Category Archives: in the news

Women, Good. Men, Bad. Read my Headline.

Credit Suisse (CS) just released a new study that digs up an issue that is always good for a headline.  The study is titled “Gender Diversity and Corporate Performance”.

Feel free to read it before reading this rest of this post.  You can also read about it on Forbes, Bloomberg, Globe and Mail and any number of other sites. I am not going to give you all the links because it is an easy Google search and you will likely find many more references. The stories all claim the same thing.  Having women on your board of directors is good for your stock price and company performance. The common problem with all of the articles and that is they rely on this CS report.

It begins with presentation of the data that it has collected in the years since 2005.  It shows us very nice graphs and return on investment charts and I am fine with all of that.  What I expected in the next sections was a clear statistical analysis of the data that used accepted tools to prove the claims that the rest of the paper is based on.  That is not included.  What we get instead is a set of correlations that are not quite backed up with any proper analysis.   I understand that this was a report released for the public but there was nothing stopping them from using the proper technical methods and then summarizing the findings for the report. Or they could even provide a website where you could see their more detailed results.  They did not do that.  They present their correlations and move on.  If you are not clear on correlation vs. causation please take 5 minutes now to look it up and I assure you the rest of this post will be more interesting.

The introduction holds references to a few studies that have been conducted on this topic and as they put it

“There is a significant body of literature on this issue; articles on the subject span several decades. Some suggest corporate performance benefits from greater gender diversity at board level, while others suggest not.”

For our first source we turn to Catalyst.

“Catalyst Inc (2007) showed that Fortune 500 companies with more women on their boards were found to outperform their rivals with return on sales 4 percentage points higher…”

Here is the referenced research. A one page infographic. Not a problem, an infographic can carry lots of information!  For instance, on this infographic we have the sentence “Financial measures excel where women serve” right at the top in big letters.  There is also a small footnote (number 2) on that sentence.  “Correlation does not prove or imply causation.” Okay.  We are still looking for studies that provide more concrete results.

So we take another reference right from the CS report. They mention two quantitative studies that use the data to perform regressions (statistical tools).

“Other studies, such as those conducted by Adams and Ferreira or Farrell and Hersch, have shown that there is no causation between greater gender diversity and improved profitability and stock price performance.”

So when the numbers were analyzed properly we were not able to find a relation.  It turns out that Adams and Ferreira actually concluded that

“…the average effect of gender diversity on firm performance is negative.”  And I got that from their abstract so it was not exactly buried deep in the paper somewhere.

This issue has been presented a number of times and a very influential paper that disputes the claim that more women on a board leads to better corporate performance is  “Corporate Board Diversity and Stock Performance” by Frank Dobbin and Jiwook Jung. This, again, is a quantitative paper that can find no causation.  Strangely, this paper appears in the references section of the CS report but is not cited directly.  I would assume it is included because the conclusion Dobbin and Jung draw is that successful companies might tend to appoint women instead of the effect moving in the other direction.

This type of research is important and I fully encourage it to continue. However, the research needs to proceed in the proper order. The main issue with the CS report is that they have a large body of work that is devoted to explaining the reasons why women are better for corporate performance without actually showing conclusive evidence that they are.


Added note:  For a good quantitative paper that supports the idea that women on a board improve performance using Spanish data see “Female Board Appointments and Firm Valuation: Short and Long-term Effects” by Kevin Campbell and Antonio Minguez Vera.


They’ll never take our FREEDOM! …to market our wheat.

On December 15th 2011 the Canadian Government passed bill C-18.  The super catchy title of this bill was “An Act to Reorganize the Canadian Wheat Board and to Make Consequential and Related Amendments to certain Acts.”  The focus of this bill was obviously the Canadian Wheat Board (CWB).

Existing in its current form since 1934 the CWB was implemented after the great depression to try and help out wheat farmers.  The CWB was given exclusive rights to the marketing of wheat from western Canada.  This meant that all farmers were required by law to sell their wheat to the CWB.  The CWB would then sell the wheat on the world market as one large company.  The CWB is often referred to in the press as a monopoly.  As in, they have monopoly on the marketing of the wheat for all western Canadian farmers.  There is a less common term that is actually more accurate for the powers that the CWB possesses, it is a monposony.  This means that they are a single buyer in a market with many sellers.

The most common example used to explain monopsony is a large company that is the only source of employment in a city.  The company can then force workers to take lower wages because they have no other choice but to work there.  The CWB had a government backed monopsony in place but there was one major difference.   The CWB’s goal was not to force costs down to produce cheaper products as is normally the case. Instead their goal was to maximize the returns on wheat sales and return the surplus profit it generated to the farmers. So yes, they maximized profits, but profits were given back to the farmers.

