Boom and Bust

I went for a walk with my son yesterday evening. We strolled around the subdivision where we now live and marvelled at how quickly hundreds of homes have been built, dozens alone in the time since we moved there last August. Many of the homes are huge, beautifully landscaped, with custom features galore and with shiny new vehicles in the driveway. As we walked around, I wondered to myself how everyone is paying for their homes and cars and furniture and country club memberships and private schools and vacations and who knows what else.

It's none of my business, of course, what these people do and how they earn their money. It will be my business however, if some of these people crash and burn under their immense debt load and won't be able to take care of themselves when they retire. I am a taxpayer, after all, and taxpayers are going to have to foot the retirement bill for those who no longer work. I'm sure that a sizable percentage of the home owners in our area have lots of income and that many of them might even have their homes paid for, in full, with money they have saved from hard work and fruitful investments. I'm not worried about them. I'm worried about the ones who think property values are going to go up forever and that they will be able to build equity in their homes, for years to come, with which to fund their retirement.

The future doesn't look good, folks. We, here in Canada, have yet to see the somewhat dramatic drop in real estate values evidenced in parts of the United States and elsewhere, but oversupply coupled with lessening demand will guarantee that at some point, probably in the not too distant future, values will fall. Then there will be the inevitable recession that comes around every so often. Some people will lose their jobs. Some businesses will see profits diminish or disappear altogether. There will be defaults on mortgages and other loans.

Boom and bust. That's the cycle. Always has been and always will be. And during every cycle it is the same. Those least able to afford to gamble pile on to the madness at the worst possible time, just when the smart money is leaving the table and cashing in. Are these people victims or fools? I won't make that pronouncement, but there is always abundant information available, for anyone who will take the time to digest and understand it, that explains how things work in our economies. The problem is is that too many people believe that the government will somehow always take care of them and that the managed and manipulated economies we now have are being overseen by intelligent, responsible and trustworthy people in government.

That is, of course, nonsense. People in government don't care about us. They only care about being reelected and about having their names on as many bridges and public buildings as possible. To blindly put our 'golden years' into the hands of these buffoons is insane.

What is worse than placing that degree of trust in government? To act in ill-considered fashion yourself, without doing the proper research. And research means not only reading and listening to those whose points of view are in sync with yours. It means understanding both sides.

Most of us, unfortunately, act in concert with our prejudices and preconceptions. And that is dangerous.

The line for the soup kitchen forms on the left.

Green: Environmentalism and Money

Consider the hypothetical resolutions below, decide whether you are for or against them, and be prepared to defend your position on either:

• Resolved that Canada and Canadians be allowed to sell Canadian water and water rights to the United States 0r
• Resolved that Canada adopt the American dollar as its national currency.

This is what my son and I discussed last night. Although he is in grade nine, he is taking a grade ten business course, and the final exam of the current semester will be written today. One of the above resolutions will be on the exam. I asked my son what, given his limited knowledge of either subject, his position would be on each. Not surprisingly, good capitalist-in-training that he is, his positions were:

• Canada has a lot of water and as a natural resource it would be a good source of income for Canadian corporations or, in the form of water rights, a royalty source for the Canadian government.
• Since Canada's largest trade partner is the United States, commerce between the two countries would be easier if we simply turfed our Canadian 'Loonie" and adopted the American dollar instead. After all, some other countries (including Panama, where I have business interests) are already doing that with apparent success, so why not join the party?

A lot of individuals with my son's limited knowledge and experience are in positions of power in government. They may be older and better educated, but they too make their decisions viscerally, in knee-jerk fashion, based on their prejudices. My son's leanings are capitalist, so he bases his decisions on what he thinks capitalist thinking would be on the subject. Our politicians are largely socialist, often Yankee haters, and they make their decisions accordingly.

I explained to my son that decisions of such magnitude need to be made very carefully. That doesn't mean months or years of discussions, it simply means being aware of the larger picture, the possible repercussions of any decision, and the knowledge that circumstances change constantly.

Let's apply these considerations to the issues at hand. Let's talk about the sale of water and water rights. Water availability in some parts of the United States is already low, so water is attracting a lot of attention as a commodity. T. Boone Pickens, the oil billionaire, is already buying water rights in select areas. He's not alone. Water is going to become a very hot item in decades to come. Although there is a lot of water in the world, it is not in infinite supply. Much of the world's water is in the oceans and it isn't much use to us unless it is desalinated. We need fresh water. There is much less fresh water available and at the rate populations are growing, more and more is being used every year. My position would be that water could be sold, in limited quantities, in areas where there is sufficient supply, but never if it would endanger future availability, and never in open-ended arrangements. Reviews should be held regularly. Water as a commodity and general water rights are issues much too large to be discussed in a short blog post, but I certainly would want responsible water rights management by people who have a long range outlook and who really understand the issues.

What about Canada adopting the American dollar as its official currency? It certainly would make a lot of things much easier, as far as commerce between our nations is concerned. But is that the only consideration? No.

The immediate reaction of many Canadians would be that we would lose yet another part of our Canadian identity and Canada would become indistinguishable from the United States and Canadians from Americans. That would be the least of our legitimate concerns. The fact is that the United States is in serious financial trouble. It already has the highest per capita national debt in the world, the highest un-funded liabilities, the largest annual deficits and the largest trade deficits. It is not only a super power, it is a super debtor. At some point, the American dollar is going to take an even worse dive than it has already against the Euro, the Yen, the Deutschmark, the British Pound, etc., and Canada should not adopt the American currency because of this. The Canadian dollar has risen steadily against the American dollar in recent years and we should encourage that trend to continue. Canada now runs annual budget surpluses and we actually make payments against our national debt. Our fiscal house is, if not in perfect order, then at least not in as much of a mess as that of our southern neighbour.

Yes, that was an interesting discussion we had last night, my son and I. I wonder how he will do on that part of his business exam today.

The Canadian fiscal situation is improving steadily, and I am proud to say that I might have had some small part to play in that. Years ago, in the early 1990's, one of my companies produced what we called 'The Doomsday Clock,' a software program that could be customized by country to track its national debt, how fast it was growing, and how it was apportioned per capita and per taxpayer. I appeared on TV and radio shows at the time and discussed the national debt problem. I also used my son Zachary, then an infant, as a' spokesman' in advertisements calling for financial responsibility in government. I played a part, a small part, in a larger thrust for financial responsibility in Canada, and so did my son. I'm proud of that.

We all live in a very complex world and it is imperative that, whatever our political or philosophical stripe, we think hard about what we want from our governments. In our push to grant so many 'rights' to ourselves, we have come very close to spending ourselves into national bankruptcy. Canada is improving. Alas, I see very little hope for the United States in the long term. What will happen when there is no money left, and no-one to coerce it from? No-one will have anything, and even the most fervid socialists will finally be happy. Everyone will have been made equally insolvent, equally hungry, equally hopeless and equally miserable.

That will not be a world in which I want to live.