Archive for the ‘Economics’ Category


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China lacks the political, economic and civil freedoms to become a world leader.

In the last decade, the notion of China becoming the world’s next superpower has become almost an idee fixe for many. Compared to the other so-called BRICS – Brazil, Russia and India – China shines like the moon. Since Deng Xiaoping created the Four Modernizations in 1978, China has surged from being a marginal player on the global stage to a powerhouse that has attracted $2 trillion of foreign direct investment.

Its economy ranks first in the world in building modern infrastructure, global exports ($2.2 trillion), Internet usage (600 million people), college graduates (7 million per year), rate of economic growth (10 percent from 1980 to 2010), movement of peasants to the city (400 million from 1980 to 2013), high-speed rail under construction (40,000 miles) and major airports (43). By 2025, it will likely have the world’s largest gross national product.

Given all this unprecedented growth, how can China miss becoming the world’s next superpower in 10 or 20 years? Chinese officials have told me more than once that it will probably be 2050 before China becomes truly modern. How can this be?

A superpower also needs to develop political democracy, economic freedom, military power, legal system, quality of life and high tech creativity. In all these areas China lags far behind the United States.

Politically, the United States had the world’s first democratic government in 1789 and expanded the franchise ever since. By contrast, after 65 years in power, the Chinese communist government has not even begun to make the transition towards a semi-democratic state. Rather, the government, whose think tanks in the 1990s used to talk of managing a democratic transition, has cracked down on movements in minority areas and in Hong Kong. There are no democratic elections at any level. Without this transition, the People’s Republic of China faces the serious possibility of falling apart like the Soviet Union did in 1991.

Economically, while the United States has a strong, relatively open capitalist economy, Chinese economic freedom is so poor that the Heritage Foundation Index of Economic Freedom ranks China 137th in the world alongside Cameroon and Tajikistan. As a result, the Conference Board, citing the negative roles of state run capitalism and growth-fixated monetary policy, estimates Chinese economic growth to slide to only 4 percent by 2020.

Militarily, the United States has hundreds of bases around the world, 11 aircraft carrier battle fleets, tens of thousands of strategic and tactical nuclear weapons, well trained officers and numerous major allies around the world. China, whose military spending is less than 30 percent of American spending, is still working on its first aircraft carrier (bought from Ukraine), imports major weapon systems from Russia, and has a small strategic nuclear force. A large number of its officers are of peasant origins. It lacks any major allies.

The United States created a government of laws, an independent judiciary and the protection of civil liberties. In China, the government does not allow free speech, assembly, an independent judiciary or religion. Massive corruption has allowed high Chinese Communist government or party officials to reap fortunes of hundreds of millions, even billions, of dollars.

The United States has been a world leader in quality of life, with more than 60 percent of the population owning their own homes and over 90 percent owning cars. By contrast, with 50 percent of the population still living in dire conditions in the countryside and massive air, water and soil pollution killing 1.2 million people a year, Chinese quality of life is quite poor. A recent poll showed that more than 60 percent of the wealthiest Chinese want to leave the country.

Finally, in a world increasingly dominated by advances in high technology, China lags far behind the United States. While the United States has the majority of leading high-tech companies – Google, Apple, Cisco, Hewlett-Packard, Microsoft, Oracle and others – China has almost none. Neo-Confucianism and Communism have suppressed Chinese creativity. Since 1950, not a single Chinese scientist working in China has won a Nobel Prize in Science. By contrast, the United States since 1945 has won a staggering 235 Nobel Prizes in science.

Overall, then China has come a long way but still has a long way to go to become a global superpower.

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NEW YORK (Reuters) – U.S. stocks turned lower in afternoon trading on Wednesday, with major indexes erasing earlier gains as a shooting at the Canadian parliament unnerved investors and Boeing and Biogen sold off following results.

Indexes had traded in positive territory for much of the session, putting the S&P 500 on track for a fifth straight day of gains. Earnings initially drove the move higher, with technology and material shares up on the back of strong results.

Market benchmarks began drifting lower in late morning after a gunman fatally wounded a soldier in Ottawa, the Canadian capital, and then entered the country’s parliament buildings chased by police. By early afternoon, the market had given up earlier gains.