On August 1st 2012 bill C-18 will come into effect and farmers will be free to sell their grain on world markets directly. The debate on this issue is fairly intense and there has been a number of studies that focus on the breakup.  I will not cite the studies directly; instead I will summarize the pros and cons of the CWB covered in the large body of literature.

Argument for the CWB
The first point is that the combined size of the CWB gives farmers more market power. There is more to this, however, than getting a better price when selling their wheat.  Wheat that is produced in the CWB zone must be transported by rail to ports for export.  CN and CP are the two big rail companies that operate in that area.  Farmers bring their grain to elevators and then pay by the container to have it shipped.  So the CWB is not only able to get a better price for wheat when they sell they are also able to purchase more grain cars and get better deals on shipping.

Second, there have been studies showing that the CWB is able to charge a premium internationally for Canadian grain because it has a good reputation for a reliable supply of high quality grain. It is argued that the loss of the CWB means a loss of this premium.

Argument against the CWB   
The main argument against the CWB is that it has a poor performance during times of high price volatility in grain markets.  The farmers and politicians that were fighting (and succeeded) to change the CWB argued that individual farmers would be better off if they could sell at spot prices when prices were high than rely on the constant large scale contracts of the CWB. Some studies found that the effect of missing out on spikes in market prices meant that overall the CWB served no purpose as it provided no overall benefit to farmers.

The less common (and more generic) argument is that the issue is freedom.  Freedom is what people want, and the CWB denies them that.  So on August 1st, farmers get their freedom.

The Rest
The CWB is not being abolished altogether. It will still exist as a voluntary entity.  So proponents of the changes say that this means more choices for farmers.  Supporters of the CWB claim that with the removal of the mandatory monopsony means the CWB loses all of its power, becomes useless and is likely to dissolve in a few years.

So there you have the two sides of the story in an extremely simplified form.  Both sides agree that this change will open the markets to large multinational grain corporations.  One side claims that this means that smaller farmers will be forced to sell their farms because they will be unable to compete. The other side claims that even smaller farmers will be able to get better prices as the large the world market competes to buy their goods.

There is no way to know how this will pan out unfortunately but I do see one large issue.  Most of the anti-CWB arguments were about how the free markets would be better for everyone.  These types of statements are normally made by people that have either never learned real economics or have forgotten.  Market failures occur when there is imperfect competition. Most intro to economics courses base everything they teach on perfect competition.  The main function of government intervention is to acknowledge and correct for market failures.

So now I will provide you with the million dollar word of the day that describes one such market failure. You can use it to impress your friends and intimidate your enemies.  The farmers will have the freedom to sell onto the world market but that market is controlled by a few, very large, corporations.  This is what is known as an oligopsony. This means that the idea of a “free” world market is not entirely true and therefore the outcome might not be what intro to economics leads us to believe. More than likely the oligopsony market will force prices down and squeeze out the small farmers that cannot compete with the lower costs that large grain corporations achieve through economies of scale (make lots of something so each unit becomes cheaper), as predicted by some of the analysts.

The argument is now over however because the change has been made and even after a number of appeals it has held up in courts.  This means that beginning August 1st we will be able to finally see which ideas from the academic papers were correct.  Unfortunately this experiment is taking place with the incomes of real people so my hope is that the change is a good one and that Canadian farmers will end up better off.

For a more complete look at both sides of the argument you can read my paper entitled “The Canadian Wheat Board in 2012: The Beginning of Marketing Freedom”.  It contains references to a large body of academic work on this topic.
(edited to change the linked file to a pdf)

Canada’s Proposed Anti Mask Law – Double Illegal

The government of Canada has proposed new legislation that would make it illegal to wear a mask while you are rioting or taking part in an unlawful assembly. It is already illegal to wear a mask while you are rioting, so the change here comes only in regards to unlawful assemblies. If you would like to know the difference between a riot and an unlawful assembly then you can read the criminal code here.  For the link averse:

  63. (1) An unlawful assembly is an assembly of three or more persons who, with intent to carry out any common purpose, assemble in such a manner or so conduct themselves when they are assembled as to cause persons in the neighbourhood of the assembly to fear, on reasonable grounds, that they

  • (a) will disturb the peace tumultuously; or
  • (b) will by that assembly needlessly and without reasonable cause provoke other persons to disturb the peace tumultuously.

       Marginal note:Lawful assembly becoming unlawful

(2) Persons who are lawfully assembled may become an unlawful assembly if they conduct themselves with a common purpose in a manner that would have made the assembly unlawful if they had assembled in that manner for that purpose.

       Marginal note:Exception

(3) Persons are not unlawfully assembled by reason only that they are assembled to protect the dwelling-house of any one of them against persons who are threatening to break and enter it for the purpose of committing an indictable offence therein.

       R.S., c. C-34, s. 64.

