Wednesday Night #1628

In a circular economy, where my spending is your income and your spending is my income, if we all stop spending then everything grinds to a halt – it is the Paradox of Thrift.

Basically, the austerity proposition is a failing proposition. If a nation stops spending and the economy inevitably falls as has recently become evident in the attempt to solve Greece`s financial problem with austerity measures which, rather than having the intended effect, actually decreased GDP. At the theoretical level there are many converts to the “Krugman position”, but at the policy level many well meaning people confuse governments with individuals and continue to pursue austerity policies. Although most of the European governments continue to promote austerity, Japan continues to increase spending, and in the U.S., the Fed increases the money supply while the government imposes austerity (sequestration at work).
Problems arise when countries cannot print their own money. The ECB has expanded the supply of euros, but that alone will not solve the problems of Greece. Once the money supply is expanded, there are consequences for other members of the EU; the northern countries fear inflation and also that their resources will be transferred to the southern members. Furthermore, how to solve the structural problem of countries being committed to spending more than they take in?
When the ECB makes more euros available, the new money flows to the banks, not to the consumer. The financial world then does very well, but the real world does very badly.
When you have 25% unemployment, you are faced with huge unused capacity and accordingly a huge gap between potential and actual GDP. (002)

The fallacy of the act of moving gold from the earth to a vault constituting national wealth has become evident, but other myths continue to exist.
Whereas the financial world appears to be doing well, the consumer sector is not. Forty million Americans are said to be receiving food stamps. With a quarter of the population unemployed, the actual gross domestic product thus well below its potential and the sole historical solution historically having being war, a more satisfactory solution would probably be a social dividend cheque for each resident. However, Government money is not necessarily the solution. Youth unemployment and record level corporate profits coexist. The solution, whether or not is entails inflation, is the transfer of wealth from corporations to consumers. It is within the realm of possibility that the gap between haves and have-nots could conceivably lead to civil war. A larger issue is the degree of inflation.
In Québec, the combination of relatively high rate of school dropout and low minimum wage produces a permanent underclass in the long run. We appear to be producing people who are unqualified to compete for the available jobs as well as for future areas of employment. Among the casualties are the diminishing opportunities for those skilled in computer technology.
The real indicator is not the number of employees but the number of work hours per unit of G.D.P. The notion of full employment is unsustainable under present circumstances. A real major mathematical challenge such as a reduction in the workweek is required.

QUOTES OF THE EVENING

“There is no free lunch. The percentage of labour costs versus profits is dropping.”
“All unused labour is lost forever. Unused labour is a perishable commodity.”
“Credit is money. Everyone produces credit; anyone can create money. Credit is psychological.”
“Apple is a design producer. Production is done in Asia. We are making ourselves obsolete”.
“The real money is not moving; it is being invested. More should be used to create jobs.”
“The problem is that people who get the money sit on it…a recipe for civil war. Could happen.”
“Historically, we got out of the mess by reducing the number of work hours I see robots as a liberation of humankind if…”
“We cannot predict what positions will open; we have to prepare people for change.”
“We`ve never been as rich as we are today. It`s a distribution problem.”
“Economics is based on scarcity with an economy of abundance.”
“Perhaps not knowing what to do when they don`t have to work is a non-issue. Most retirees do things. Work less and earn more has been reversed”.
“The innovation cycle has become shorter. In this post-labour economy, distribution through wages and salaries requires another distribution system.”

In his column on Skills, Education, and Employment, John Mauldin confirms many of the points raised, in particular: The unemployed do not need more school; what they need are more skills. Why? Because what employers need are abilities. Workers are essentially a delivery mechanism for the ability to do whatever the employer happens to need done. This is not to say that formal education is unimportant; it is critically important – but not for the reason most people expect.
Apple & taxes The technology giant Apple has been defending itself against accusations that it’s avoided paying tax on tens of billions of dollars in profits. Chief executive Tim Cook told a US Senate committee Apple paid all the taxes it owed, complying with both the law, and the spirit of the law.
The simmering stew of income inequality
One of the most urgent questions in economics today is the connection between inequality and growth. That is because one of the big economic facts of our time is the surge in income disparity, particularly between those at the very top and everyone else. The other big fact is the recession set off by the financial crisis and the consequent imperative to jump-start economic growth.

