Financial Post - Diane Francis

Euro: another sub-prime currency

Diane Francis — Mon, 08 Feb 2010 17:10:00 GMT

"This is a statistical recovery and a human recession" -- Larry Summers

It was the best one-liner I heard out of the recent World Economic Forum in Davos. Of course one week later, speculation rife in sessions entitled "Will there be a double dip?" were overtaken by the Double Dip itself. Markets began roiling after the European Union's central banker and various leaders admitted that they had not ever undertaken, nor required, independent audits to monitor the financial behavior of the Euro's 16 user-nations. They took their finance ministers' words for it. Sounds like the Bush regime which took their Wall Streeters' words for it.

We enter a new currency melee which gives "Beware the Greeks" new meaning. Greece is only the beginning of a new Euro Plague, whose value will be drubbed by a complete failure to supervise members -- a governance lapse every bit as reckless as the deregulatory religion that brought down the U.S. and British economies. The Euro's woes will drives up the bailouts required by Germany and France, the uber-Euro nations, and will lead to more collapses. Enter the "PIGS" -- Portugal Italy, Spain as well as Greece -- which have been a currency headache to many since 2008. These countries are the Fannie Mae, Freddie Mac and AIG of Europe and the loans required to keep them afloat promise to be Europe's sub-prime equivalents. This is because these basketcase countries are cheaters when it came to the voluntary rules and regulations that were designed to uphold the integrity and value of the Euro.

So much for Sarkozy's Gallic finger-wagging in Davos at the Anglo-Saxon economies and their laissez faire regulatory regime that brought about the world's collapse in 2007-08.

Conclusion? China rising. Too bad we cannot invest in their currency because it would be going through the roof.

America cannot afford its military

Diane Francis — Wed, 03 Feb 2010 13:46:00 GMT

DAVOS -- Barney Frank is the gruff and powerful Chair of the Financial Services Committee in the House of Representatives. He spearheaded the passage of stern financial and banking reforms which are before the Senate for passage but which, due to delays, have already been implemented by regulators.
But Frank's next target is the Pentagon -- that costly sacred cow among Republicans. It's a topic that few dare address but Frank is correct when he states that America's military over-commitments stand between Americans and the type of health care and other benefits that Europeans and Canadians enjoy.
In an interview with the Post, Barney hammered home the unsustainability of America's role as policeman to the world. It's a message that, if it begins to gain traction, will start to bring about a sea-change in American attitudes.
"Iraq has cost US$1 trillion," he said in an interview with me at the World Economic Forum in Davos. "It was a Vietnam-scale mistake, not in terms of lives lost, but as a geopolitical disaster which destabilized the region, encouraged the worst kind of radicalism and made us hated around the world. It is one of the single worst decisions in the history of the US."
If the US had not waged two wars -- Afghanistan and Iraq -- and continued to keep unnecessary military commitments, the deficit and debt situation would not be an issue, he said. "There would have been enough to improve the quality of life of Americans and bail out the financial sector."
According to the Stockholm Peace Research Institute, the U.S. accounted for nearly half of the US$1.46 trillion spent in 2008 by the top ten defense spenders. The next highest was China at US$84.9 billion.

Going broke
More than half of the current US federal government's "discretionary" budget is military expenditures. This is equivalent to the level of expenditures in 1946 after the second world war.
"We are defending the Czech Republic and Poland against an Iranian missile attack. We have expensive bases all over the world which are not needed," he said. "We are keeping troops in Iraq until the end of 2011 even though there is no external enemy in Iraq. The problems in Iraq now are entirely internal."
"There is no threat to the US in the sense of the Soviet Union. China is decades away from being a military issue if it ever does become one," he said. "We should have a policy only of going to the defense of countries that are attacked. As for our own home defense, tell me what a Trident [nuclear] missile does against a shoe bomber? You could cut $250 billion a year from our military budget and take 5 or 10% of that to put into increased security at home and we would be a safer country. More airport security and more magnetometers would be more effective. Also more cyber security."
He rejected out of hand any arguments by allies that only the US can defend the world against tyranny and terrorism.
"The America-must-do it argument? That's BS. We are everybody else's military. My answer is `do it yourself'. Urging us to do more than necessary is just giving others a free ride," he said.
Trimming US$250 million from military expenditures would more than cover the cost of universal health care and the extension in other ways of the social safety net and environmental improvements.
"Our debt crisis began when the previous administration tried to finance two wars with tax cuts. We are overburdened. What we face is a debt crisis, due to military over-commitments, which has devastated our ability to improve our quality of life through government programs," he said. "We would have had US$1 trillion now to help fix the economy and do the things for our people that they deserve."

Davos: wealth from west to east

Diane Francis — Sat, 30 Jan 2010 15:51:00 GMT

The World Economic Forum in Davos has for years boasted attendance by the highest-octane pundits, celebrities and politicos on the planet. This year's attendance reflected the asymmetrical nature of the recession.

China was here in full force; the United States was not. Li Keqiang, the Chinese Vice-Premier and heir apparent, delivered a proud and forceful address about his country's success and desire for international collaboration and co-operation. India, which also posted a robust performance during the economic crisis, was amply represented, minus political leaders.

Also missing-in-action were Wall Streeters, American, Canadian and British bankers, movie and rock stars, Russians and Germans, promoters who shilled for Dubai, and the usual army of media representatives. There were fewer lavish parties by businesses and countries with the exception of the Asians.

