Deficits ‘essential,’ Harper says
The ‘Conservative’ mask slips a little further. To whom will we be paying the interest on these deficits? And how will that interest be funded? Through taxation after a deflationary crash and subsequent hyperinflation. We’ve been warned. But the warnings have not penetrated the media. It’s only now, as the economic trap is closing, that people are starting to get the picture. The central bankers have blown out the economy with easy credit again, just like they did in the 1920s… these bubbles act as massive wealth pumps, tools to centralize assets as they are inflated and subsequently dumped. What we’re seeing now, as Goldman Sachs moves their cronies into positions of power and Obama appoints Timothy Geithner as his Treasury Secretary (who’s been calling for a global banking framework since he got back from the Bilderberg conference this year), is the consolidation of holdings of real equity as homes and land are foreclosed on in the US. What we need is another Andrew Jackson.
Thomas Walkom, Toronto Star
November 23, 2008
PM reveals economic conversion at APEC summit, hints at bailouts even for ‘badly run institutions’
LIMA–Against the backdrop of a collapsing world economy, Prime Minister Stephen Harper yesterday drew on memories of the Great Depression as he outlined his strongest arguments yet for the need to rack up government deficits.
He also hinted at his willingness to bail out “badly run institutions,” an intriguing reference at a time when the Big Three automakers are soliciting government aid.
“The world is entering an economic period unlike, and potentially as dangerous as, anything we have faced since 1929,” he said, in a speech to business moguls in Peru’s capital for the Asia Pacific Economic Co-operation forum.
With central banks no longer able to keep the economy limping along, he said the world – including Canada – now faces “the classic circumstances under which budgetary deficits are essential.”
The Prime Minister outlined his intellectual journey from deficit hawk to Keynesian spender, pointing out he had entered politics at a time when Ottawa seemed locked into a situation where federal spending always outpaced revenues.
“I say this (speak about the need for deficits) with some reluctance,” he told the gathering. “I began my political career about 20 years ago in a fledgling new political party (Reform) and I did so in part to campaign for the necessity of fixing that structural deficit.”
Indeed, as late as October, in the midst of the federal election campaign, he – like his Liberal and New Democrat opponents – assured voters he would never run deficits.
But even then it was clear that whoever formed the government wouldn’t be able to keep that promise without forcing massive spending cuts on a weakening economy.
Harper began to backtrack just after the election. Yesterday, he gave a coherent explanation of his reasons, saying that any attempts to balance the books in today’s world risked a repeat of the 1930s.
“In an earlier life, I was studying to become an economics professor,” he told his audience, noting that one of his key interests at the time was economic history.
“As we enter a period we have not seen in the memory of virtually anyone alive today, we must be good students of history – and not just recent history. Let us remember what led to the Great Depression. It was not caused by a stock market crash. That was only the beginning. Policy-makers pursued four sets of actions that defined that terrible decade.
“They allowed a rapid contraction of the banking system. They allowed widespread deflation (falling prices) as a consequence. They undertook to balance the books at all costs – raising taxes and contracting government economic activity at the one time when fiscal stimulus was absolutely essential.
“And, finally, they erected protectionist barriers in a short-sighted attempt to preserve jobs.
“These are mistakes the government of Canada will not make.”
The Prime Minister said action on the fiscal front is necessary because monetary policy – having central banks cut benchmark interest rates in an attempt to keep the economy moving – is no longer sufficient.
Harper also suggested he was not prepared to let what he called “badly run institutions fail” even though this might be the right thing to do at a different, more prosperous time.
Aides declined to identify which institutions he meant.
Harper made his comments as 21 political leaders from around Asia and the Pacific Rim met to add their support to efforts hammered out last weekend in Washington by the so-called Group of 20 nations.
The G20 had called for fiscal stimulus to boost the world economy, as well as better financial regulation and a moratorium on trade protection.
Yesterday, the 21 APEC leaders added their imprimatur to these sentiments. In particular, they pledged not to raise any new barriers to trade or investment within the next 12 months.
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