Juggling Dynamite

This short documentary is an overview of the events that marked Canada between 1927 and 1934. It shows a confident and prosperous Canada expanding in all directions until the stock market crash of 1929. Despite it all, Canada maintains an optimistic outlook. The period is witness to bargains by mail order, extremes in women’s fashions, political seesawing, hockey broadcasts by a very youthful Foster Hewitt, and the word “quintuplets” in every headline.

Here is the direct link.

As domestic debt levels in Canada continue to climb, and government budgets assume continued growth, this piece offers a cautionary reminder of how quickly economic optimism can turn down with global trade.

Here is some timely perspective from The Business Insider:

It is of far broader interest than Canada, however. It is fascinating to look at the insatiable optimism of the Twenties, the commodity boom, the expansion of trade and the sense that human beings had overcome adversity and created ever-lasting prosperity. In fact, the Roaring Twenties were simply a rediscovery of leverage, as are all credit bubbles.

Bubbles artificially boost demand, bringing it forward in an orgy of present day consumption and profit, at the expense of crashing it for a prolonged period thereafter. Over the very long term credit bubbles are neutral, but on the scale of a human lifetime, they most definitely are not. The impact is devastating as euphoria morphs into fear and then panic, and the real economy freezes over.

Watch in the video how quickly that psychological shift unfolds, how ephemeral prosperity can be and how quickly society can shift into long-lasting malaise. Exporting commodities into the teeth of a bubble is not a guarantee of eternal wealth, as modern commodity exporters are set to discover over the next few years.

Canada is vulnerable again, as is Australia, and other exporters into the current Chinese bubble. So are all those who are betting on continued rises in commodity prices. Just because resources will be scarce in the long term, does not mean that will be true in the short term. Prices can crash and fortunes wagered on mistimed bets can evaporate.

Here is the direct link to part 1.

Direct link to part 2.

For those who don’t know Abramoff’s story here is more from the Daily Ticker.

A decade ago, Jack Abramoff was one of the Washington’s richest and most-successful lobbyists.Representing Indian tribes, telecom companies, sovereign governments, and dozens of other clients, he played the lobbying game extremely aggressively–so aggressively that he eventually caught the attention of the press and federal investigators.At first, Abramoff says, he thought he was being unfairly singled out and that the scandal would quickly blow over.

Then he began reviewing some of the ~850,000 emails he had written during his lobbying career and realized that, at times, even in a city and profession in which “legal bribery” is business as usual, he had crossed the line.In early 2006, Abramoff pleaded guilty to three felonies, including conspiracy to bribe public officials, and was sentenced to 6 years in jail. He served three and a half years at a minimum security prison in Cumberland, Maryland, as inmate number 27593-112. He was then released to a Baltimore halfway house in 2010, where he worked at a pizza parlor for about $10 an hour.

Since then Abramoff has published a book–CAPITOL PUNISHMENT: The Hard Truth About Washington Corruption From America’s Most Notorious Lobbyist–and started giving speeches. He still owes $44 million in “restitution,” so a big chunk of any money he makes will go to the government.

Here is the direct link to Abramoff talking about his jail experience. Interesting stuff..

I am all for fair pay. But some of the club med countries have truly earned their road to ruin. Take this example:

The Spanish government recently introduced legislation to cut compensation for workers fired without cause from 45 days salary per year of service, up to a maximum of 42 months salary. The new rules would cut that to 33 days salary per year of service, capping the payout at 24 months salary. Even if companies can prove the firings were because of economic conditions, they still have to pay the departing workers 20 days of salary per year of service.

Meanwhile, back in my home province of Ontario, Canada:

In Ontario, workers fired without cause can only dream of getting two years salary in compensation. Here, the most you’re legally entitled to is either eight weeks notice, or eight weeks salary. And you can only get to that exalted status after having worked at the same job for (you guessed it), eight years. Until then, it’s one week’s notice or salary for each year you’ve worked.  See: Three reasons Europe is in crisis and Canada is not

It is rather like the investment bankers who sold risk and levered up the financial system to insane levels.  You can try to take too much and you may get away with it for a while, but at some point you take so much you kill the host.  Then you are out of work.