Marginal note:Riot

64. A riot is an unlawful assembly that has begun to disturb the peace tumultuously.

Sometimes I wonder if lawyers are secretly poets on the side.

Let us take a quick look through these definitions. We have a group of three or more people that are assembled for a common purpose, a lawful assembly. That assembly can then become unlawful if the police officer on the scene believes that the people are about to disturb the peace tumultuously. That is, marked by tumult. If the assembly then begins to actually disturb the peace tumultuously then it becomes a riot.  Pretty straight forward.  Also, it appears that it is lawful to disturb the peace calmly, quietly and without emotion.

Currently section 351.2 of the criminal code states:

(2) Every one who, with intent to commit an indictable offence, has his face masked or coloured or is otherwise disguised is guilty of an indictable offence and liable to imprisonment for a term not exceeding ten years. 

Originally the government had set the maximum penalty to 5 years but they quickly realized that the new law was very similar to section 351 of the criminal code and so they upped the maximum on the new law to 10 years.

“We don’t want to have two different types of penalties for very similar offences in the Criminal Code” said Blake Richards, the conservative that proposed the new legislation.

Unlawful assembly is not an indictable offence but rioting is.  Your assembly becomes unlawful when you are deemed to be about to riot. One might say you are unlawful when you intend to riot but have not yet begun. So when you intend to commit an indictable offence.  Sounds familiar.  So rather than a “harmonization of the existing sections”, as Mr. Richards suggested, it appears they are doubling up on laws for the same offence.

Unlawful assembly is a summary offence meaning that you do not have to give your fingerprints, and normally carries a maximum jail term of 6 months.  (There are some summary offences that go as high as 18 months.)  I will use a photo from the G20 protests in Toronto to show the effect of this law. We will say that the people in the photo are participating in an unlawful assembly for the purposes of this example. I am not claiming anything about the actual tumultuousness of their actions at the moment this photo was taken.

Seems fair.

I feel very secure in the fact that there is an army of lawyers somewhere ready to tell me that the words in the laws I am reading do not mean what I think they mean. I do not consider the arguement that noone ever gets the  the maximum valid in any way.  If noone ever gets it, make a lower maximum.

For now however, I have to conclude that this proposed legislation is almost pointless. I say almost because it is a good way for the government to let citizens know they are definitely, for sure, getting tough-on-crime™.


Student Protests in Quebec. We Should Talk.

Today we look at the student protests currently taking place in Quebec. It is a very polarizing issue and unfortunately the media reports tend, as always, to focus on the most violent aspects of the protests.  The violence has no place in these protests and no reasonable person would agree with that aspect of the unrest. However, in most protests the overwhelming majority of the participants are peaceful.  We see this almost every time there is a “lefty” protest.  The media does tend to mention this minority source of the violence this during their reports but only after reporting the total number of people arrested, a list of damages, number of injured police officers and a detailed description of the dispersion techniques used by the police.

The students are protesting a government plan to raise tuition fees in the province. The most common reaction to this statement is to mention that the students in Quebec pay the lowest tuition in the province and that they should shut up and get back to class. In fact, minus the part about shutting up, this line is also included in almost every news report about the protests.  Readers/viewers are always reminded that the students are complaining even though they pay the lowest rates and will continue to pay the lowest rates even after the changes.

The first question we need to ask ourselves is how much should a university education cost?  If we follow the logic of the most common argument against the students, then the answer is at least as much as the rest of the country.  If you ask the people making the budgets then the answer is MORE; from the people paying the tuition the answer is LESS.  The argument for higher tuition fees because other provinces have higher fees is one that can never end.  No budget maker would ever want to be the lowest rung on the ladder and they could always say well X province has higher fees so we can too.  This is the same way that professors negotiate their salaries at most universities (school X professors make more than us!), and it takes place in almost every industry.  No one ever wants to be the bottom of their pay scale so the bottom is continually increased (This is actually an argument in favour of inflation but this is not an inflation post).

Now I will get a little philosophical and I apologize but I think it is something that needs to be discussed.  Do Canadians want to improve things in this country for everyone? If Canadians have this as a goal, including improvement for themselves, then we should be trying to figure out how we can decrease tuition, decrease dropout rates and increase post secondary participation. On the other hand if the mentality is that Since I had to pay, so should everyone else then we should remove subsidies to universities, remove regulations on tuition fees and I suspect watch the prices skyrocket.  The comments I see about the Quebec protest often involve the words “entitled spoiled brats”. This would lead me to believe that the people posting the comments think the students should have to pay more for their education. Implied in this type of comment is the admission that there is a real value to getting a university degree.  So we can conclude that even people that support the tuition increases admit that a person will contribute more if they have that degree.  That is, they cause the entire economy to be better off because of their increased skill set.  Please understand that when I say these things that I am speaking about average results. I would never claim that every person that has a university or college degree is more productive than a person that does not, because it simply is not true.  So, we must decide if each of us should pay more (through taxes to government then transfers to the schools) to lower tuition to increase the long run strength of the Canadian economy or do we continue to let the fees rise so each individual pays their way through and likely develops the same mentality of I paid, so you should as well. To answer this each individual must consider how they see the Canadian economy in 15-20 years.  If you believe that Canada can recover low skill labour jobs and even grow that sector then education should not be a big issue. On the other hand if you think Canada should be creating innovative technology based employment then education should be important.

