Tuesday, March 31, 2009

Prepare for the worst, hope for the best

I acknowledge that attempting to predict the future in the current economic climate is nearly impossible, but one thing is for certain; it can get worse, much worse. When the American stock market collapsed in 1929, it did start to rebound the next year. However government intervention in the market exasperated the problem. Governments have a role to play in easing the pain felt in the average household, but they do not hold the key to correcting the problem. If we agree that the Global Financial System is driven by the United States and the strength of the dollar as the monetary standard; then we must alarmed if it takes a turn for the worst. The amount of debt their treasury holds relative to their GDP is insane. The margin for error is that much smaller, and if the Democrats want to spend trillions of dollars on pet projects and failed business; the negative consequences of failure are the complete collapse of the dollar. China and the EU are already talking about dumping the dollar and adopting a new Global currency.

In Canada there is very little that we can do, except prepare for the worst and hope for the best. Embark on some new infrastructure projects to add jobs to our economy, provide a moderate safety net for people who have lost their jobs, and take the opportunity to cut wasteful spending. The notion that General Motors and Chrysler are “too big to fail” is asinine. If any business engages in unsustainable activities, signs labour contracts that it can’t afford such that it is no longer competitive in the world marketplace; it should be encouraged to fail! That is economic Darwinism, survival of the fittest. Just think of GM as being like a big, furry wholly mammoth. As the world changed, the mammoth slowly withered away into extinction. Some day you will take your grand kids to a museum where there may be a GM car and you can tell them the story that once upon a time there was a powerful automotive company who signed obscene contracts with its union and went out of business. With any luck, the chapter where the Government kept dumping money onto the sinking ship, extending and possibly worsening a severe recession is not a part of the story...

“I don't know the key to success, but the key to failure is trying to please everybody.”

-Bill Cosby

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