The tone of the conference was set by kick-off speaker, France's President Nicolas Sarkozy. He delivered an impassioned speech scolding and prodding the world's leaders to reinvent capitalism. Applause was lukewarm, hardly surprising given the fact that the Forum's supporters were supporters of the so-called "Anglo-Saxon" deregulation model that nearly destroyed the world economy.

"The question is, how can we use the economy for the benefit of mankind?" posed Sarkozy. "This was not a failure of capitalism. It was a skewing of capitalism. We are irresponsible if we don't change bank regulations, market rules, accounting rules."

He called for a "new Bretton Woods" (the original system collapsed in 1971) of currency valuations in order to remove volatility and monetary manipulation by some nations to enhance their export successes.

"The prosperity of the post-war era owed a great deal to Bretton Woods, to its rules and its institutions," Sarkozy said, adding that capitalism should not be replaced but that it has to be changed. "We will only save capitalism by reforming it, by making it more moral."

The only other G8 leader to attend was Prime Minister Stephen Harper, who in his remarks described the recovery as "one mile wide and only one inch deep." He said international collaboration was essential in reforming the financial sector, continuing stimulus to create jobs and avert protectionism.

The shape of the agenda's sessions underscored the historical inflection point since the crisis: the power shift from West to East. Many sessions dealt with the bearish prospects for Europe and the United States and the bullish prospects for China, India and Brazil. Figures show that tens of millions of jobs have been lost around the world, most of them in the West in a "jobless recovery," while Asia roars along. The Asian Development Bank has said the region will need 750 million new jobs over the next 10 years.

Shareholder democracy oxymoron

Diane Francis — Mon, 25 Jan 2010 14:13:00 GMT

Imagine a democracy where those who don't vote have their ballots automatically cast in favor of the incumbents?
Well, that's how the game is rigged in the world of so-called shareholder "democracy".
That's why it's little wonder that certain CEOs have made a career of increasing the gap between their performance and their paycheque, to the detriment of shareholders.
Enter an idea whose time has come, i.e. websites such as corpgov.net; shareholder.org; proxydemocracy.org and moxyvote.com. These are just four offerings on the Internet which are designed to help disgruntled shareholders organize and register their displeasure or lobby for change.
Best guess is that there will be many of these, some of which will become powerful countervails to some of the exceedingly bad behavior in the C-suite.
These websites are the beginning of Business 2.0 just like Politics 2.0 which swept American elections in 2007 and 2008. That world changed with the advent of web-based campaigning, recruiting and fund raising.
The Obama campaign, whether you like him or not, transformed politics by allowing $5 and $10 donations to help him mount a credible race, eventually displacing the usual suspects who have always raised money by making backroom promises to vested interests.
Likewise, these shareholder advocacy websites, and future ones,will provide the best leverage for the disenfranchised shareholder to raise a fuss, solicit funds for litigation and also to influence the public corporation's behavior. In other words to impose transparency and accountability on those managements who disdain both.
Shareholder activism has been absent, in part because of passivity as well as unfair proxy rules. Other culprits have co-opted big pension and mutual funds from being proactive by giving them fees-paying business. Or worse.
These are sites devoed to improving the investment climate. Each is a specialist:
-- Corpgov.net is a blog which deals with the hot issues in boardrooms and proxy battles. It also provides many links to dozens more activist or aggregator sites so that investors can join forces or research what other companies and shareholders are doing.
-- ProxyDemocracy publishes reviews of companies by activists and big shareholders.
-- Most interactive is moxyvote.com whose motto is: "30% of shares are held by individual investors, but most have no voice in the boardroom. Let's change that."
Moxyvote picks fights and helps people vote or get organized around issues.
-- Another is shareowners.org which is an advocacy site which interested individuals can join to pressure for change.
Clearly, shareholder democracy is often an oxymoron. But things are changing because the technology enables improvements and investors or taxpayers want to avoid the excesses of the past.
"The importance of the issue cannot be overstated," wrote former New York Governor Eliot Spitzer in the Wall Street Journal recently. "Virtually every thoughtful discussion of corporate governance concludes that unless shareholders act like the true owners they are, all the proposed corporate reforms will fail. While there are some who claim shareholders are simply too ill-informed to participate meaningfully, this argument should carry no more weight in the corporate context than it does in the traditional political arena."

Google grow up

Diane Francis — Sat, 23 Jan 2010 13:50:00 GMT

The war of words between China and Google escalated this week into a full-blown diplomatic flap.
U.S. Secretary of State Hillary Clinton asked China to investigate cyber-sabotage incidents against Google that led the search giant recently to threaten to leave unless Chinese censorship requirements were scrapped.
She lectured: "Countries that restrict free access to information or violate the basic rights of Internet users risk walling themselves off from the progress of the next century." Then she added China to a list of countries which have become a "spike in threats to the free flow of information" recently such as Tunisia, Uzbekistan, Egypt, Iran, Saudi Arabia and Vietnam.
What she failed to add to that list were the "spikes" such as Google itself, Yahoo and Microsoft's Bing which have obeyed Beijing's censorship restrictions, all to gain market share in China. Even worse, in 2007 Yahoo was pilloried after revelations that it turned over information about dissidents to Beijing.
It's somewhat amusing, therefore, that Google and its two American competitors have collaborated with the Great Internet Fire Wall all the way up to about 40% market share. And Google has about 30%, or most of it, which undoubtedly made it the biggest target by persons unknown who may want it out of China.
Despite its corporate outrage, and White House support, Google has more temperately said it seeks a face-saving compromise with China which may have something to do with the fact that its exit means it will leave behind a place in China's monstrously vast (also censored) cell phone market.