It is hard to control the violent members of the protests and hopefully people thinking about this issue can ignore the idiots smashing windows. If we use these protests to start a discussion about how, as a country, we see our current education system and how we want it to exist in the future then they will have done a much greater good than fighting a tuition increase.


Rethinking Inflation, Ron Paul and Quantitative Easing.

I have recently discovered the FRED website that is maintained by the St. Louis Federal Reserve. All the U.S. economic data you could want is available for download in an easy to use interface. It also offers a graphing tool so I figured I would put it to good use.

With the financial crisis there has been a lot of talk both in politics and on the internet about inflation and how all of this quantitative easing in the U.S. is going to lead to massive inflation and basically cause the world to come to an end. I have discussed inflation in past posts. If you follow U.S. politics then you are likely familiar with Ron Paul. He has a very strong hatred for the Federal Reserve and its quantitative easing, asset-buying-up ways. His ideas are in line with how I have discussed inflation in the past (more money on the market means more inflation) but there are a few things that we can look at to see if maybe we have been wrong about the causes for a very long time.

First, the liquidity trap. You can read about it here. It is a favourite of Paul Krugman who believes that the U.S. and much of the world are currently in a liquidity trap like Japan was in the 90s. A liquidity trap is when people expect bad things in the near future so they hoard their cash which is bad for the economy. Krugman mentions it in his book “Return of Depression Economics” but has also written a great deal about it on his blog. It is based on the IS/LM model of macroeconomics which I will not cover here as it is already discussed pretty much anywhere you care to look. Major parts of the model depend on the supply of cash on the market (that’s the LM). In IS-LM the Fed floods the market with funds, drives down interest rates and people start to spend again. But in the liquidity trap the Fed floods the market and people just hoard the cash. In his opinion we should be using fiscal policy (government spending) to break the liquidity trap.

Ron Paul is concerned that as the Fed “prints” money to try and stimulate the economy inflation will rise. High inflation destroys savings as prices skyrocket. This would be very bad. So this is where out new friend FRED comes in, FRED loves graphs. We will want to see how increasing the money supply has affected inflation. We will use “St. Louis Adjusted Monetary Base” as our supply of money indicator. From the official description this is:

“The Adjusted Monetary Base is the sum of currency (including coin) in circulation outside Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks. These data are adjusted for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories.”

For inflation I will use the CPI (Consumer Price Index) in % change values. Wait! I know what you are thinking. Those guys at the Fed always use core inflation! For that reason I have included the core inflation numbers (green line) as well as the “all goods” inflation numbers (red line). You can see that the “all goods” line is a lot more volatile as we would expect. As a reminder, core inflation does not include energy or food prices while the “all goods” inflation does. So please take a moment to look at the graph and consider the two ideas outlined above.

I hope you noticed something strange. As the monetary base surges, inflation drops.  Now the argument is that there is some lagged effect so I included data all the way back to 1995.  There is an upward trend in the monetary base but no similar trend in the inflation.  So there seems to be no link between the monetary base and inflation in this case.
The second half of the argument is that the buying power of the dollar has decreased because of the constant “printing” of money and inflation. For this I plot the percentage change in buying power of one U.S. dollar (blue line) but I include the percentage change in personal income. This is sort of getting off track but I thought I would throw it in here anyway.

We see that for the most part, the effects are opposites. It is obvious here that the buying power of a U.S. dollar is dropping but on average people are earning more of them.

Now, back to the issue at hand – the cause of inflation! The main idea behind both of the previously mentioned ideas is that banks will wait for a supply of money before they begin to lend. Without those funds there is no lending. There is another possibility however and it arises because of the fractional reserve banking system.

