDT, particularly in areas where serious diseases (malaria) are carried by insects has led to untold millions of human deaths. How many deaths can be shown to be caused by DDT spraying? Certainly not anywhere near the deaths attributed to malaria. What I'm suggesting is that there is a level of DDT use that allows it to be used effectively without undue risk to human health, and therefore it should be used in that context.  

The ban and abandonment of DDT is for me a perfect example of the "lets be safe attitude" that many environmentalists have with regard to global warming and similar situations. You know the attitude, where they come out and say lets curtail energy output, lets cut back on industrial production, lets stop using fossil fuels to drive our economy, just in case it may cause catastrophic global warming, melting of the ice caps, raising sea levels - in fact the whole Al Gore "inconvenient truth" scenario that only the most fanatical still believe. That attitude has the effect of destroying or diminishing our economy on the chance that global warming or whatever will lead to catastrophe.

The Post's editorial mentions the use of chemical spraying in Dallas Texas to curtail the spread of West Nile virus. The irony there is that West Nile's North American invasion is likely an effect of global warming, but the spraying went ahead without much fuss.

My point being, that environmental issues are best examined where they actually affect people, and that is in local situations where those involved can make use of all the tools that are available to them and make rational and objective choices.

The elephant in the room: Rollover risk

chart from PFS Group....

Interest rates are at historic lows, still. Most people take for granted that government Central Banks dictate interest rates, and most of the time they seem to. And yet there are stories from the financial crisis in Europe that you may be aware of, where local country rates in Greece or Spain have spiked far higher than anywhere in the Western world. What's going on? If rates are in fact controlled, why are they seemingly out of control in some countries?

The answer is related to the confidence of the lenders, markets and money supply.

As an investor or lender you may not want to consume some of your money over a defined period of time. You could choose to put the money in the stock market, but the risk is high and the return is unknown. You may want to make certain you will be repaid for your investment and also paid interest for the time the money has been lent out of your control. The rate of return, interest, is a function of the time the lender is willing to forgo consumption and control of the money invested. However, you expect to be repaid.

High rates of return (high cost of money) should indicate that investment money is scarce, this might entice investors to take advantage of good returns, and it also tells business people that it might not be the best time to expand their particular business. As money is saved in banks and becomes more plentiful, rates of interest would fall indicating more money is available to be borrowed.

On the other hand, with low rates of interest (when borrowing is cheaper), it should be a signal to the business community that there is more money available now for borrowing and that means it's a good time to expand business.
   

According to the Austrian business cycle theory (ABCT), originated by Fredrick Hayek and part of the reason he received a Nobel Prize in 1974, interest rates serve the purpose of signalling to the competitive business community whether they should be expanding or contracting their business. Interest rates have an important function that way in regulating the movement of capital, and allowing the market to operate most efficiently.

When Central Banks took on the role of issuing currencies and regulating market conditions by manipulating interest rates, they created distortions and inefficiencies in the operation of the free market. For example, the ABCP crisis of 2008-09, had its roots in years earlier, when interest rates were set artificially low (ignoring the lack of savings at the time) by the US Federal Reserve Bank which sent a false signal to builders that expansion was a good idea. The housing bubble thus created, popped as soon as variable interest rates "rolled over" and moved slightly higher exposing the extent of overall consumer and business debt. Banks stopped lending because they feared they would not be repaid. Financial transactions froze in the US.

But that crisis was primarily in one country, the US, and of course it had huge ramifications around the world. But what if there were a similar borrowing bubble with the same root causes, only bigger?  

Central banks around the world have set their interest rates very low through a variety of complex manipulations since the US housing bubble. The "interest signal" to the market is, money is cheap to borrow, it must be abundant (according to ABCT). Governments are borrowing, individuals are borrowing, all because rates are low. Cumulative debt is increasing, rollover risk is also increasing. What is rollover risk? The following is from a newsletter I received recently from Agcapita.

"Rollover risk can be defined broadly as the possibility that a borrower cannot refinance maturing debt. If combined with insufficient funds/liquid assets on hand to fund the shortfall, the borrower will experience a liquidity problem and technically may be considered insolvent.

Here is a concrete example of rollover risk that may be unfolding right in front of us: Bloomberg estimates that the developed economies have $7.6 trillion of debt maturing in 2012 led by Japan ($3 trillion) and the U.S. ($2.8 trillion) and more than $8 trillion must be financed when interest payments are included. By 2015 it is estimated that half of the debt of the top 10 global debtors ($15 trillion) will mature and must be rolled.

Debt Maturing in 2012 ($)

Japan - 3,000 billion

US - 2,783 billion

Italy - 428 billion

France - 367 billion

Germany - 285 billion

Canada - 221 billion

Brazil - 169 billion

U.K. - 165 billion

China - 121 billion

India - 57 billion

Russia - 13 billion

Considering that global GDP is estimated at $70 trillion the magnitude of these numbers beg the questions of 1) how this will be financed and perhaps more importantly 2) at what rates?"

So, you see, there is an elephant in the room, the question is how will it be dealt with? The answer could come sooner than we might like. 

Ready for more on Austrian Economics and interest rates? Robert Murphy:

Watch while you can, Robert Higgs on Warfare, Welfare and the State

The other day I was speaking with a colleague about his fear that governments will become less and less comfortable with the freedom of the internet. I'm not talking about China or Iran, I'm talking about Canada, and the United States.

The US tried SOPA and PIPA in recent months and while most people think they are gone, defeated, the fact is, the danger is still present, just delayed.

Those US laws are supposed to stop piracy and protect intellectual property, don't believe it. If they are passed they will be the thin edge that signals the end of internet freedoms. Who knows what will follow, what interests need to be "protected" by government fiat?

One thing that may disappear is the kind of thing displayed in Robert Higgs' speech last month at the Mises Institute. Higgs pulls no punches, and tells it like he sees it. It's almost an hour long, but well worth your time.