The Village Voice: A Hudson Blog Forum

Wednesday, May 27, 2009

From 1,000,000,000 to 50,000,000 in 120 days

Defecit will be much Bigger than Forecast: Flaherty (CBC:May 25th, 2009)

Government on right economic track despite pessimistic reports: PM

IMF sees global economy shrinking 1.3% in '09

Opposition demands PM fire Flaherty over Ballooning deficit (CBC: May 27, 2009)

Dollar Club

This has been forecast for some time now.  I myself have seen it coming since October 2008.   I think everyone knew that when the budget was delivered - it was a lame duck.

The whole point in a recession is that the threshold of supply to demand has been crossed too far, due in large part to the huge spike in gas prices during the summer of 2008 when people had to make concessions in their spending to make room for the extra financial (it was at least %50 more expensive here in Quebec)load of fuel essential for homes and transportation.

Inflation jumped %1.2 in that time(that's $12 on every $100 in common speak- passed on to us the consumer)

As this implies, it didn't stop there with consumers, though, the knock off effect was felt in the transportation sector as well, so goods became a whole lot more expensive to transport and in some cases produce.  Prices started going up just at the time people found themselves with that much less disposable income, so they stopped buying frivolous goods - the simple truth is there were (and still are)not enough buying and too many were working to produce.  The job losses started.  The whole thing falling like a house of cards: more people lose their jobs, less people spending, more job get the picture.  In technical jargon that is referred to as an 'recessionary spiral' and the last one we had was just before the Great Depression.

And this is why there is no Tax revenues:  People still aren't spending.  

Take into account also that, according to my October 2008 numbers (gleaned from the 2006 Census numbers) between %18 and %24 of the population of this country were earning (individually) less than $25,000pa and you begin to see where that threshold was.  I myself as a seasonal worker earn roughly $9,000pa, then depend on EI for the next $3,000.  Changes to the system meant I didn't receive it this year.  My rented accommodation alone costs me $6,600pa, with increases in Hydro imminent.  Then, food.  No tax revenue there.  Matter of fact they mailed me a big fat refund I used to pay down debts incurred over the income-less winter.  I know there are many like me in Canada at the moment.

The opposition Parties are pushing for the EI reforms to try to create spending stimulus for the market economy, and hopefully curb lay offs - which the current administration still shows no signs of relenting to.  The way they have done their books they expected %75 of the population to spend like %100 of it would.  $49 Billion is a big gap and a big mistake, especially when you will not apply the remedy. 

This is Grade 11 Economics with a failing grade folks, and it will push this country deep into a depression that will probably make the last one look tame because of a lot more mouths to feed in this era. - no matter how big your bank balance may be, no matter how much tax you save, it's money not in the hands of those who need it to create jobs - those who produce goods that no one can buy right now.

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