The shooting in Ottawa is “the only news event I’m seeing here that could be spooking this market. There’s nothing else other than technical points,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

Biogen Idec was the biggest drag on the S&P 500, falling 5.1 percent to $310.04 after sales of its big-selling new multiple sclerosis drug, Tecfidera, fell short of Wall Street’s lofty expectations. It also reported a higher-than-expected quarterly profit and raised its full-year earnings forecast.

Boeing Co lost 4.4 percent to $121.57 despite reporting higher-than-expected earnings and lifting its outlook, as analysts raised concern about the costs of the 787 Dreamliner. Its decline comes after a rise of 5.8 percent over the four previous sessions.

Along with healthcare and industrial names, energy shares <.SPNY> were among the day’s biggest decliners, off 0.9 percent as crude oil lost 1.7 percent.

On the upside, Yahoo Inc and Broadcom rallied a day after both tech companies reported better-than-expected revenue.

Broadcom shares climbed 6.1 percent to $39.62 while Yahoo was up 5.2 percent at $42.25; the two made up the S&P 500’s top percentage gainers.

In the latest economic data, consumer prices rose 0.1 percent in September as energy costs fell broadly, painting a weak inflation picture that could give the Federal Reserve room to keep interest rates low for a while.

At 2:09 p.m. the Dow Jones industrial average <.DJI> fell 100.73 points, or 0.61 percent, to 16,514.08, the S&P 500 <.SPX> lost 7.4 points, or 0.38 percent, to 1,933.88 and the Nasdaq Composite <.IXIC> dropped 19.19 points, or 0.43 percent, to 4,400.29.

Declining issues outnumbered advancing ones on the NYSE by 1,813 to 1,194, for a 1.52-to-1 ratio on the downside; on the Nasdaq, 1,793 issues fell and 844 advanced for a 2.12-to-1 ratio favoring decliners.

The benchmark S&P 500 index was posting 44 new 52-week highs and 1 new low; the Nasdaq Composite was recording 53 new highs and 25 new lows.

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As she enters her golden years, Joan Dunphy may have to go back to work to afford a roof over her head — and she’s not the only senior to find herself in a tough housing situation.

Dunphy, 67, qualifies for subsidized housing. But the problem is that there’s no rental unit available for her.

She was living in an apartment, but can no longer afford it. About 60 per cent of her net income goes for rent, heat and light. That’s double the recommended amount.

“I’m at the point now where my savings are gone and I can’t afford this any more so I have to move,” Dunphy told CBC Investigates.

“I went see my family doctor, and my blood pressure was up. I’ve never had a problem with blood pressu

“They have to decide where you live,” Dunphy said. “It doesn’t matter where you are or how you’re settled. If they’re going to subsidize you, it has to be in a place that they subsidize.” **

Right now, she says, there are no such places available.

So Dunphy went looking on her own.

She found a place that costs less, but it doesn’t qualify for a subsidy.

That doesn’t make sense to her.

“If I am eligible for a subsidy myself, why can’t I pay my rent and then Newfoundland Housing can say: ‘Did Mrs. Dunphy pay her rent this month?’ ‘Yes.’ ‘OK, send me the subsidy.’ If the subsidy is for me, then subsidize me.”

‘Only the tip of the iceberg’

The Seniors Resource Centre of Newfoundland and Labrador says it had nearly 400 calls from seniors about housing situations during the last fiscal year.

In fact, for the first time, housing-related calls were the number one area of inquiry, according to executive director Kelly Heisz.

“We’re only the tip of the iceberg, because being a non-profit, we don’t advertise a lot,” Heisz said.

The centre provides advice and hooks up seniors with government programs.

“For a lot of seniors, housing crisis means that their whole living expenses have been uncontrollable, which spirals to the point that a lot of seniors just get so anxious, and have anxiety, that they really don’t know what to do,” Heisz said.

She says a typical one-bedroom apartment which would have gone for between $450 and $650 a decade ago now has a price tag of over $1,000.

“Ideally, if a senior wants to stay where they are, well why can’t we work to try to have them stay where they are?” Heisz said.

NDP MHA Gerry Rogers also gets calls. She believes seniors should be able to choose where they want to live, within reason.

“B.C. has a very interesting housing program that’s specifically for seniors,” Rogers said. “It’s a program where they get rent supplements. The rent supplement goes with the person, it doesn’t go to the unit specifically.”

Clyde Jackman is minister of the newly-created Department of Seniors, Wellness and Social Development. He is also responsible for the housing corporation.