C'mon
American governmental and corporate righteous indignation about unfair or unjust trade practices is amusing to Canadians given the fact that the United States has embedded buy-America policies in contravention of the Free Trade Agreement as well as has alowed systemic protectionism against Canadian lumber, livestock, steel and other products made by other trading partners.
Despite the double standard, Washington's spin doctors now are in full flight bashing China as though Google was a foot soldier in some great moral struggle between America and the Middle Kingdom.
My guess is that this is probably just another case of old-fashioned, ruthless capitalism on the part of Google's rivals, present and future, which are fighting for the biggest piece of the biggest piece of the biggest web market on earth. And they don't have the motto "do no evil" like Google does. This is the biggest Internet gamble around: There are more net users in China, 384 million, than there are human beings in the U.S. and Canada combined.
China's search company champion is Baidu with 60% market share now. What Google and Americans know better than anyone is that home teams usually win on home ice.

Tories must correct income trust blunder

Diane Francis — Tue, 19 Jan 2010 14:36:00 GMT

The income trust flip flop in fall 2006 still haunts Prime Minister Stephen Harper. It has cost him in polls and this year, in 2010, will likely do so again as Ottawa's punitive 31.5% tax on the remaining 169 income trusts will force them to privatize or be taken out by big corporations or pensions.
His policy boondoggle caused damage: 1. A broken promise by the Prime Minister made, unequivocally, to leave trusts intact because of their importance to small investors and retirees; 2. The soiling of the country's reputation because the flip flop was retroactive and confiscated $35 billion in value; 3. The disappearance of 51 income trusts (out of 220) bought by foreigners and others who do not pay taxes; and 4. Evidence that finance did not understand nor do the necessary homework.
The Liberals say the 31.5% income trust tax should be 10% this year to prevent huge disruption. But a more elegant solution has been put forward by a truck driver from Cornwall Ontario and his wife, David and Lorraine Marshall. Dubbed the "Marshall Plan", it has been formally submitted in response to requests by the government for ideas before the March budget.
In a nutshell, the "Marshall Plan" calls for creation of a unique tax shelter where income trust units held in RRSPs could be placed and the 31.5% tax avoided. In return, any capital gains tax would be deferred until monies were withdrawn but the distributions to unitholders would be taxable every year.
This could be an instant windfall to Ottawa. The 169 trusts that are left pay out about $16 billion annually in distributions to their unitholders and this income, if taxed annually at an average dividend-rate of 38%, would generate $6 billion a year in taxes to Ottawa.
If this is not done, the damage already caused will multiply. Since 2006, the policy led to the buyout of 51 income trusts by purchasers who don't pay taxes (pensions) or who will write off profits against interest payments on debts used to acquire the trusts. This phenomena is the most damning indictment of the 2006 nonsense and will be compounded this year.
Some may argue that the Marshall Plan constitutes another bailout. But that's nonsense. How can a tax shelter which yields $6 billion a year in taxes be a bailout? How can a tax shelter which allows the feds to eventually tax capital gains when it collapses or funds withdrawn be characterized as a bailout?
The Caisse de Depot et placements du Quebec, National Bank and others were rescued after they didn't do their homework and peddled or bought asset-backed commercial paper. So what's the justification for not rescuing innocent investor-victims who did their homework and were promised protection, then double-crossed?
The income trust policy is a blunder but can, thanks to a truck driver and his wife, be somewhat corrected. Only if, Harper and Flaherty heed and adopt the Marshall Plan in the budget this March.

China largest English speaking nation now

Diane Francis — Mon, 18 Jan 2010 14:15:00 GMT

The world's "lingua franca" is English and an estimated two billion are trying to learn it as their linguistic passport to business success and global access. China leads the pack, followed by India and Eastern Europe.
"This year China will become the world's largest English-speaking nation of more than 300 million," said Mike Kraft, CEO of Lingo Media Corporation which is poised to cash in on this gigantic market.
But English speaking is a bit of a misnomer. The problem in China is a shortage of teachers who actually speak English properly.
Enter Lingo Media, Kraft's small, Toronto-listed company. He has been a specialty publisher for years who has been developing English textbook products for China's governments for years. Then he realized the teacher shortage problem so he just launched a breakthrough web-based learning product, using voice recognition software, for the Chinese market.
Within one year of operation, it has signed up one million registered users and is growing its client base exponentially.

Check it out
The site, speak2me.cn, is in Chinese and accessible on the web. Free to registrants, it provides a virtual teacher, an avatar, who interacts with students. This avatar speaks English properly and, through voice recognition software, "listens" to students repeat her words and sentences then makes them verbalize over again until they get it right. There is scoring, contests and prizes.
Students can tap into hundreds of tailor-made modules -- about shopping, studying, working, traveling or socializing -- that help them practice their pronunciation, vocabulary and grammar. They can repeat them as often as they wish and the site is friendly and playful. It makes practice enjoyable instead of painful.
"The Chinese are so proficient at passing tests by memorizing, reading, writing but the teachers cannot speak it properly," said Kraft. "We are giving them a personal English teacher, without cost, on their PCs."
Speak2me is free to registrants because its business model is based on advertising. Messages are embedded into content, without affecting its quality. Because speak2m is so far ahead of language instruction rivals, in the giant Chinese market, it has been approached and has signed up some of the world's biggest advertisers such as Mercedes-Benz, Motorola, Procter & Gamble and others.

