Wednesday, April 20, 2011

Banks on the Economy

The business plan template that I use sensibly calls for a section on Economic Outlook.  I try to keep it to two pages covering local, provincial, Canadian, American and global situations in a nutshell.  Of course one looks for good news to bolster the client's ability to get financing.  Bad news stays out of the business plan but goes direct to the client as advice.

There are two banks whose economic research and commentary I routinely use. these are the same ones as my associate uses so we see and say the same things for consistency's sake: RBC (Royal Bank of Canada) and BMO (Bank of Montreal).  They have a series of publications, some weekly, some monthly and some quarterly, looking at various aspects such as trade, housing, labour etc.

After a while, you start to recognize the boiler plate and the bull shit.  They make a big fuss if the Canadian or American GDP growth forecast goes up or down 1 point.  This month it is projected to grow at 2.9% in 2011 and 3.1% in 2012.  Or vice versa.  They just circle around 3.0% pretending they actually have a clue.  As long as "the Economy" is growing, they are happy that all's right with the world.

They deal with "The Economy", not with people, blithely quoting aggregate numbers about foreclosures and unemployment totally unaware that human misery might be involved.  They did say that so far America has recovered only 14% of the jobs lost in the downturn and suggest that the problem is "systemic".  It is systemic but not the way they mean it.  Establishment economists always use the term systemic to describe unemployment after every recession.  They mean that there are lots of jobs but the people available just don't match the requirements.  What a crock and cop out.  But then they don't have to face the reality that the jobs just aren't there.

They did like Obama's tax cuts (for the rich, though they didn't mention that part) and had a nice chart to show how it would stimulate the economy.  I am sure they have nice charts showing how Harper's tax cuts for the rich will help the Canadian economy too though I didn't see them.

GDP growth, stock market rises, tax cuts for the rich might help "The Economy" but if it doesn't help "The People", then what good is it?  THAT is the systemic problem.


  1. Good observations BF. Companies cut their workforce to the bone and beyond. Those left are forced to try and do the work of several people. That's were the productivity gains came from and those left have seen no increase in wages or benefits. People getting back into the labor pool are finding reductions in pay of 25 to 30%. Also I'm seeing many many more who may never make it back to work because their skills are no longer needed and they are so close to retirement age they are too old to retrain. I was lucky enough to have so many and varied certifications that I managed to make it back. It isn't what I had been doing and doesn't pay as well but at least it's a pay check.

  2. The fantasy about tax cuts for the rich creating jobs is bullshit. The rich will invest the money in companies whose stocks are rising in price and the stocks that are rising in price is the ones that are getting rid of workers to increase profit. That means it is actually causing the situation to get worse. After 30 years of tax cuts for the rich, if those tax cuts actually created jobs, everybody would have a job whether they wanted one or not!!!

  3. A slightly right of centre newsletter I get was praising some academic economist who wrote a paper detailing the high cost to an economy of taxation. I could suggest a few countries they could move to with no taxes and no government, or avoided taxes and some government. No thanks. Taxes are the price we pay for civilization.

  4. Deliberately lost in those calculations is the notion that the people are the economy. That includes all people, from the richest to the poorest. Our system, regrettably, has evolved to the point where too many of the wealthiest are all but comepletely disconnected from the average citizen, who, in too many of their minds, is reduced to an abstraction.

  5. In Canada, the Harpers like to say that the unemployment rate is back down. Well, sort of. We've lost a lot of high paying jobs with benefits and in there place we've got lots of poor paying part-time jobs with no benefits.
    50% of the Canadian economy is small business. Tax cuts for the rich who already have capital at their disposal does not help.
    Telling a parent who is working 3 minimum wage part-time jobs that they should not complain - not so impressive. Telling the same person that subsidized day care is evil? Well, perhaps they are too tired to notice that it isn't true.

    Whoops. I ranted.

  6. Because I like graphs:

  7. SW, you are right. The wealthiest are "self-made men who worship their creator" and have forgotten everyone else who are just aggregate numbers.
    PN, I am a graph person too. I read the article you referred to and followed a commenter's link to this one which is the clearest explanation I have seen for the income disparities of Piketty and Saez. It is not an easy read but can be managed.

    Politicians spin stuff. I detest the Harper government and everything it stands for but have read the commentary Liberal MP Ralph Goodale puts out related to Saskatchewan and more than half of it is pure BS too.


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