He says there have been success stories, such as affordable housing units built on the Burin Peninsula.

“How we get to providing more of these, and providing more home-care support to keep people in their homes is essential, and that’s where we’ve got to go,” he said.

Jackman acknowledges that “creative options,” such as possibly shifting subsidy dollars to a person instead of a specific location, could be considered.

“If someone independently goes out and finds their home, I think it’s something certainly worth looking at,” he said.

“It’s pretty scary.”

That apartment in Pouch Cove isn’t ready for Dunphy to move into yet.

She’s staying with her daughter while she waits.


** This is NOT true in all parts of the country!!!!!!! OTR

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The common refrain from Conservatives is that raising a minimum wage is a job killer.

Well, a new study pokes some pretty big holes into that theory.

The Canadian Centre for Policy Alternatives — an Ottawa-based left-leaning think tank — reviewed minimum wage increases in all provinces from 1983 to 2012 and studied its affect on employment levels.

What they found was that, in 90 per cent of the cases, there was “no statistically significant relationship whatsoever between a higher minimum wage and labour market outcomes in Canada.”

“In the overwhelming majority of cases, gradual increases in the minimum wage were not generative of negative labour market outcomes in Canadian provinces,” notes the report.

“Most fundamentally, employers never purchase labour as an end to its own right. Employers hire workers in order to produce a good or service that is then sold into a product market.

“The demand for labour is thus a derived demand, which depends entirely on the final demand for the product that labour produces.”

The study — one more robust empirical reviews of minimum wage ever done in Canada — was written by Unifor economists Jordan Brennan and Jim Stanford.

In an interview with Yahoo Canada News, Brennan said the study dispels myths propagated by those who are interested in keeping wages down.

He said his empirical research shows that hiring decisions are primarily driven by macro economic conditions such as GDP growth.

“In 75 per cent of the cases [the link between employment and GDP growth] was very strong and a further 15 per cent of the cases it was moderately strong.”

[ Related: NDP’s renewed interest in a national minimum wage a strong political play]

Some aren’t buying it.

Charles Lammam of the Fraser Institute remains resolute against minimum wage increases. In the past he’s written that Canadian studies show a 10 per cent increase in minimum age will likely decrease employment between three to six per cent.

“The independent, peer-reviewed, academic research on the effect of minimum wage increases in Canada is clear: Higher minimum wages have negative effects on youth employment,” Lammam, who hadn’t read the CCPA report, told Yahoo Canada News.

“The research also shows no effect on poverty reduction in part because most minimum wage earners do not belong to low-income households. They’re often young kids living with their parents or adults supplementing their spouse’s income.”

Brennan insists his study is thorough.

“There have been dozens if not hundreds of studies certainly worldwide and even in North America,” he said.

“I don’t know of other studies that carve things up the way we did. The data stretches back three decades — so we get three full business cycles — and we looked at each province and then we carved the labour market into seven variables. And that seven variables times 10 provinces allowed us to run 70 econometric tests.”

The CCPA study seems to mirror a 2013 U.S. study conducted by a progressive think-tank called the Center of Economic Policy and Research. The CEPR analyzed minimum wage increases in the U.S. and suggested that “modest minimum wage increases don’t have much impact on employment” because “the cost shock of the minimum wage is small relative to most firms overall costs and modest relative to the wages paid to low-wage workers.”

In the United States, President Barack Obama continues his push to gradually raise the federal minimum wage from $7.25 an hour to $10.10 by 2016.

The very divisive and polarizing debate has elicited great debate and even protests.

Minimum wage debates don’t get the same attention in Canada as they do in the United States, but it could be an election issue in 2015.

NDP Leader Tom Mulcair introduced a motion in the House of Commons that would have reinstated a federal minimum wage, and increase it to $15/hour.

Even if the motion had somehow passed, its affect would have been limited — it would only apply to those workers who belong to a federally regulated industry such as banking, air transport and radio and television broadcasting.

But it’s at least the beginning of the conversation.


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Evan Siddall says CMHC was a ‘shock absorber’ in the financial crisis and should not be privatized


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Treasury Board president says government won’t spend all the surplus on tax cuts

The fall economic and fiscal update that’s expected later this month will almost certainly herald a return to surplus for next year. But the size of that surplus and what will be done with it remain very much up in the air.

