From a Suffering Canadian Patriot - Part II

I've always been a deeply pragmatic person. Although I have an economics background, I don't live in an academic ivory tower - I live in the (in my opinion) far more exciting reality of our financial system. As such, I believe that critical analyses are of limited use without prescriptions for how to do things right. Part II of my letter follows, further outlining my views on how to save our ailing economy - and prevent future catastrophes.


From a Suffering Canadian Patriot - Part II

There are glimmers of hope that our politicians have made some headway in visionary thinking. If we speak out and create an environment conducive to a true leader, we will discover who has this potential. And I'll emphasize that we need LEADERS… not another round of self-serving political animals. Citizens please engage!


1. Bolster Credit Unions and some trusts: By opening financial windows to these facilities and enhancing their status, they create real competition for the Oligopoly that we now call a financial system. Enough said…Monopoly bad…Competition good. Not to mention they will be more nimble and efficient than the Crown Corporations the government is looking to expand.

2. Debt Rollover Moratorium: The government needs to step in and legislate an immediate moratorium on all short or long term debt rollover, until other measures take hold. (Epilogue: They are trying to do that with enhancement of the BDC, CMHC and EDC, but these will be too slow). There is a lot of money sitting and lurking in the shadows waiting to pray on those that are forced to beg because they are unfortunate to be renewing debt at this time. If the ‘money’ knows that they won’t get to prey on the unfortunate, they will look away from the ‘prey’ and begin putting their money back in circulation. Obviously, short term provisions by the government will be necessary for those loans that simply must be rolled over, but if someone is making their payments, they should not be destroyed.

3. Create a reverse value add tax: For far too long we have been shipping our raw materials out of the country while adding very limited value. We are searching for ways to stimulate job creation and the jobs are sitting there waiting for the taking. The more that raw materials are processed, the lower the tax gets until it becomes a tax incentive once certain value add has been achieved. This will take time as oil (for example) can be refined and then shipped, but building more refineries will take years and dollars. As long as the corporations are taking steps towards being able to add concrete value, the government can freeze said tax, provide access to capital and other incentives or guarantees to assist in this process. We create jobs immediately while building the infrastructure that people will be able to work at, (productively) for decades.

4. Forget auto (and other tired industries): Demand for cars is far less than capacity and will get worse as people cannot afford to keep replacing cars like Elizabeth Taylor replaces husbands. The world needs our resources and intellect, not our cars! Their needs to be a subsidy here as their will be a transition, but not a subsidy as proposed. Reduce workers hours (thus auto output) but continue to pay them while they retrain/reeducate and help them make the
transition to the better long term jobs being created by point 3 and below. The line worker should not suffer but must adapt to change.

5. Immigration: This country was built on the backs of immigrants but our needs change. Our government is taking steps to put immigrants to work in a more efficient fashion and to be more selective; for that I applaud them. It does, however, boggle my mind that they still insist on resisting working more closely with industry. After all, who knows the current and future needs better than the industries themselves? It is great that they bring in a ton of skilled trades- carpenters for example. They are qualified in their field and thus require less training, but what if we have too many carpenters already? I am not suggesting cuts or quotas but in this environment we need to be better at assessing and adjusting to needs of our economy.

I pause here to address the elephant in the room that few are talking about. When one invests, some of the investment is for today and some is for the future. We will soon be entering the biggest demographic shift in modern history. The Baby Boomers are nearing retirement and there are realities that we will be faced with that, if not addressed today, will be insurmountable tomorrow. The balance of my piece is for the future and predominantly with this theme in mind. It promotes spending today for a better tomorrow.

6. Government Hiring Freeze: With taxpayers retiring at a quicker pace than they are being replaced, we will not be able to afford to sustain an already overblown government sector. Certain sectors will be more in need while others are already overkill to begin with and so it must be, on balance, frozen with some sectors shrinking (through attrition hopefully) and others growing, all the while driving efficiency. Just because it is government does not mean it has to be inefficient.

7. Government employee bonus pool: I think that we are agreed that we are all better off if we are more efficient. What better place to start then rewarding our government employees and managers to find better, smarter and cheaper ways of doing the same thing. But what is in it for them? We have many brilliant public sector employees but they have never been encouraged (and in fact would often end up punishing themselves if they changed, improved or saved).

Imagine what would happen if we gave bonuses (say 2% of savings) to our public sector? And what of those people in jobs that they know are redundant or overkill…wouldn’t they be happy to show their bosses how to eliminate their post if they, say, were guaranteed ½ their salary (in addition to what they can make in the future) until 65 as well as their pension together with full transition pay and free training? Some ideas will require capital.

It's a great place for our government to start stimulating spending would be by approving, and paying for, long term government sector projects that show guaranteed returns. If you are borrowing at 3%+/annum and investing in projects today that will pay/save you 10%+/-/annum, you get to improve, stimulate spending now and make/save money in the process! A similar (but modified) approach to our medical system is also desperately required.

The associations need to start recognizing that change is necessary now to make the transition to an aging population as certain changes need decades to achieve and we are running out of time. A great doctor (and we have the best in the world) does not necessarily make a good manager. Let’s also promote prevention to stimulate the economy for now, and provide benefits in the future.

Earlier I mentioned that what we had to offer the world was our plentiful resources and Intellect. Points 8, 9 & 10 will be dedicated to those.

National Think Tank: We need to find better ways of encouraging the exchange of thought and ideas and of putting them into practice. The Israeli’s propelled themselves into the arena of thought, and thus prosperity, by creating a National Think tank that was in the pure R&D side of the equation. Thereafter private capital was brought in to bring thought to action.
(Epilogue: Genome Canada, which funds large science projects, was shut out of funding in the budget…are we going backwards?)

8. National Idea Bank: If you gave me a room of 1,000 of the brightest minds in the world or 33 Million people, excluding those 1,000, and asked me which group would come up with the better ideas, I would have to pick the 33 Million. How often have you had a great idea that you simply didn’t know how to bring to reality, who to trust/approach with it, and whether someone was already doing it? We should create a secure government site that is there to listen to your ideas, pick those ideas that are deemed by the Think Tank to warrant further work, and advise on and finance the deployment of the idea (bring private dollars to the table). This is thought to action!

9. Structured Student Loan Program: We need more doctors, nurses, scientists, engineers and business minds to insure Canada’s long term viability and ultimate prosperity. (I am not saying that we should wipe out Philosophy or law but we need to put resources where they are needed more). The reality is that those professionals are not created over night. I suggest working with the colleges and association to insure they make spots available and to provide 100% loans for those studies. The loans are ultimately forgiven if the graduate dedicates 5 years in Canada to a related field. Our armed forces do it…why not replicate the idea!

10. Eco-Infrastructure: This is necessary and a great way of stimulating action now. The money cannot be spent on bottomless pit, impossible to operate once finished projects or on roads to nowhere. We need research labs, schools, hospitals, long term care facilities, retirement residences and add-value projects (point 4).

Two things; if it doesn’t make the list herein (or compliment the list such as a road or bridge to the lab, school, hospital etc.) then it is simply a plan C project that shouldn’t be entertained. Secondly, it must be eco friendly. Remember we are doing this for our kids and grand kids. You wouldn’t build a building out of stone and mud just because concrete is a little more expensive. We will more than pay for the added expense, over time, by reducing utility consumption and exporting our advances in this arena to the rest of the world, all the while making the Canada of tomorrow a better place.