Thursday, March 26, 2015

Canada now imposes cuts in face of 50% off crude oil

Result of management via the NIA framework:  Once (X-M) drops, then they are compelled to reduce G and xfers, so (G-T) remains as low as possible, even though xfers are not in G.  The hit to xfers then results in a drop in C.

Even in what we might term the "social welfare states" like Canada here and those in Europe, that social welfare is still predicated upon high exports that result in NIA numbers that allow for an acceptable (G-T) result.

If the exports go away or are significantly reduced, then we soon see fiscal cuts and resultant social unrest.


Brian Romanchuk said...

In Montreal, we've always had a small dedicated group of rioters. They are well acquainted with our somewhat notorious riot police.

But more seriously, the a Federal government as well as most of the provincial governments have been implementing "small" austerity packages. Not enough to push us into a deep recession, but enough to prevent the economy from accelerating (despite the housing bubble). This predated the oil drop by years. Moreover. Quebec benefits from low oil prices (although our electricity exports are hit by low nat gas).

Peter Pan said...

This is strictly provincial politics. I haven't lived in Quebec in years. Comforting to see things haven't changed radically.

Matt Franko said...

Brian maybe there are some form of royalties/taxes on the oil that were directly funding ('earmarked'?) some of the former rate of expenditures... now gone so they have to cut they have no choice...

They would have to increase leading expenditure and they dont want to lose what they look at as an admirable "deficit" result (formerly due to the export surpluses...) so they dont do it...

Then the 'loonie' has moved adversely over the last few months so imported products from US are more expensive... cut in real terms for Canadians and more domestic pressure.

Stay safe up there!!!!

Matt Franko said...

Here from this article you can see how the idiot left-wingers are zealous for a fiscal conservative result:

"Daniel Boyer of the FTQ said the government has chosen the wrong strategy. Rather than austerity, it should look to increase revenue.

He said, “The richest of our society should pay more taxes, businesses should pay more taxes. It is abnormal that over 1,000 businesses each year pay no taxes.” (La Presse, Feb. 12)"

All heart and no brain as usual on the left....

Peter Pan said...

Just increase your union dues, FTQ guy.

Peter Pan said...

For Christ sakes, there are as many leftists in the FTQ as there are unicorns.

Matt Franko said...

Bob what are you saying?

that the Unions in Canada are right-wingers?

Here in the US the Union people are all left-wingers....

Malmo's Ghost said...


I know literally hundre4ds of union members in America. Trade union members are almost exclusivity right wingers. Teachers are more moderate, generally center left. Cops and firemen 90% center right to hard right.

Peter Pan said...


What Malmo said, and it applies to the leadership.
Here's an article from 2014 that mentions Boyer and other unpleasant history:

Brian Romanchuk said...


I am not sure what prompted this latest riot, but I think it has something to do with provincial (Quebec) issues. Trust me, we have no oil. There are spending cuts, but that is for other reasons.

Alberta is cutting spending because of lower oil royalties. But I doubt that you scare up more than a dozen Marxists out there; Alberta is now Canada's knock-off of Texas.

Marian Ruccius said...

Unions in QC are as much QC nationalist/ separatist as/than leftie. (This is not universally true, as there are truly democratic QC unions, but many of the largest and most influential labour groups have been controlled by a separatist clique since the 1970s.) This is also true for most of the student associations, which are highly undemocratic, usually fail to hold secret ballots, and claim to represent the entire student bodies of their respective institutions, when they in fact represent small portions of the student populaces (and obtain their putative "strike" authorization through blatantly undemocratic means). There have also been a quite a few cases of student on student intimidation, as opponents of the Printemps Érable were (a couple of years ago) roughed up by pro-strike groups, which labelled them "scabs" for wanting to go to class.

Nonetheless, the student protestors' cause today is a good one, as the cuts and underfunding of education are a real problem and entirely unjustifiable on economic grounds. This cannot be honestly denied.

However, the resources, planning and ideological bulwark for the student protest come from the nationalist unions, and the Parti Québécois (which is as right-wing as the Liberal party, but which has been allied with elements of the labour movement since the 1970s, when the PQ was social-democratic). A corporatist alliance of labour "leaders", politicians, separatist businessmen and mafiosos work comfortably in concert.

The Liberal Government of QC has similar informal coalition, involving construction companies and corporate bosses, "ethnic" community organizations, mafiosos, and municipal power brokers. So, it really is just a kind of gang war. The students have legitimate claims, but they are really just pawns in a larger game.

The original "Printemps Erable" protests, a couple of years ago, were fomented from the rear primarily by the unions, which were opposed to new measures that the then Liberal Government of Jean Charest wanted to bring in to end the unions' "droit de placement" -- this was literally an exclusive right for the unions to name which workers could be employed on construction and other projects around the province. Only workers who obeyed their labour bosses got hired, and on most work sites many positions were reserved for people tied to organized crime or in the union hierarchy. (These folk did no work, but entrepreneurs had to pay them as if they actually were to win public contracts.)

Charest’s PQ opponent, Pauline Marois, after she took office, gave the students a worse deal than that offered by Charest (and was lauded for doing so by the student "leadership", a couple of whom she named to easy ridings where they got elected). Marois tried to impose a racist (anti-semitic, anti-anglophone and islamophobic) charter as a way to rally enough votes for a majority. Quebec's electorate was not fooled, and did not want a referendum on separation, so they booted her out in favour of the economically right-wing but genuinely pluralistic and ethnically egalitarian Philippe Couillard.

It is hard to believe that the student protests will have the same effect as last time, as the public is fed up with the student protestors. Couillard's bet is that if he makes cuts now, while the low loonie promotes QC exports, and can somehow present a surplus on paper, over the next couple of years he can reinvest in politically popular initiatives and thereby win the next election.

Matt Franko said...

Pearce thanks here.... interesting.... any references available where you can see Coulliard referencing the Canadian trade balance?

If so then that would be textbook management via the NIA data (rear view mirror)....

Suggest tell these groups to give up on the "fiscal conservative" approach and just advocate for direct pursuance of public purpose for education... the tax deposits will increase at a new equilibrium level with the higher withdrawals iow the public's new savings desires conditional on this new level of withdrawals....... which might even be lower than observed currently...


Marian Ruccius said...

Hi Matt!

Here is a link to Premier Charest's recent address to the Chamber of Commerce of Metropolitan Montreal. I am afraid there is no English-language version posted, but it is all, all, about exports, the loonie, increasing QC productivity and competitiveness, balancing provincial budgets in the context of a growing US economy:

Marian Ruccius said...

Change that to Premier Couillard's recent address! Tweedle-dee and tweedle-dum!

Marian Ruccius said...

Here is a sample from Couillard's speech (my translation):

• The lower Canadian dollar = exporters.
• Combined with the strong recovery of the US economy, it is an important stimulus.
• The decision of the Bank of Canada to lower its key rate, two weeks ago, is another boost for investment growth.

Several economic indicators confirm that we are on the right track.

• In the labour market, the trend has reversed.
• Since April 2014, Quebec created almost 19 000 new jobs, more than half full time. It is not enough, we will continue our efforts.
• On the export side, the recovery is already here.

International exports of Québec goods increased 9.8 % in the first eleven months of 2014, compared to the same period in 2013.

• Another very positive signal, current growth in manufacturing shipments are at record levels.
•These shipments increased 6.4% in 2014.
• Quebec has done better than Canada and Ontario, and recorded its best performance in 15 years.

etc. etc.

So I guess Canada WAS suffering from Dutch disease!