Category Archives: politics

Gold Standard. Part 2 … Ron Paul has entered the match!

Ron Paul recently announced that he will be entering the race to become the Republican candidate for President of the United States.  One of his well known views is that the U.S. should return to the gold standard.  So in honour of Mr. Paul’s announcement I have decided to continue my discussion on the gold standard. The first post did not really deal with gold itself so much as establishing what money is and how fiat currency is differs from the gold standard.

The first major problem with gold is its supply.  With a fiat currency a central bank can use monetary policy to increase or decrease the supply of money of an economy. With gold you are limited by how much of it you can extract from the ground.  When an economy starts to slow down a central bank will add money to the system in order to keep things moving.  Gold does not allow for this. If things start to slow down in an economy people will tend to hoard money, especially at the low inflation levels that are associated with the gold standard.  With the decreases in spending the economy gets worse.  Some argue that this is a good thing, that economies should correct themselves from time to time to remain efficient. 

If we look instead to an international scale we see that as the world’s economy grows there needs to be more money to go around.  Since gold is in such limited supply we would run into shortages that would drive the price of gold up. This would benefit some countries and harm other in a way completely outside of their control. Also, since the amount of currency issued is related to the value of the gold in a fixed proportion this would actually cause inflation.  A very low level of inflation is the main feature that proponents of the gold standard mention.  So a problem arises because while it is true that inflation levels are low under a gold standard most of the time, so is stability.  The ability of an economy to absorb shocks is diminished.  Let’s looks at an example.

Fake Canada trades with the Fake U.S. and both are on the gold standard.  Each have issued an amount of domestic currency equal to their gold reserves.  In this fictional example let’s say that Canada is running a trade deficit with the U.S. meaning that they are importing more than they are exporting. The difference must be paid in gold. So Canada sends gold to the U.S. and must reduce the amount of domestic currency in circulation. This forces prices to drop, and interest rates and unemployment to rise.  Gold bugs (people in favour of the gold standard) argue that this is how it should be, that the correction is a good thing and is required.   So it really depends on your personal beliefs here, but I am guessing that the people that lose their jobs or have increased mortgage payments to help with this correction would not argue that the gold standard was the better option.

Another issue with the gold standard is of course is the gold is now used for many things other than money.  Gold is purchased as an input material in industry and so fluctuations in demand for say, computers could affect the price of gold. This would cause the value of currency to change as well.  We certainly do not want the industrial demand for gold to influence our currency.

Finally if we are talking about the real U.S economy we have to understand that the amount of currency in circulation is enormous.  If they were to change to the gold standard there would be massive deflation. When deflation hits people stop spending all together because they believe that prices will continue to drop and hold onto their money waiting for the lower prices. This is of course disastrous for the economy as everyone is holding money and not spending.

So this was a scattershot look at the gold standard.  I will likely address this issue again sometime but for now at least we have taken a very broad overview of why it is unlikely the gold standard will ever return.

Canadian Election results… What it all means, further discussion.

Currently the federal government subsidizes political parties based on how many votes they get. From what I have read it is about $2.04 per vote. In 2008 the Conservative party proposed a bill that would eliminate this subsidy but they were stopped by the opposition parties.  Now that the Conservatives have a majority I imagine this will be one of the first proposed changes.  There was much discussion about this change in 2008 and it has now begun again.  The main argument against the subsidies is that giving a person’s tax dollars to a party they did not support is undemocratic.  This argument of course makes no sense since when I vote for my party, they get the $2 and when you vote for your party they get their $2. It really is not all that complex.  Some people feel that we should not be paying political parties with public money but I believe this is a good program.  Not everyone is able to set aside money to donate to political parties.  I will not get too specific but if you were a political party that had supporters that were, on average, lower wage earners, you might end up getting fewer contributions than a party that had ,on average, higher wage earners.  Keeping this payment system in place is a good way to ensure that even if one party’s supporters cannot give quite as much as another that all parties are at least getting some form of funding that is proportional to their popularity.

Canadian Election Results… What Next?

So the votes are counted and (most of) the results are final. The Conservatives won a majority with 39.62% of the vote.  In the next four years we will see new fighter jets, new prisons, lower corporate taxes and strict new copyright laws.  These we know for sure.  The question now is what else will we see?  With a minority, a government can refrain from acting on controversial issues and blame the opposition for holding things up. With a majority they will need to take action on a number of lingering issues.  How will they fix the Canadian pension plan?  Will they allow individuals to contribute more to their federal pensions or will they bow to the banks?  They will need to make a real effort to come up with a plan for a future Canada that is more environmentally friendly.  I understand that our economy is heavily dependent on natural resources, but relying on vague ideas about carbon capture and sequestering to solve our emissions problems will need to end. (This is a technology that is extremely expensive and unproven, a bad combination). One thing I believe we will see is an increase in free trade agreements all over the world.