MegaNumbers
"Within three months, 60,000 Chinese professionals did English lessons on our site which included Smart Car content and promotion," said Kraft in an interview.
The site's one million users are coinage to advertisers, spending nine minutes on the site on average. China's pool of learners is the largest by far worldwide and will grow. All Chinese post-secondary institutions requires English proficiency for admission and the reality is that salary premiums to English-speakers is an average of 72.5%.
Speak2m has also been hired to provide modules to teach English to the guides for this year's World Expo in Shanghai. But its main product is on the web and China represents the world's biggest pool of online users or 328 million.

Income trust fix: the Marshall Plan

Diane Francis — Thu, 14 Jan 2010 19:28:00 GMT

This is a brilliant idea for the Tories to save face over their income trust fiasco as well as to provide pension-like income plus taxes in an era of deficits. It was sent to me by Brent Fullard and is from the Marshalls written to their Member of Parliament. This is the letter in its entirety. I couldn't paraphrase or polish it any better than is already the case. I should be read and sent to every MP and every income trust victim in Canada.

January 14, 2010
Mr. Guy Lauzon MP
621 Pitt Street
Cornwall, Ontario
K6J 3R8

Mr. Lauzon:
Re: Your letter of yesterday that reads: “I am asking you for your ideas and suggestions as to how the government can lay the groundwork to continue Canada's progress in dealing with the current global recession and address the temporary deficit resulting from the stimulus funding” and “Experience has taught me that some of the best ideas for programs and services originate from grass root Canadians”

It is our hope that your government is serious in making this representation, and that you are truly looking for suggestions from grass root Canadians, that you will treat them seriously and that if our suggestions meet the objectives that you have outlined above and are beneficial to all Canadians as opposed to just some, that you will implement them.
In that regard we am submitting to your government what we refer to as Canada’s Marshall Plan for dealing with Canada’s pension crisis.
We have broken this letter into two parts and highlighted the salient points, as follows:

Benefits:
(1) It will resolve Jim Flaherty’s income trust policy fiasco of Halloween 2006 that caused seniors, like myself and my wife, and 2.5 million Canadians, many of them seniors, to lose $35 billion of their life savings and an essential source of retirement income for the 75% of Canadians who, unlike MPs, are without pensions
(2) It will create a massive new stream of cash tax revenue for the government that is presently being “deferred” to future periods. The concept of “deferred taxes” and your treatment of them in a manner inconsistent with the Auditor General’s rules of Accrual Method Accounting are the sole source of your government’s “tax leakage” argument from income trusts. My proposal turns these deferred taxes collected in future periods into cash taxes collected in the present period. This will be a MAJOR help in dealing with Canada’s structural deficit in a manner that will be free of any taxpayer backlash or need to reduce spending programs like health care and other essential social programs that Canadians rely on
(3) This new source of revenue provides the equivalent of a 0.75% GST increase, but with no GST increase required. Think of it as found money, measured in billions of dollars per year, estimated as approximately $6.0 billion per year, since income trust distributions are taxed at an average rate of 38% (according to the Department of Finance) and there is approximately $16 billion of income trusts distributions that are paid by the remaining 169 income trusts (versus the 220 trusts that existed previously before they were taken over by foreigners and tax deferred pension funds, whose taxes aren’t otherwise collected, similar to the alleged problem with RRSPs that your income trust tax was intended to solve, but clearly did not)
(4) It will help seniors like ourselves along with the 75% of Canadians without pensions to restore an essential source of income for retirement, that is presently going to be lost when your government’s income trust tax comes into effect in one year’s time that will see all these income trusts convert to corporations and start paying taxes (in total) that are significantly less (in total) than would be paid to Revenue Canada under my proposal (in total) amounting to the difference referred to in (2) above
(5) It will avoid the continued rash of takeovers of vulnerable income trusts by foreign corporations, foreign state-owned entities and foreign private equity and the accompanying permanent additional erosion of the tax base, that will accelerate in pace now that the one year deadline is looming
(6) It will restore a level playing field between the 75% of Canadians without pensions (RRSPs) with the 25% of Canadians with pensions (eg OTPP), who are presently able to own income trusts (privately) and not pay the 31.5%, whereas we pay the 31.5% tax in our RRSP on income trust investments.
(7) It will promote saving and investment in Canada and provide corporations with a lower cost of capital and allow them to compete on a level playing field with US companies who use an identical structure to income trusts called MLPs.(8) It will direct the vast pool of Canadians’ retirement savings into real investment in the Canadian economy, rather than into synthetic, derivative type savings products, such as Manulife’s Income Plus. As we witnessed during the Global Financial Meltdown, many of these products like Manulife’s Income Plus were not being hedged properly by those entrusted to manage them, with the result that Manulife became unstable financially and almost became “AIG north”, and therefore the Marshall Savings Plan averts a “too big to fail” taxpayer bailout in the years ahead from failed derivative investment strategies or other synthetic income investment products like Asset Backed Commercial Paper (ABCP). Seniors like ourselves should not be exposed to investment products that are similarly defective and whose defects only become apparent when it's too late, putting us in the same situation as say, a Nortel pensioner or a GM pensioner, who were ultimately bailed out by taxpayers like us.
(9) The Marshall Savings Plan avoids the systemic risks to our economy from toxic investments like ABCP and Manulife’s Income Plus and whatever the next get-rich synthetic scheme might be dreamed up, thereby lowering the “country risk” assigned too Canada in the global capital markets and translating into a higher credit rating on Canada’s debt and minimizing the country’s cost of borrowing, an important consideration now that Canada has to fund some $50+ billion in deficit financing

