Cheap Shots

Neil Reynolds, August 15, 2007, Globe and Mail:

"What's the best way to expand a welfare state, irrationally assuming for the moment that you want to expand a welfare state? Cut taxes. Especially cut corporate taxes. You will collect less revenue every time you nick a dollar but you will have many more dollars to nick - and you will almost certainly find yourself with more tax revenue than you know what to do with. Iceland is a good example."

Willem Buiter, January 21, 2009, Financial Times (London):

"Iceland’s largest three banks with border-crossing activities collapsed last fall, as did its currency. The three banks are in administration and new state-owned banks with a purely domestic focus have been set up. Strict capital controls make external borrowing all but impossible and discourage foreign investment. The country now has an IMF program.

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Iceland’s government had to let the country’s three main banks go into administration because it did not have the fiscal capacity to bail out financial institutions with balance sheets amounting to 600-700 per cent of annual GDP. Any attempt to commit further government resources to the rescue of the banking system would have precipitated a sovereign default.

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The excesses in Iceland during the past decade were greater than in the UK, but not qualitatively different. In both countries, the regulation of banks was laughably lax.

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Households were permitted, indeed encouraged, to accumulate excessive debt - around 170 per cent of household disposable income in the UK, over 210 percent in Iceland.

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Both countries permitted the real exchange rate of their currencies to become materially over-valued, more so in Iceland than in the UK, but still to a worrying extent even in the UK. The same version of the ‘Dutch disease’ - the crowding out of the non-financial internationally exposed sectors (exporting and import-competing) by the excessive growth of the financial sector and the construction industry - occurred in both countries, again to a greater extent in Iceland than in the UK, but to an highly undesirable extent even in the UK. Iceland’s gross and net external indebtedness are much greater than that of the UK, and its current account deficits during the years just prior to the crisis were much larger than those of the UK.

Both countries pay the price for the hubris of policymakers who believed that they had engineered the end of boom and bust and replaced it with perpetual boom. The risks associated with asset market and credit booms and bubbles were dismissed (”how can you be sure it is a bubble? Do you know better than the market etc.”). In neither country have the responsible parties (the prime minister, the minister of finance, the governor of the central bank and the head of banking regulation and supervision) admitted any personal responsibility for the disaster. Instead we are told tales of a once-in-a-lifetime calamity, coming at us from abroad, that ruined a perfectly sensible and sustainable set of domestic policies, regulations, rules and arrangements. As if!"

Neil Reynolds, January 9, 2009: Globe and Mail:

"Why Government Can't Stop Market Crashes"

The man really has no shame. But of course there are always going to be ideological hacks who move on blithely from failed prediction to failed recommendation and back to failed prediction without ever a word of apology, a reconsideration of their premises or a questioning of the ideology that blinds them. The question is why the Globe and Mail thinks one of these people should be one of their columnists.

As Expected

Offered without comment, ok maybe one (at the bottom of the post)....

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From the CBC, October 19, 2006:

"Economy seen cooling till 2008: Bank of Canada - The 2008 growth forecast remained unchanged at 2.8 per cent."

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From the CBC, October 10, 2007:

"Economic growth is expected to cool to 2.3 per cent in 2008 — down from its previous forecast of 2.6 per cent"

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From the CBC, January 24, 2008:

"Bank of Canada lowers 2008 GDP estimate: Growth to pick up later in the year and into 2009 ... In its latest monetary policy update issued Thursday, the central bank now says GDP will rise by 1.8 per cent in 2008, down from its October estimate of 2.3 per cent. "We will come through 2008 fine," Bank of Canada governor David Dodge said at a news conference."

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From the CBC, July 15, 2008:

"...the bank said it expects economic growth in Canada this year of only one per cent. Growth is expected to rise to 2.3 per cent in 2009 and 3.3 per cent in 2010.

That is down from the lowered outlook the central bank offered in April, when it said it expected 1.4 per cent growth for this year. In January, the bank said it was looking for 2008 growth of 1.8 per cent.

The bank also sounded a warning over its outlook for inflation, saying that commodity prices continue to outstrip expectations.

"Assuming energy prices follow current futures prices over the projection period, total [Consumer Price Index] inflation is projected to rise temporarily above four per cent, peaking in the first quarter of 2009," the bank said."

The bank sees energy prices subsequently stabilizing and inflation is projected to return to its two per cent target in the second half of 2009.

Many economists see the central bank remaining on the sidelines for several months."

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From the CBC, October 23, 2008:

"the Bank of Canada said growth is expected to pick up over the remainder of 2009 and to shoot to "above-potential" in 2010 ...

Asked if Canada was headed for recession, Carney would only say that economic performance will be sluggish for the next few quarters.

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From the CBC today:

"While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity," the bank [of Canada] said.

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As expected!! You can take these clowns seriously if you like, but you do so at your own peril, they certainly don't take their audience very seriously...