I am in favour of free trade but if we are going to expand our free trade agreements to Europe, South America and the rest of the world then we also need to balance this with strong investment in education. We cannot compete on labour prices with developing countries so we will need a highly educated workforce that is able to provide highly skilled labour that is not as easily moved elsewhere. Manufacturing jobs are hard to keep when there is an unlimited workforce in foreign countries that is willing to work for a fraction of domestic wages. 

What I am talking about here is not simply pouring more money into the current system.  We need to really understand how the amount of knowledge in our world has increased in the recent past. First year university courses are teaching the same thing today as they did ten year ago. In order to understand the latest innovations in any field students require an education well beyond a standard undergraduate education. We need to figure out a way to make a major shift in education levels.  What I mean is that we start a transition that would see elementary and high schools begin to teach more advanced material earlier.  This would allow our universities to begin first year with more than the basic concepts. It would truly make university a place of higher education rather than somewhere people go to learn the basic skills of an advanced economy. I am not an education expert and I understand that we cannot simply shift the curriculum overnight. I also understand that there are many factors that affect the effectiveness of basic education. It just seems to me that for a long time people have been happy to keep everything moving along at a snail’s pace.

The problem with all of this of course is that this change in education does not have a short term effect while jobs that are lost to cheap foreign labour most certainly does.  This is hard to justify to voters because they see big spending and the loss of jobs but if we want to have stability and prosperity in future this is a necessary step.

More discussion on election results as the week rolls on.

One F35 Lightning II for every man, woman and child.

On Monday May 1st Canadians will go to the polls to elect a new government.  For this post I will be discussing one of the hot topics of the election.  The Conservative government has announced that they would spend 9 billion dollars on 65 new fighter jets.   There would also be a maintenance cost that could push the total cost closer to 20 billion. The main point of contention for many people is that the government did not open the purchase of the jets to bidding.  That is, the government agreed to purchase the F-35 Lightning II from Lockheed Martin without allowing other companies to offer alternatives. 

Let me be clear before I get into this, I am not endorsing the Conservatives in the election I am only outlining my position on the purchase of these jets.  I agree with the purchase of these jets and think that starting a bidding process does not make any sense. This is not a contract for landscaping on parliament hill, this is a very specialized product.  Canadians live under the military protection of the United States, plain and simple.  I am not knocking our armed forces in any way, they always represent us well and do a great job. The size of our military however is relatively small. No one in the world would consider attacking Canada because our neighbour to the south controls the most powerful military force in history.  Our military is used for operations all over the world but never in unilateral actions.  We participate in military interventions with the UN and NATO. This means that our jets are being used in the same theatres as the US air force.  The reason this is important is because the US is going to be using the F-35 as their next generation fighter.  So when we send our jets to participate, does it make sense for the US to send all of their jets, all of their support crew and all of their spare parts etc. for the F-35 while we send our openly bid alternative jets with their support crews, their spare parts, specialists, etc.?  Not at all.  We should be using the same model as our closest ally. 

Lockheed Martin is an American company. The US buys 75% of all Canadian exports.  Without the US there is no way our economy would be doing as well as it is.  When the financial crises hit most Canadians had no idea what it was all about, but they took pride in the fact that the Canadian system, whatever it was, had worked and that we had come through the global crises in very good shape.  This was true and it is something to be proud of.  However, we should now consider how we can use this good fortune to help the US.  Our economy is small compared to the US, very small. However, we are doing well and they are having a rough time.  Spending this money is something that we should do as an ally and good neighbour. It is going to help out their economy and it lets them know that we appreciate them powering our economy.  It is a way to indicate that we will not just sit back while they spend billions on military actions that we condone and encourage.  We will pay our share and keep our military on the cutting edge.  I like this position. 

I fully endorse the purchase of the jets. Canada is not an island as they say.  We are a member of the world community.  That involves military action, and while we have our relatively small deficit and stable economy we should be letting our allies know that we are willing to do our part.

CBC Vote Compass and Election Predictions

I’ll come back to the gold standard when I have the time, it ended up being a rather big topic.  I didn’t want March to roll by without a post so instead let us talk about the Canadian Election.