Description of the Marshall Plan:
Our proposal is to create a new retirement savings vehicle, called the Marshall Savings Plan (MSP).
The MSP is a hybrid that will position itself between the existing RRSP and the TFSP (your government’s Tax Free Savings Plan) and borrows all of its measures from either the RRSP and/or the TFSP, and maximizes tax collection for Ottawa, while solving your government’s income trust problem by way of the following features:
- as with RRSPs, monies can be contributed to MSPs from individuals’ pretax earnings in amounts equal to the contributions that can be made to RRSPs, such that each $1,000 of a taxpayers’ contribution eligibility can be apportioned between a RRSP or an MSP
- all INCOME earned in a MSP is taxable in the hands of the holder of the account, in the year received, which means more tax dollars are collected by Ottawa relative to either RRSPs or TFSPs
- all CAPITAL GAINS earned in a MSP can be deferred under circumstances where new securities are purchased during a six month period, consistent with your party’s election promise of 2006 to provide for the rollover of capital gains, but this benefit would be restricted to MSPs only. This will raise significantly more tax dollars that the TFSP and will raise no less tax dollars than the RRSP
- for a transition period of 12 months, Canadians will be allowed to transfer their holdings of income trusts in their RRSP to a MSP, with no tax effect. As such their former RRSP holdings of income trusts that will now attract a cash tax averaging 38% (according to the Department of Finance) rather than the 31.5% tax. To facilitate the payment of these cash taxes to Ottawa, all income earned within MSPs would be available for payout to the account holder
- The cost base of such transferred income trusts will be assigned a value of zero, which is the effective cost base of these income trusts within RRSPs, for all intents and purposes. Importantly, this means Ottawa is “kept whole” on any capital gains taxes.
- as such, the existing 31.5% tax will continue come into effect for all income trusts held in RRSPs and Pension Plans, exactly as planned, although you would be well advised to remove this tax insofar as foreign investors are concerned and/or lower it substantially (given you were the ones who reduced the withholding tax on corporate interest to zero from 15%)

Conclusion:
The effects of this policy are all beneficial and introduce no trade-offs. The Marshall Savings Plan will solve the original problem associated with your government’s alleged “tax leakage” converns of income trusts, since Ottawa will now be receiving full rates of taxation on the 38% of income trusts held in RRSP in the form of CASH since they are now held in MSPs, rather than deferring these taxes for payment in future tax years, as would be the case if these income trusts remained in RRSPs.
The Marshall Savings Plan would deal with the issue that faced your government in 2006, but in a much more elegant, inherently fair and refined manner, while restoring true tax fairness and leveling the playing field for investors while fully addressing the following policy concern that was at the heart of your government’s income trust tax, in the first place, namely:
“As Minister of Finance, I have a fiduciary obligation to the taxpayers of Canada today, not tomorrow, an obligation to pay for needed social, environmental and economic programs today, not tomorrow. I cannot, and I will not, fund
today’s programs from tomorrow's revenues.” Jim Flaherty, January 30, 2007, Finance Committee Public Hearings on Income Trusts.
The Marshall Savings Plans meets that objective along with a host of other important policy objectives and for these reasons needs to come a marquis aspect part of your governments upcoming 2010 Budget, as there is no plausible reason why The Marshall Savings Plan should not be implemented to help address the economic and social challenges facing this country and the 75% of Canadians without pensions.
To provide for retirement savings and essential retirement income, Canadians need more options, not fewer. Rather than taking investment options away from Canadians, by killing income trusts, to deal with your party’s concerns about alleged tax leakage, this proposal of ours is designed to increase the number of options that Canadians are presented with for retirement, while at the same turning your party’s concerns about alleged tax leakage into a windfall source of tax revenue of $6 billion per annum. We can not conceive of a reason why this proposal would not be a key element of your government’s 2010 Budget, especially now that you have actively solicited the “grass roots” views of Canadians like ourselves.
If you have any questions please do not hesitate to contact us. We are only a mouse click away.
Yours very truly,
David and Lorraine Marshall
326 Gloucester Street
Cornwall, Ontario
K6H 3W9

Diktat Kanada

Diane Francis — Tue, 12 Jan 2010 14:55:00 GMT

The decision by Prime Minister Stephen Harper to prorogue Parliament again has upset some and sent others to their dictionaries.

The word means suspension, but not dissolution, of Parliament and is an eye-glazer that masks to most Canadians the irritating fact that the Tories have essentially given federal politicians a month off with pay to watch the Winter Olympics in Vancouver. It's irritating that leaders would do this in a jobless recession.

The unjustifiable maneuver is undemocratic but most annoyingly un-businesslike for Canada's party of business. Those, unlike MPs, who actually work for a living are outraged if they know about it. Others feel that the country should be prorogued for three weeks with pay to watch the Olympics too under the government's stimulus programs. This would be as effective as shovel-ready projects.

Of course, the Prime Minister maintains that not having to be in Parliament does not constitute time off. It is a needed respite from question-and-answer period and public inquiries in order to "recalibrate", said one of his spokesmen. But that mentality makes no business sense either and is equivalent to a corporation giving executives time off operations to brainstorm about the future even their job descriptions require them to operate and brainstorm

The best guess is that the real purpose of this parliamentary hiatus is to buy the Tories enough time before the budget in early March in order to gain control of the Senate through the replacement of five vacancies with five loyal Tories.