As the ink in the government’s ledgers turns from red to black, promises the Conservatives made in the last election will be triggered.

“We can turn the page and talk more about how we can get more money in the jeans of the average taxpayer,” said Treasury Board President Tony Clement.

The government promised in 2011 to introduce an adult fitness tax credit, double the amount that can be deposited annually into tax-free savings accounts, and — the big ticket item — introduce income splitting for families.

Not just tax cuts

However, Clement says his government isn’t planning on spending all of the surplus on tax cuts alone.

“We’ve always tried to take a balanced approach,” Clement told Evan Solomon, host of CBC Radio’s The House.

“We continue to allocate money to important projects that help stimulate job growth and economic growth in the Canadian economy. So I think what you’ve got from us is a balanced approach and I would be surprised overall — over the next year — as we roll out budgeting for 2015 if that is not the approach,” Clement said.

He also sounded a familiar caution. “Canada is not an island. We have impacts as a result of general global economic trends.”

Canada’s economy continues to grow, but the pace has slowed. Clement and economists point to uncertainly in Asia and Europe — as well as falling oil prices.

Oil on the slide

Although oil represents a small percentage of the federal government’s revenues, the swing in prices could cut the expected surplus in half and give the government much less room to manoeuvre.

For Alberta Premier Jim Prentice, the market price of oil is of much greater concern, although he is sounding confident.

“We have weathered lower prices and we will weather this low-price environment,” he also told Solomon on Saturday’s edition of The House.

Prentice concedes that if oil prices remain just over the $80 (U.S.) mark per barrel for an extended period of time, then growth in the energy sector would likely be stifled as companies are forced to make “decisions” about their capital spending.

“There will be an equilibrium set because some oil will be taken off the market at these prices and prices will rebound to some extent,” he said.

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Some new statistics to make investors feel even worse while watching the stock markets sink: A new study shows the richest 1 per cent of the world’s population are getting richer and own almost half of global wealth.

According to the annual Credit Suisse Global Wealth Report, global personal wealth grew by 8.3 per cent US$263-trillion last year, creating a greater divided between the rich and poor that could trigger a recession.

“The overall global economy may remain sluggish, but this has not prevented personal wealth from surging ahead during the past year,” the report states.

It says the world’s wealthiest hold 87 per cent of the global wealth, and the top percentile alone account for 48.2 per cent of assets. Meantime, the bottom half of the global population own less than 1 per cent of total wealth.

It says that 3.3 billion people, more than 70 per cent of adults worldwide, have wealth below $10,000.

The report says global median wealth  – which is the minimum net worth of the top half of global adults – has fallen every year since 2010, “a surprising result given the robust rise in mean wealth.”

“We should always be worried about inequality,” Credit Suisse’s Markus Stierli told the Wall Street Journal.

The report says the U.S. saw the biggest increase in wealth, with $31.5 trillion added to household worth in that country since 2008. It also notes the ratio of wealth income is at levels not seen since the Great Depression.

“This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past,” the report states.

Oxfam International says the report shows the world’s poorest are paying the price of the recent financial crisis, while the rich have bounced back.

“These figures give more evidence that inequality is extreme and growing, and that economic recovery following the financial crisis has been skewed in favour of the wealthiest,” Oxfam’s head of inequality Emma Seery said in a statement.

How Canada fares

The report says household wealth grew at an annual rate of 7.1 per cent in Canada between 2000 and 2004, in U.S. dollar terms. It says the wealth per Canadian adult is $274,500, which is 21-per-cent lower than the U.S. at $347,800.

“Canada is similar to the U.S. in that more than half of its household wealth is held in financial assets,” the report states. “But wealth is more equally distributed. “

It says Canada has a much higher median wealth of $98,800, versus $53,400 in the U.S.

Canada has both a smaller percentage of people with less than $10,000 and a larger percentage with wealth above $100,000.

Canada has 1,138,000 millionaires who account for 3 per cent of the top 1 per cent of global wealth holders, the report says. That’s even though it has just 0.5 per cent of the world’s population.

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Whether a shift away from fossil fuel, or a temporary price decline, falling oil will alter economy


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CIBC economist says mortgage amortizations are getting shorter, meaning less risk from rising rates

CIBC economist says mortgage amortizations are getting shorter, meaning less risk from rising rates


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