Here in Canada we have no reserve requirements at all, in the U.S. they have very low requirements, something like 10%. When a bank is deciding if is going to loan money to a customer, be it a private citizen, business, or another bank it considers their credibility and then grants or denies the loan. Now this is the hard part for many people (including myself) to get their heads around – the loan is created out of thin air. The bank places the money into the account of the borrower as a deposit. So now that borrower is free to do with the money as they please. If the borrower takes all the money out in cash then the bank is now in a negative position with the central clearing system. I could likely write a whole post about the clearing system alone but I will give you the summary version. All commercial bank transactions are recorded on a central clearing system. Banks that are in the negative at the end of the day can borrow from other commercial banks or from the central bank. Banks in the positive can loan to other commercial banks or just deposit into the central bank, these deposits are reserves. We have discussed this type of thing before when looking at Bank of Canada interest rates. When everything is running smoothly the banks will all loan to each other and the demand for reserves will be very low. When all the badness happened in 2008 banks in the U.S. didn’t know who to trust because they didn’t know who was holding bad assets. As a result, they would not loan to each other. This means that any banks in a positive position would simply keep their funds in central bank as reserves. When the interest rate hit a near zero level the Fed continued to pump money into the system because they believed it was the shortage of liquidity supply that was causing the problems. Let’s look at the excess reserves in the U.S.; these are what the commercial banks are holding in the central bank above and beyond what is required of them by law.

So the reserve balances skyrocketed. I included data all the way back to 1995 just to show how rare this really is. So the banks just kept all the extra money they were being given. This would seem to go along with the idea of a liquidity trap.

Now we move to a different line of thinking. Under these conditions we can say that banks are not liquidity constrained but are constrained by the number of eligible borrowers available to them. You might be thinking There are millions of people that want to borrow! and you would be right but obviously the banks do not want to loan to them. So we must now consider that inflation is caused when banks create a lot of new loans rather than just being the result of an excess supply of money in the market. Currently however, banks don’t want to create those loans due to a lack of credible borrowers. We need a measure of banks willingness to lend to verify this idea. Luckily, the Fed sends out a survey to all the top loan officers in the U.S. every quarter and asks them if they are tightening their lending constraints (making it harder to borrow) or loosening them (making it easier to borrow). Here are the figures.

You can see that commercial/industrial loans (blue) move in sync with the personal loans (red). Any point above the zero line means that banks are in general making it harder to borrow and below zero means they are making it easier to borrow. Keep in mind that this is not only talking about interest rates, this is looking at the requirements that a borrower needs to meet given the interest rate at the time. So I now remove the personal loans because we know they move with commercial loans and add the inflation rate to the graph.

For the legend-ly challenged blue is percentage of senior loan officers tightening their lending constraints and is scaled on the left axis. Green is CPI including food and energy and is scaled on the right axis. This graph is a bit harder to read because the zero levels are different on the left and right scales but it does appear that we have a relation. When lending constraints become higher, inflation becomes lower. I won’t pretend that we have come to the conclusion of a causal relation here; but there is certainly an argument to be made that that inflation is driven more by the willingness of banks to loan that it is by the amount of money in the system. We cannot write off the idea of a liquidity trap entirely but it certainly would be a very flat-tailed LM curve that remained in the trap with such huge reserves in the system. We would need to look at similar data from Japan in the 1990s to see if they follow these same patterns. However, this has already been an extremely long post so let’s leave that for another time.

I do not think that the traditional ideas are incompatible with what we have said here. If the loan officers start to relax their constraints then we will see those funds flow out onto the market. This will be when the Fed will start to raise the interest rates in order to slow the rise of inflation as is normally expected. The main difference is that traditionally we would think that the huge supply of money would drive lending. Here, we say that bank confidence in borrowers is actually the driving force. Not all that radical a thought.


Wi-Fi Shutdown – Electromagnetic Hypersentitivity in Ontario Schools

Electromagnetic Hypersensitivity (EHS) is known by various names but I will use EHS. I first heard about this a long time ago as I was working as tech support for a large computer manufacturer.  The customer had made his way through the first few levels of support when he finally reached me.  He calmly explained that no one had been able to help him to this point.  His issue was that he needed to know the frequency of the electromagnetic radiation that was being emitted from our monitor.  I asked him why he wanted to know this information and he calmly and very matter-of-factly explained that he had a condition called electromagnetic hyper sensitivity. I had never heard of this so I asked him to describe it to me.  He said that when he sits in front of one of our monitors and turns it on that it feels like his skin is burning.  I did not believe him at all so I asked a few follow up questions.  It seemed that it was not just our monitor, but all electronics, that gave him this reaction.  He said that if he walked into a Future Shop that it would cause a burning sensation all over his body.  He then began to explain to me the various ways he went about avoiding this problem, including special headphones he would wear.  Yes headphones.  It became clear that the customer had other issues that did not involve electromagnetic radiation. Since that time the references to this phenomenon have exploded on the internet and around the world.

Why am I writing about this?  Back in 2010 I posted this. It was about a school banning wireless internet.  And now we have this.  The Ontario English Catholic Teachers Association(OECTA) is recommending all schools disable their Wi-Fi networks. This is a position paper released by the OECTA. In it, they recommend school turn off wireless networks and use traditional wired networks instead. It is only 8 pages long, including appendix, so feel free to read it. At this point in writing this post I was just going to mention how ridiculous this all was but instead I decided dig a bit deeper because this is getting out of hand.