First, here is something you may not have heard of before.  It is something from basic game theory called Hotelling’s Law.  I will not be discussing the validity of the term “law” in this post. I will however give a brief overview of this law when applied to political parties.  In the original game there are two political parties. A and B. We depict the political spectrum as a line that goes from left wing to right wing, pretty standard stuff. In this game voters are evenly distributed across the spectrum and they vote for the party who’s platform is closest to them on the political spectrum.  I will give three examples to clarify.

You be learnin game theory

Ignoring my terrible paint image accuracy we see in the first game that both candidates position themselves exactly in the middle of the spectrum and each player gets 50% of the vote.  This is actually the final equilibrium point and I likely should have drawn it last but I didn’t.  The second game is where each party positions themselves at the extremes of the spectrum.  In this case. both parties still get 50% of the vote but it is NOT in an equilibrium state.  You see, either party can move one step towards the other player and instantly capture more than 50% of the vote and win.  In the third game I don’t know the exact payoff but each player gets all of the votes on the outside of their position and split the votes in between their two positions evenly. For the same reason as game two this is not an equilibrium,  So the point of this is to see that with two parties the only smart move is to move as close to the centre as possible.

Now I understand that there are some major flaws in this idea, mostly to do with the even distribution of voters on a political spectrum and that voters will always vote for the party that is closest to them but it still interesting to work through.

Now lets see how we can use this little bit of game theory and apply it to the current political situation in Canada.  We are in an election and to help everyone make the decision of who they should vote for the CBC has come up with… THE VOTE COMPASS.  It’s so easy!  You answer a few questions and the website tells you which party you are going to vote for.  Just like that, no need to waste your time keeping up to speed on current events.  Here is an example of a vote compass result.

Don’t get too excited, that is not my result, it is just the first hit on Google image search when I searched vote compass.  The positioning of the parties on this grid was determined by “a team of Canadian political scientists, including an advisory panel comprised of the country’s most prominent scholars in the study of electoral politics”(from the FAQ). So you know it is accurate.  I thought to myself I wonder what Hotelling (from 1929) could tell us about this grid. The most obvious answer when you look at the party distribution is that the left is a fragmented mess that shares votes and has no real hope of beating the right unless they ditch some of the parties BUT that would be too trivial an observation for this site and its readers, wouldn’t it?  Instead I will try something totally, legitimately, 100% scientifically proven, really valid.

Yes that is right. I drew a line from one corner of the grid to the other. I then placed a marker on the line in the location for each of the parties. You can see the extreme accuracy of my lines in the picture.  The length of the line is 567 pixels in total and from now on all lengths are in pixels.  The distance between the Conservatives and the far right is 85. The distance between the Conservatives and the Liberals is 259. The distance between the Liberals and the Bloc Quebecois is 94. Everything to the left of the Bloc is 134.  I will get into that area in a bit.

I’ll spare you the math here. Remember that two parties split the distance between them 50/50.  Here are the total number of pixels “voting” for each party.
Conservative: 214 or 37.74%
Liberals: 172 or 29.86%
Bloc, NPD, Green: 181  or 31.92%

Totalling 99.52% which means my crappy MS Paint skills are not 100% accurate surprisingly.  So the issue here is that the Bloc does not run candidates in all the provinces so the uniformity of the voters should go right out the window. Strange thing is that the Bloc is 17 pixels away from the NDP which gives them a total of around 55 total pixels or 9% of the vote.  This leaves 23% for the NDP and Green to fight over.

So there you have it, based on the compass provided by all the latest experts and a very loose interpretation of Hotelling’s Law you have the official prediction for the election outcome.

This is where it gets a little surprising.  Take a look at these polls.

In case the results change and lose the surprise factor of my outcome, here is a small screenshot.

Some of you might say that I rigged the image or something but to be honest, that would take so much more effort that just doing these calculations.

So it appears the only way the Liberals are going to win this election is to move more to the right.  Or of course form some sort of coalit…  nah that is another post entirely.

Hope you enjoyed this one, I did.

Potash Protected.

The Canadian government has decided to block the takeover the Potash Corporation of Saskatchewan by the Australian company BHP.  Potash is used to make fertilizer, you can find lots of information from any major news source.  The premier of Saksatchewan made a special visit to Ottawa to make sure that the sale of the company was blocked.  You see, the provincial governments have the power to regulate and tax resources in each province but only the federal government has the power to block the sale of a private company to a foreign interest.  And they did. They stopped that sale cold.  Last I heard the offers for the hostile takeover were far below the market price for the shares and way below the peak of the company’s shares before the all the badness in 2008. The numbers we are talking are something along the lines of $135 offered, $145current value and over $200 peak.  These are all numbers I am just pulling from memory at the moment but I can assure you they are close to the real figures.  So the offer that was on the table was blocked by the government before it could even be rejected by shareholders, which I am guessing it would have been. 

