Notes From Underground: How could a citizenry have NO CONFIDENCE in the best-run G-7 nation?

There is a story circulating that the Canadian Parliament may have a “NO CONFIDENCE” vote on Prime Minister Stephen Harper’s government. The Conservative Party holds power but it is not a majority government and therefore always susceptible to losing a vote. Tomorrow, Finance Minister Jim Flaherty is to table the new budget. The problem appears to be the opposition to the proposed cuts in the corporate income tax that will cost the government C$6 BILLION in revenue.

The opposition maintains that the revenue hit will be larger and they are also claiming that the Harper Government is misleading the public about the costs of the plan to purchase 65 LOCKHEED F-35 fighter jets. There is no doubt that the Canadian Air Force is in need of new jets. The issue is the budgeted amount. The opposition is led by LIBERAL PARTY stalwart, Michael Ignatieff. This is not the first time that IGGY has entertained forcing a “NO CONFIDENCE” vote. During the past few years he has made overtures about forcing an election but was prevented by his fellow members who believed that the LIBERALS would hurt themselves with the electorate by bringing down the government during the credit crisis. Ignatieff must believe that the Canadians are now doing so well economically that they can now afford to think about policies beyond economics. It is a gamble because polls show that the Canadians are fairly happy with Harper–presently 43 percent to 21 percent over the Liberals.

If Harper were to prevail with an outright majority, it would send IGGY down to a terrible defeat and end his reign as LIBERAL leader. If the government falls, the LOONIE will be sold as the market will detest confusion. As always, check DOLLAR/CAD resistance levels (IMM support) to find places to buy the Canada. I think that Ignatieff is making a grave mistake but at 63 years old he may feel his time is running out. Hell knows no idiocy than a politician scorned!

Canada has been the investment destination during the entire credit crisis as the well-managed Canadian Banks were not subject to suffering from over leveraged balance sheets and spurious loans. Throw in the fact that Canada is well endowed with the natural resources that the world demands and the economy has been able to weather the financial storm in a relatively safe harbor. Yes, Canadian consumers are carrying too much debt due to low interest rates, but at least the finance minister and central bank governor have been out front about this potential problem–NO CONFIDENCE, not from a global perspective.

Besides the AT&T-T-MOBILE/DEUTSCHE TELEKOM deal, the biggest news was that the U.S.TREASURY was going to begin to sell off the $140 BILLION of MBS that it took on its books during the height of the financial crisis. The Treasury said it would sell off the securities in a way that would not disrupt the market–in increments of $10 BILLION a month. I am not sure of the impact although the market’s first reaction was to sell the long-end of the curve. It seems the CONVEXITY traders got a little nervous but this amount should be easy for the market to absorb. My only thought is why doesn’t the Treasury swap the MBS for U.S. Treasuries with the FED and just retire the paper. Again, does anybody communicate with each other except in times of emergency? I know the FED holds more than $1 TRILLION of MBS but they also hold $1 TRILLION of Treasuries, so there’s not much difference either way.

One last point to place on your radar screen. When the Egyptian rebellion started and spread to Libya and Bahrain, I wrote that I wouldn’t get excited about the ARAB SPRING until the citizens of Syria rose up against the most repressive minority regime in the Middle East. It seems that the Syrian street has awoken for the first time since the brutal suppression of the city of HAMA in 1982. Wikipedia refers to the HAMA reaction as a scorched earth policy by President Assad, the previous president.

If the Syrian rebellion begins to grow and the present President Assad were to invoke harsh military measures against the majority SUNNI, would the FRENCH-led coalition move to BOMB strategic military sites in DAMASCUS? Once the policy of military intervention against a brutal, repressive regime  that slays its own citizens begins, where will it end–especially since the Syrians are an ally of the Iranians? Just something else to contemplate as the doors of “misperception” are opened.

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3 Responses to “Notes From Underground: How could a citizenry have NO CONFIDENCE in the best-run G-7 nation?”

  1. tw Says:

    The swing vote in this case goes to the NDP (the far left) here in Canada. That means that the Bloc (the party of Quebec separation) feels that it can likely gain against the Conservatives in Quebec, and The Liberals think they can exploit recent negative PR events against the conservatives, that plagued the Liberals in a past election cycle.

    The NDP however was in a much better position when the liberals were weaker and they made some gains. It meant with a clear Liberal leadership deficit, they were a viable alternative…in spite of being largely a fringe party. This is the most power they have had in years.

    If an election means that Jack Layton may take some losses, which is likely the case as voters appear to have a clearer choice, then expect him to posture (attempting to show that he is “actually the power player” with the swing vote), but ultimately Layton will vote with the Conservatives. If he doesn’t he will likely lose seats and potentially his job as voters will see the highest potential of winning a leftward vote with a more organized Liberal party, versus the largely irrelevant NDP.

    Expect lots of thunder, but status quo in my opinion.

  2. yra Says:

    Tw–thanks for the addition.This is the rewards of writing the BLOG as we as a group inform and build the knowledge base

  3. Arthur Says:

    Very useful, learning about Canada. On my radar screen OIL. In a recent note, Jim O’Neill said: “I have no idea where oil prices are going to go next.”

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