There are a number of very broad claims made by the paper and each seems to be well cited. If you want to read up to page 5 you will see this:

“Approximately 3 percent of the population (over 1 million Canadians) has been diagnosed with environmental sensitivities (ES) which include multiple chemical sensitivities (MCS) and electromagnetic sensitivity.”

And this is the article by Park and Knudsen they cite for it. We run into a problem here because the quoted text does not appear in that article. Go ahead and check that if you like. On top of that the article is titled “Medically unexplained physical symptoms.” That really should give some indication how compelling an argument can be made by citing it. Directly after that they have:

“Some studies show that adults who are electrically sensitive react to this frequency (2.4 GHz) at levels 0.3 percent of SC6 Guidelines.”

The study they cited can be found here on page 273. This is the main argument behind the article and when searching for this article I noticed that every website that cited it appeared to be dedicated to letting everyone know how horrible 2.4 gigahertz radiation is  (That is the frequency that Wi-FI and many cordless phones work on). Written by Madga Havas, PhD from the University of Trent and published in the European Journal of Oncology it appears to offer evidence of EHS.  Unfortunately there exists a very compelling rebuttal which you can read here.  In short, it mentions that the European Journal of Oncology may not be the most reputable journal around and that the methods used in the study were imperfect and likely lead to a false conclusion. That one you should read because it does a really good job of picking apart the original study.

The OECTA does actually forget to mention one of the most popular articles on this topic.

This is a meta analysis of all studies about EHS.  A meta analysis looks at all studies on a topic to see if any conclusions can be drawn from them.  Using 31 studies they conclude that the effect has never been proven to exist.

If there are health issues that arise from extended Wi-Fi exposure then I am all for shutting it down until we come up with an alternative. I live in a appartment where at any point I can see 15-20 wireless networks.  If there were any credible evidence to support the claim I would not have a basis for this post and would likely be guranteed to get whatever Wi-Fi is supposed to cause.  At this point turning off the networks is silly and there is no reason to do so. With the publication of this paper I suspect we will start to see more schools turning off their networks and that is sad.  This is a teachers association – you know, the people that teach the children – and they could not take the 10 minutes required to verify their information before they posted this embarrassing position paper. I really question how well these same people can set educational standards.


SOPA – PIPA – Blackout Wednesday.

Please be aware that today is a day of protest against the proposed SOPA/PIPA laws in the US.  I will not take my site down for this but I will give you this link to get all the information that you need.  The EFF also has a series of articles that clearly outline all the terrible things included in these bills.  Read one here.

Now you might be thinking that this is an American problem but the same entities that are pushing for those laws are also at work in Canada.  Bill C-11 is the proposed new copyright bill here in Canada.  You can view it here.  The MAJOR problem with this bill is that it says that Canadians can no longer copy any content if there is need to circumvent a “digital lock”.  It does not elaborate on the definition of that digital lock so it could be anything. If you own a DVD from a different region and play it in Canada, that could be illegal. Recording a show on your PVR? Could be illegal. Transferring a song from one device to another?  Could be illegal.  The reason I use could in all of these cases is because no one knows.  A digital lock could be anything.  There any many other problems with this bill but this seems to be the most popular one to complain about.  It should make you very worried.  This bill existed in the past as bill C-32.  When the government was trying to pass c-32 I filled out a form letter in protest and sent it in I got no response at all. Here was the form letter I sent.  I believe I got it at

May 15 2010

The Honourable Tony Clement
Minister Of Industry, Science & Technology
House of Commons
Ottawa, Ontario
K1A 0A6

The Honourable James Moore
Minister of Canadian Heritage and Official Languages
House of Commons
Ottawa, Ontario
K1A 0A6

The Right Honourable Stephen Harper
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Ministers,

In the summer of 2009 the Government of Canada held public consultations on copyright and Canadians engaged in those consultations at unprecedented levels. Unfortunately, it now appears that the Government may be poised to ignore the vast majority of Canadian consultation submissions and proceed with anti-consumer copyright reform legislation. Legislation that would employ strong protection for digital locks, a rejection of flexible fair dealing and support for specific technologies and business models. Legislation that may indeed be more stifling than the US Digital Millennium Copyright Act (DMCA) which, over the course of the last decade, has proven to be a backwards, ill-conceived approach to copyright.

To ignore the input of thousands of Canadian consumers and creators when modernizing Canada’s copyright regime would be irresponsible. Alternatively, I urge this Government to heed what Canadians have told them and only proceed with legislation to reform copyright that is technologically neutral by not integrating protection for specific technologies or business models (e.g. all-encompassing prohibition of circumvention devices and technologies). Legislation that expands and protects fair dealing to ensure Canada has the legal framework to adapt to future business models and new forms of creativity we have yet to discover.