T H E   P R O L O G U E

It would be hard to top last week’s SRO session with Peter Berezin, aptly described by Guy Stanley as [taking] on the air of a PH.D. examining committee quizzing a particularly brilliant candidate on his latest research, however, we will endeavour to capture your attention with a number of not-so-random items starting with the redirection of the NRC’s efforts away from pure science and the failure of StatsCan’s National Household Survey (NHS) to successfully replace the long-form census. [See Conservatives should eat crow, reinstate mandatory long-form census , National Household Survey: Tory Heartland Hit Hardest With Loss Of Census Data and 2011 NHS: Community organizations officially left in the dark]
Both issues, particularly the second, have attracted sharp criticism from media of all political hues, and reminded the public (at least the public that follows anything beyond the tabloids) of the pervasive view that Mr. Harper’s government does not care for science or evidence-based information. [Living in the Age of Dumbness]
We only hope that our educators persevere in making science an ever-more attractive field for students – here’s one approach: Competitive Robotics: Bringing Excitement Back to the Canadian Classroom that appeals to us, while Nigel Penney’s Westmount Science Camp spreads excitement within our own community and is full of plans to expand. Unfortunately, we have seen little interest on the part of the federal government in contributing to the teaching of STEM (Science, Technology, Engineering and Math), but only a keen interest in (revisionist?) history – Stephen Harper’s Conservatives to lead review of Canadian history . In light of a recent article on the obsessing by the PMO and PCO over the one-minute  Canadian Heritage Moment “Fight for Canada” (you have to read this!), we are not reassured.
We realize that some will accuse us of Harper-bashing, however it is difficult to find anything positive to say about the NHS. Furthermore, there is much more to bash and the media of all stripes are doing a far better job than we could [check out some of the selections on Canada in 2013]
To change the tone: one Canadian nobody will bash is astronaut Chris Hadfield. It is impossible to think of a more charismatic, inspirational figure, or one who has done more to pique an interest in science among the younger generation (and many of the older ones) — A look at Chris Hadfield, the Canadian who made space cool and How Chris Hadfield turned earthlings on to space
We only hope that Ottawa in its wisdom will build on his populist triumph, however, as the Globe & Mail reminds us “when he sets foot on Earth for the first time in 146 days, he will be stepping into a future fraught with uncertainty for the program he represents as well as for the $100-billion facility he leaves behind. Back home, the Canadian Space Agency has lost its president since Mr. Hadfield lifted off and the cash-strapped agency remains in need of a ‘reset,’ as recommended by a government mandated review.” The article continues, quoting Marc Garneau [who] “said he is largely in agreement with the Emerson report, released last November, which recommends restoring the agency’s budget and stabilizing core funding to facilitate participation in major projects with international partners. The report also recommends establishing an advisory council to improve ties with the research community and a Space Program Management Board with deputy minister-level powers to co-ordinate space-related activities across the government.”
There is one item that was called to our attention, however for which we believe the government should be congratulated – in anticipation of the June 14 elections in Iran Ottawa backs using social media to boost Iran’s dissidents  The Harper government is launching an effort to reach Iranians through the Internet and social media nine months after cutting diplomatic ties to Tehran. Meanwhile, Reuters announced Rafsanjani’s last-minute entry transforms Iranian race , expressing the opinion that the election will be “the most unpredictable contest for decades”. No doubt Wednesday Nighters will be following developments closely.
Whether or not it is an good omen for Rafsanjani, Nawaz Sharif’s decided comeback victory in Pakistan’s election augurs well for a clear set of goals but it remains to be seen whether he will be able to overcome the military’s reluctance to cede any authority, especially to someone they have already overthrown once. Nonetheless, it is to be hoped that he is able to overhaul a moribund economy, end his country’s decades-old feud with India, and put Pakistan’s meddlesome generals in their place. Nawaz Sharif ‘ready to hit ground running’ as he takes Pakistan victory
Nearer to home, while the Liberals have won big in the Labrador by-election, Tuesday’s election in BC is unpredictable according to the polls. We do have a dog in this hunt (forgive me, Jaime) as Wednesday Nighter Jaime Webbe is running as an independent  in North Vancouver – Seymour and has been endorsed by The Georgia Straight – what a wonderful role model – we are so proud to know her! And Friend of Wednesday Night, former Mayor of Vancouver, Sam Sullivan is running for the Liberals in Vancouver False Creek – our thoughts warm wishes and admiration are with them. [Update: Turnaround after ‘full-on battle’ surprises even B.C. Liberals — Liberal candidate Sam Sullivan, a former Vancouver mayor, seemed shaken by the unexpected victory.
“Over the past 24 hours I have gone through the five stages of mourning … I was angry, I negotiated, I tried to bargain my way and eventually I came to a really unhappy acceptance of the death of our political vision and I woke up and somebody had risen from the dead. What a miracle,” said Mr. Sullivan, who won in Vancouver-False Creek.
Sadly, Jaime Webbe was not successful, but we are sure this is only the beginning of her political career.]

In conclusion, we offer a couple of items for your entertainment —
Stacking up who’s talking (or not) on Parliament Hill  (obviously a slow news day)
Samara finds New Democrats register most words, with NDP MP Peter Julian most talkative
(CBC) In honour of the summer reading season, Samara studied how much MPs and parties spoke in the House of Commons in 2012 and matched some members up with notable works of Canadian literature.
And, from the BBC:
Apostrophe now: Bad grammar and the people who hate it
Grammar is not just an educational issue. For some adults, it can sabotage friendships and even romantic relationships.
The research arm of dating site OKCupid looked at 500,000 first contacts and concluded that “netspeak, bad grammar and bad spelling are huge turn-offs”. The biggest passion killers were “ur”, “r”, “u”, “ya” and “cant”. Also damaging to online suitors were “luv” and “wat”.
On the other hand, correct use of apostrophes was appealing. Using “don’t” and “won’t” caused better than average response rates – 36% and 37% respectively, according to the research.