Senatorium

Control of the Senate, an embarrassing national anachronism of appointees, is key to Harper because it will give him and his Tories a de facto majority without the bother of trying to earn one from voters in an election.

Why would this be necessary, given an unelectable Liberal leader. But Harper is both smart as well as ruthless. It's pretty clear that Canada is a fragmented jurisdiction that is carved up permanently into four political mindsets. A majority government in this country is unlikely unless some day the Liberals and New Democrats merge. Canada is divided. Permanently so.

As a small "c" conservative I would support gaining backdoor control through the Senate only if the Tories used the power to reform Canada's Parliament permanently.

This would involve: dissolving the Senate and putting all up for election; allowing party leaders to be replaced by caucus votes as is the case in Australia; preventing leaders from handpicking candidates; rigidly adhering to fixed terms and limits of two terms per elected official; eliminating non-confidence motions and calling off the party whips to end control over backbenchers.

But don't hold your breath.

Washington: monkeys guarding bananas

Diane Francis — Mon, 11 Jan 2010 20:00:00 GMT

The cornerstone of integrity in markets is the requirement that players must make full, complete and timely disclosure. That inviolate rule is why the lapses by America's regulatory bodies themselves that have been recently revealed are both infuriating and worrisome.
The latest revelation is that U.S. Secretary of the Treasury, Timothy Geithner, told AIG in 2008 to ignore disclosure laws by not revealing its bailout to counterparties involved in its credit-default swaps such as Goldman Sachs and other banks. On Jan. 7, Bloomberg described the suppression of information shown in a series of emails which had bee obtained by Congressman Darrell Issa of California. Issa, a Republican, sits on the House Oversight and Government Reform Committee.
Bloomberg writes: "The NY Fed was in charge of negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp AIG despite its its initial bailout. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a `backdoor bailout' of financial firms."

Geithner and others in emails were against disclosure of these indirect bailouts. So one of many ironies is that in 2008 Geithner, as head of the New York Fed, was answerable to Ben Bernanke, Federal Reserve chief who has been saying publicly that the failure to regulate financial players properly was the root cause of the collapse of the U.S. financial system.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
Around the same time, then-Secretary of the Treasury Henry Paulson was reported to have pressured Bank of America executives to suppress information as to how disastrous its takeover of Merrill Lynch was becoming. More recently, was the Freddie Mac incident where government officials with the Federal Housing Finance Authority tried to persuade the mortgage giant not to disclose massive losses.
The revelation promises to make Bernanke's reappointment as head of the Federal Reserve slightly tougher but not impossible.

The failure to disclose also raises another concern. This week, watchdog and former New

York Governor Eliot Spitzer published a blog demanding that the government publicly disclose on-line all of AIG's emails for journalists and citizens to scour. Issa's email trail is only for five months following November 2008.
"AIG - and more specifically its credit-default swaps exposure - was an important contributing factor to the crash of the financial markets. What sets this company apart from others that played a role in the crisis is that we, the taxpayers, own it. As we noted in our original piece, US taxpayers bought 80% of AIG when they bailed the company out with $182 billion last year. As owners of the company, taxpayers are also owners of AIG. As owners of the company we can demand the release of these documents," wrote Spitzer.
The other issue is the level of backdoor bailout which I have argued should be repaid by Goldman Sachs and others to taxpayers before they are allowed to pay themselves obscene bonuses again. The emails confirm that the Fed, led by Tim Geithner, paid Goldman, Sachs Group and other banks 100 cents on the dollar even though some might have been worthless or a fraction of 100 cents on the dollar. Geithner, in testimony to the Congressional Oversight Panel, said a discount would have been catastrophic. Elizabeth Warren, head of the oversight panel, has repeatedly challenged this assertion.

Underscoring the entire mess is the unacceptable incestuousness of Wall Street and Washington. Goldman Sachs has been the master of the public service swap out as well as a master of providing lucrative employ for ex-politicians, former central bankers, unemployed finance ministers and possibly their supporters, children and goodness knows who else.
There's also part-time gigs: New York Times in a recent editorial pointed out that one of the most "aggressive creators" of "questionable investments" was a firm which answered to another run company which was run by Lewis Sachs, now a senior advisor to Treasury Secretary Geithner.

Diane Francis: gone fishing til 2010

Diane Francis — Fri, 25 Dec 2009 22:34:00 GMT

HEY!!!

I'm away

from the fray

to return another day

or so I say...

Happy 2010!!!

Venezuela: banana republic goes bananas

Diane Francis — Mon, 21 Dec 2009 14:05:00 GMT

American oil, businessmen, Canadian mining companies and now the rule of law are being attacked by Venezuela's President Hugo Chavez.
Anyone thinking of going there or doing business. Think again.
Here's the latest injustice. On December 16, United Nations judicial experts condemned Venezuela’s arrest of a judge as a “blow by President Hugo Chavez to the independence of judges and lawyers in the country”.
This condemnation follows the release by Judge María Lourdes Afiuni of banker Eligio Cedeno and her subsequent incarceration. According to human rights activist and Cedeno lawyer, Bob Amsterdam of Toronto, Chavez went “crazy”.
Judge Afiuni has been jailed, denied a lawyer and Cedeno and his defense team are being sought by police.
The banker, accused of embezzlement, has become a cause celebre among human rights activists and attempts to have his case aired through due process have been fought along the way by the regime, wrote Amsterdam. Here is the time line of events:
n     In 2007, the charges were brought against Cedeno without sufficient evidence. This was corroborated recently by to an affidavit by the lead prosecutor Yoneiba Parra. She said under oath that there was prosecutorial misconduct and other irregularities in Cedeno’s case. She was fired by the Attorney General and fled to Colombia where she now has political asylum.
n     In February 2007, Judge Yuri López issued a ruling that tangentially favored Cedeño. That judge was also immediately relieved of her responsibilities and was subsequently granted political asylum in the United States.
n     Last month, after an appellate panel in Caracas determined that Cedeño’s pretrial detention had exceeded the maximum legal duration, the appellate judge who wrote the opinion was demoted. The appellate court’s decision was subsequently suspended by the Supreme Court.
Now the release of Cedeno by Judge Afiuni.