Fortunately, there remains time and opportunity for this Government to reassess its approach on copyright reform and ensure that the input provided by Canadians via public consultations process is taken into full consideration.


(removed all my address info here)
CC: The Honourable Michael Ignatieff
CC: Marc Garneau – Official Opposition Critic For Industry, Science & Technology
CC: Pablo Rodriguez – Official Critic For Canadian Heritage and Official Languages
CC: Charlie Angus – NDP Digital Affairs Critic
CC: My member of Parliament.

Since I got no response at all I then decided to send this email.

Jun 29 2010

The Honourable Tony Clement
Minister Of Industry, Science & Technology
House of Commons
Ottawa, Ontario
K1A 0A6

The Honourable James Moore
Minister of Canadian Heritage and Official Languages
House of Commons
Ottawa, Ontario
K1A 0A6

The Right Honourable Stephen Harper
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Ministers,

I have previously sent in a form letter that I am sure you have recieved thousands of. I thought maybe a more personal letter would show that I am willing to put a little more effort into expressing my concerns.

The version of the copyright bill as proposed is entirely too broad. Many new DRM technologies are actually disruptive to the normal use of products that people own.

Take for example music CDs that install DRM technology on systems using an autorun function. If I decided to prevent that autorun from occurring by something as simple as holding the shift button while inserting the disk, under bill C-32, this would be illegal. This is just one simple example of how this law makes common usage of media illegal.

Please reconsider.


(address info removed here)

CC: The Honourable Michael Ignatieff
CC: Marc Garneau – Official Opposition Critic For Industry, Science & Technology
CC: Pablo Rodriguez – Official Critic For Canadian Heritage and Official Languages
CC: Charlie Angus – NDP Digital Affairs Critic
CC: member of parliament

This time at least I got a reply.

From: <>
Subject: RE: My Concerns With Bill C-32 And Copyright Reform
To: phil
Date: Tuesday, June 29, 2010, 4:00 PM

Dear Phil,

Thanks for contacting me regarding the proposed legislation which aims to modernize the Copyright Act, in efforts to bring it up-to-date with the advances of the digital age.

This legislation will bring Canada in line with international standards and promote home-grown innovation and creativity. It is trying to strike a balanced and common-sense approach, respecting both the rights of creators and the interests of consumers in a modern marketplace. The Government of Canada is working to secure Canada’s place in the digital economy and to promote a more prosperous and competitive Canada.

The popularity of Web 2.0, social media, and new technologies such as the MP3 player and digital books have changed the way Canadians create and make use of copyrighted material. This bill recognizes the many new ways in which teachers, students, artists, software companies, consumers, families, copyright owners and many others use technology. It gives creators and copyright owners the tools to protect their work and grow their business models. It provides clearer rules that will enable all Canadians to fully participate in the digital economy, now and into the future.

For more information, I would encourage you to visit

Thank you once again for bringing this to my attention.

Kind regards,

Ed Holder
Member of Parliament

Since this kind of felt like an automated response I decided to reply.


I realize now that I should have changed the subject line of my email as I am sure I triggered an auto response email. I would just like to stress that it seems like the people trying to push through this law are not actually aware of what the consequences will be. The fact that you have to call it “balanced” when you refer to it is a pretty clear indication that it is anything but.


At this point I got no further response and from that day on I was automatically subscribed to a weekly newsletter about my member of parliament(super awesome).

The last line of my email really does express how I feel.  If something is balanced you don’t need to say it is balanced, it just is.



Happy New Year! What to expect in 2012.

What kind of site would this be if I did not talk about the year to come and make all sorts of outlandish predictions? I cannot promise the predictions but we can sure look ahead to 2012 and see what Canadians are up against.

The Bank of Canada is currently reporting that CPI inflation is sitting at 2.9% while core inflation is sitting at 2.1%.  I have discussed the differences in the past and it is an easy internet lookup so I won’t cover it here.  We know that the BoC’s primary goal is to keep
core inflation at 2%.  So if any of the things we look at in the rest of this post causes inflation to increase then we will see the overnight interest rate begin to rise.  So if you think the economy is going to return to strong growth then you should lock in your mortgage now. When BoC raises their rate, banks are soon to follow.

What can affect the Canadian economy?  The number one thing is, of course, the U.S.
economy. Our neighbour to the south buys 75% of our exports and even though the
Canadian government is looking to expand into other markets, in the near future
our economy is tied very closely to the U.S. So we must watch and hope that the
Americans can avoid a double dip recession. Briefly, a double dip recession is when an economy is in recession and then begins to grow again only to fall back into recession shortly after.  This would be terrible for the entire world and Canada would certainly feel the impact. I will write gain soon about the American economy and what we should be worried about but there is lots of information floating around about that and so for now I will just say that we want them to have a full and healthy recovery.