Tragedy unfolding
“Given the disproportionate response of the Chávez regime to Cedeño’s conditional release – which was an independent judicial decision rendered in compliance with Venezuelan law – it is clear that Judge Afiuni is in grave danger,” wrote Amsterdam.
“They are talking about a 30-year sentence for the judge and threatening to burn her alive,” said Amsterdam in an email over the weekend.
Statements by the UN’s human rights judges in Geneva, and Venezuela’s own bar association, have condemned the jailing.
“The key points she [the judge] made were that: (1) when she sought Eligio’s detention, there was insufficient evidence to incarcerate him, or to indict him; and (2) she sought his detention under pressure from the Attorney General, who indicated that the source was Chavez himself.”
On September 1, 2009, the UN Working Group on Arbitrary Detention declared Cedeño’s detention arbitrary, citing violations of the right to fair trial. His counsel team introduced the UN experts’ opinion at the hearing before Judge Afiuni on 10 December 2009, following which he was conditionally released after almost three years in detention without trial.

The UN's memo this weekend:
“We are particularly troubled about allegations that President Hugo Chávez attacked both Mr. Cedeño and Judge Afiuni, calling them ‘bandidos’ (bandits) and accusing Judge Afiuni of corruption,” stressed the UN experts.

Copenhagen a hopeful start

Diane Francis — Sun, 20 Dec 2009 13:26:00 GMT

Countries are like families. All families are dysfunctional, some more than others.
This reality has driven history, caused wars and made global cooperation difficult or downright elusive.
Family feuds have scuttled deals even when everyone agrees on a goal such as trying to clean up the global neighborhood. As the Copenhagen exercise in the past fortnight shows, there are minds that cannot be met and there are some families that cannot afford to help themselves much less to help others.
Of course, this is no different than families within nations. Some are headed by morons. Some have more children than they can afford or can properly parent. Some are too uneducated to make a living. Some are crooks, ideologues or religious crazies. Some lack respect for others or are abusive, negligent or lousy parents whose children will run amok, causing problems for the rest of the world.
That's why it was unrealistic to believe a definitive agreement in Copenhagen was possible, but it's important to note that two advances occurred. All leaders agreed they would submit targets, for the first time; they agreed to transparency; they agreed to financial help for poor nations to meet their targets and agreed to work in 2010 to forge a binding agreement that would stall warming.

World worsening
At the same time, the issue of carbon emissions began to morph into a global version of the second-hand smoke issue. The proliferation of dirty smokestacks and cars combined with deforestation and oceanic degradation, which eliminate the world's lungs, are now broadly considered as health hazards just as are cigarettes and cigars.
This changes the conversation to health concerns and away from the endless squabbling over science between global warmers versus deniers. The U.S. Secretary of the Environment singlehandedly did this by labeling emissions as health hazards at the conference. In future, this may mean that just as medical evidence of harm caused by second-hand smoke led to restrictions, social shaming and litigation, so will evidence of excessive emissions.
Last night, President Barack Obama held a press conference and described this non-binding deal, as a "first step" which was an accurate description. He said it was cobbled together by the U.S., China, India, Brazil and South Africa and represented a "meaningful and unprecedented breakthrough" which may be torquing it a bit.
After all, past promises have been broken, the deal is not yet binding and in the past 12 days the world's population increased by three million, or more people than live in Vancouver. But the collaboration and involvement of Kyoto's "outliers" and the world's biggest polluters -- the US and China -- is certainly a very hopeful development.

Vancouver and Vancouverism

Diane Francis — Wed, 16 Dec 2009 14:31:00 GMT

Normal 0 0 1 635 3307 57 21 4451 11.768 0 0 0

Vancouver is ranked as the world’s most liveable city by many established organizations and according to many measurements. The city’s natural advantages are spectacular: a backdrop of mountains and water. But other cities have squandered such benefits while Vancouver has enhanced them because it is also one of the world’s Smartest Cities through a savvy combination of dedicated conservation and innovative urban planning. This interview was conducted with Vancouver's Mayor Greg Robertson as part of the Financial Post's Smart Shift series with IBM and CBC.

The Economist Intelligence Unit ranked Vancouver as the best in 2008 and 2009 on the basis of additional criteria: its stability, healthcare, culture, environment, education and infrastructure.

Originally the settlement, named after British explorer George Vancouver, was a staging ground for two gold rushes in the 19^th century. In 1887, the Canadian Pacific Railway linked Vancouver to the rest of the country and world. It’s now Canada’s busiest port and North America’s fourth largest by tonnage.

Major industries in forestry, mining, tourism, technology and film production have followed and turned it into a large city of 615,473 in 2009 and greater metropolitan area of 2,318,200 residents.

But the city’s evolution is unique and known as “Vancouverism”, or land use curbs to limit sprawl by protecting wild life preserves, green space and farmland in and around the city. This gives the city a distinct “nature” vibe and has also fostered population density that promotes the use of parks and public transportation.

“Vancouver is well designed,” says Mayor Gregor Robertson. “We have a great legacy of smart planning decisions that mean diverse neighborhoods, a dense and walkable downtown. Keeping freeways out was another big differentiator.”

Respect for nature is a core value.

“Metropolitan Vancouver has doubled in 20 years and a good percentage of growth has been integrated into smart density. We have some sprawl but we have an agricultural land reserve [since the 1950s] that protects the farmland around the city,” said Mayor Robertson. “Another visionary planning initiative since the 1970s has forced development to be contained to protect the drinking watersheds and wilderness. This provides the best drinking water in the world. So the combination of protecting what’s most valuable for health – water and food – have primarily directed the growth of Vancouver onto a smaller footprint that’s enabled better transportation planning and high density nodes.”

Water barriers and bottlenecks have made driving difficult in the city which is why more rapid transit is being planned to accommodate the next million people estimated to arrive as residents of Vancouver within 20 years, he said. High housing costs are another challenge which are being addressed through cooperative housing, legalized secondary suites and increased density zoning.

The city is diverse, not only ethnically but also socially. English is a first language to only 48% of Vancouver residents and its tolerance for alternative lifestyles is well-known.

“The city is a real mosaic of culture and persuasion. We celebrate these. There is a spirit of tolerance and acceptance here that is refreshing. It’s been that way for decades so we’re well beyond where many cities are in terms of accepting different lifestyles and perspectives. I think that only makes us stronger and more relevant and attractive to people who don’t fear differences,” he said.

Underpinning the city is economic stability.

“We have more small businesses per capita than anywhere in Canada and the U.S.,” said Mayor Robertson, who co-founded juice maker Happy Planet before entering provincial then municipal politics. “A small business driven economy means there’s huge opportunity for emerging technologies and ideas.”

“We have enormous opportunities emerging in the green economy. I’m focused on capturing the opportunities created in clean technology and we’re attracting more talent from all over the world because we’re considered a green city. We’ve got momentum on that front. And our trump card, in terms of attracting talent, is the beauty and liveability of this city.”

Copenhagen divides Canada

Diane Francis — Tue, 15 Dec 2009 13:30:00 GMT

It's disappointing that Ontario and Quebec publicly demanded in Copenhagen that Canada's emission-reduction targets be raised to match theirs.
A joint press conference yesterday, staged by Ontario's John Garretsen and Quebec's Line Beauchamp, constitutes a blow against fossil fuel producers in the west, the country's principal engine of economic growth.
It also constitutes a serious swipe against the Canadian economy as a whole and represents a nation-rattling glimpse into the hitherto closeted battle between the eastern have-nots and western haves which is, sad to say, now Canada's economic reality.
Ontario's environment minister actually used environmentalism's label of "tar sands" as opposed to "oil sands", an uncalled for shot.

The two provinces are out of line and here's why:
-- It takes energy inputs and emissions to create energy of all kinds. Energy is Canada's cornerstone and fossil fuels are not going to be replaced for at least a generation. That's why any deal signed by Ottawa in Copenhagen must refuse to allow fossil-fuel consumers to punish fossil-fuel producers. Any pain should be equally shared.
-- Ontario and Quebec are promising deeper emissions cuts than are the feds and insisting that their targets be adopted. This is cynical, and easily done, because the Ontario and Quebec economies and accompanying emissions have already shrunk due to the fact that their economies have been declining along with car, airplane, steel and lumber sales.
-- Ontario and Quebec are also able to deliver deeper emissions cuts because their electricity is mostly generated by cleaner nuclear and hydro. But their energy mix isn't due to their prescience or strategic insight. It's due to the fact that uranium was in Ontario and both provinces were blessed with natural water assets.
-- Conversely, Alberta and Saskatchewan have produced power from fossil fuels, not due to recklessness or selfishness, but because they had such fuels in abundance. And the nuclear option out west so far has not been viable either, despite Saskatchewan's huge uranium deposits discovered in the 1970s and 1980s, because of the west's small population base.
-- Also side-swiped in this Ontario-Quebec political gambit in Copenhagen is Newfoundland which has lurched from economic handout to economic handout until the 1980s when oil gushed in from offshore fields.
Many Newfoundlanders are concerned about higher emissions cuts along with the fact that Quebec has impeded Newfoundland's hydro-electric potential for decades by refusing to renegotiate a 99-year lease that made new investments in hydro-electric power in Labrador impossible and by attempting to block Newfoundland power exports directly to the U.S.
-- What's unfortunate is the refusal, on the part of Ontario or Quebec, to account for the fact that Alberta's fossil fuel largesse, and now Saskatchewan's, was sold at a discount by edict for decades (until deregulation in the mid-1980s) in order to subsidize industry in Central Canada. Now when the pain needs to be shared, Ontario and Quebec simply would beggar their neighbors.
-- Lastly, attacking our fossil fuel industry through unfair emissions restrictions is an attack against the value of the Canadian economy, and its dollar. Both are directly linked to the country's oil production. In December 1998, oil was US$18 a barrel and the Canadian dollar, 67 cents US; in December 2004, oil hit US$60 a barrel and the Canadian dollar, 87 to 90 cents US; in December 2008, oil fell to around US$40 a barrel and the Canadian dollar to 80 cents US.
The east must cease its attack against the west. To continue would be to follow a dangerous course, not only economically but politically.