Canada is a nation that likes to trade.  We have lots of natural resources and we love
to sell them.  As mentioned, we sell mainly to the U.S but worldwide markets for these products exist. This is important because even though we sell relatively little oil to say, China that does not mean that we can ignore their demand. As China, India, Brazil and other nations start to consume vast quantities of world resources the prices of those resources increase everywhere.  This means that people will be willing to pay
more for our oil, natural gas, potash and anything else we are selling.  Energy products alone accounted for about $91 billion of Canada’s $405 billion dollar in exports. What this normally means is that as we sell more oil internationally at a higher price, people need to
purchase more Canadian dollars to get that oil. This can cause the exchange rate to be driven up.  This is a good for Canadian companies looking to upgrade their infrastructure because foreign capital goods will be cheaper.  The downside is that this means that
everything we export is more expensive to foreign buyers.

I was going to write more but since it’s new years eve, I have other things to do. Happy New Year all.  Lets hope 2012 goes smoothly.

Why Greece Should Not Switch Back to the Drachma.

So I have posted many times about Greece in the past but they continue to be at the top of all the newsfeeds so we will look at a different aspect of this situation.  You can see my previous posts on this topic here:

More on Greece
Greece Debt Crisis. How Did They Get There? Part 1
Greece Debt Crisis. How Did They Get There? Part 2

Originally when I wrote this post it was about the choices the Greek people would need to make and the consequences they would face if there was a referendum held regarding the bailout package.  Since then the referendum has been scrapped and the Greek Prime Minister has agreed to step down.  We can instead discuss why the idea of reissuing the Drachma and dropping the Euro is a bad idea.

If you have read past posts on this site then you will know the costs and benefits of a country using a floating exchange rate and issuing its own currency.  Briefly, if a country can issue its own currency – print more money – it will sometimes choose to do this in order to make its money worth less. It would do this so that the goods it produces would be less costly internationally which should encourage other countries to buy its products and to invest their stronger foreign currency locally. Greece is unable to do this because it does not control the Euro. The solution that comes quickly to mind of many is for Greece is to drop the Euro and return to the Drachma. This is the currency that they used before they switched to the Euro in 2002. What would happen if this decision was made?

Immediately there would be a drop in the value of Drachma against the Euro. It would take some time for the markets to decide exactly what the new level would be but it is pretty much a given that it would plunge drastically at first and then level out at some lower point. The effects of this devaluation would be severe.  The immediate effect would be people rushing to get their money out of Greek banks before their funds were converted from Euro to Drachma. This would not be isolated to foreigners; Greeks would want to keep as many Euros as possible before the changeover occurred. This would cause the banks to have a massive outflow of cash, a classic bank run. You would likely see huge lines of people at banks waiting to get their money out but the biggest outflow would be electronically of course.

All debt that Greek banks and companies currently hold is in Euro. This means that when the switch to the Drachma occurs, they will be trying to pay down debt in Euros while their income will be in the weaker Drachma. This would cause a large number of businesses to close up shop because they are unable to pay off their debts or purchase the materials they need internationally. Again, the idea behind devaluation of a currency is that you are trying to make local companies more competitive against foreign companies.  With such a sudden currency shock the increase in competitiveness would be completely dwarfed by the terrible effects of bank collapses and companies closing their doors. The government would need to bailout the banks with more of the new Drachma, devaluating it further, or simply let them collapse.

The exact levels of the third effect are less clear to me but it is my understanding that since the Drachma would be dropping so swiftly that wages would need to quickly increase in order to keep pace.  This would cause price inflation as people’s wages start to become more volatile.  Anyone not paid an inflation indexed wage would suffer the worst.

The decision to reissue the Drachma would need to be taken knowing that for the next few years in Greece things would be extremely tough.  They would need to get used to the fact that their wages were unable to buy all the foreign goods they were used to.

We can discuss one other possibility but only briefly because it is so unlikely.  That is a total default on all Greek debt.  If we ignore for the moment the effect on the Euro area markets one of the major reasons this will not happen is that Greece would instantly be cut off from money markets.  Remember that if a government spends more than it takes in then it must borrow, most governments do this at some point. Greece would no longer have this option. The Greek government would need to balance its budget overnight. This would mean massive layoffs, and the end of many government services. The levels of austerity that the Greek people are currently experiencing would seem very mild in comparison.

The situation is changing extremely fast in the Euro area and I hope that the newly forming Greek government can get a plan in place that stabilizes everything.  The trouble is that Italy is having problems of its own having recently been put under IMF supervision.  All we can do in Canada for now is watch and wait.

And we can send Mark Carney to be chairman of the Financial Stability Board, that we can do.