Wait, did I say shareholders?  Why yes I did. You know shareholders, the people that own the company.  I guess you see where I am going with this.  It is not for the government to decide if a company should be sold to a foreign interest or not, it is up the owner(s) of that company.  Canada needs to decide what kind of economy we are running here.  Are our markets open to foreign investment or not? We can’t start picking and choosing deals at random. If we are going to be protectionist then we need to set up some guidelines.  The reason given for blocking this sale was that it was not a net benefit to Canada.  Sorry, it seems to be popular to write it “net benefit” to make sure that it is clear that not a single journalist knows what the hell that means anymore that you or I.  There was a lot of debate on the issue and the most common objections I read were:

–          Loss of tax revenue

–          Loss of jobs (this is totally invalid since the mineral still needs to be extracted here, it’s not an IT company)

–          It is a strategic resource.

There has not really been much elaboration on any of these points but most have pretty automatic arguments built in. Sorry, I forgot the big one.  This is not a net benefit to Canada.

Are they saying that the bid wasn’t high enough?  Did they do a cost benefit analysis and one outweighed the other?  They must have. What would push the benefits over the tipping point for them to allow this type of sale?  Are there different levels of net benefit for a natural resource versus say a car company or a technology company?    Does the percentage of the world’s supply that we own play a factor? Why potash and not oil, nickel or any other resources? These are all things that we need to answer.

I would like to take a trip back to a subject that was popular in June.  G20 summit, I wrote about it then so please go read that post too.  At the conclusion of any major summit of this nature there is a declaration released from all of the countries that attend.  Toronto was no different.  I think I linked to it in the past but here it is again.

I would like to draw attention to the portion of the document starting at section 35 (page 7 in the PDF). This is the section entitled “Fighting Protectionism and Promoting Trade and Investment”. Now I realize that the guy that had to type up this document, me, and a few journalists that were forced are the only people that read this release but we really need to think about what it says and what it means for our policies. 

“…we renew for a further three years, until  the end of 2013, our commitment to refrain from raising barriers or imposing new barriers to investment or trade in goods and services…”

I fully supported the G20 summit. You need to have conferences like that to get things done.  There were some issues with the execution but overall I think it was a good thing.  My problem is that we spent a billion dollars talking to other countries about the greatness of open economies, the wonders of mobile capital and how protectionism in this financial crises will not help anyone and then we do the exact opposite.  Supporters of this decision to block Potash will say that it does not constitute a new policy, and that we are not setting up large barriers, that it is a one-time thing.  It could be a one-time thing, but no one knows because the true reasons have not been released.  Seems like the commitment we made in that document doesn’t hold much weight once the polls start turning against the idea. 

Maybe in the next few days the reasoning for this action will be released. Of course, if in a week the bid from BHP is doubled and the deal is approved, we will know exactly what the issue was.  This was actually just a elaborate bargaining tactic before the final sale was closed.

Edit: typos.

Ontario Online Casinos – Place your bets!

The government of Ontario has announced that they plan to have an online gambling site up and running by early 2012. Atlantic Canada is thinking the same way and BC recently launched its own online gambling site called It seems like something that we should talk about.

Is a government run online gambling site a good thing? We will try to address both sides of the answer.


There are a number of studies that suggest that a large part (70-90%) of gambling revenues from casinos and lotteries come from just 10% of the people that play.  This of course means that the entire system is setup to take money from the small percentage of people that are likely addicted to some form of gambling. The government is knowingly taking money from the citizens that it should be helping.

People use their money to gamble in the hopes that they will somehow strike it rich without having to work hard for it. They forget that the best way to be better off is to save, get a good education and work hard. The pipe dream of hitting it big becomes their main focus. This kind of falls in line with the encouraging addiction idea but I thought I would include it.

If we encourage people to gamble, gambling addiction will become a larger problem and we will end up paying more to solve the gambling related problems. More theft, addiction counseling, etc.


The government runs lotteries, which are gambling. Slot machines, horse racing, bingo, all gambling. Online casinos are just another form of gambling. It is not a new thing for governments to make a profit from this vice. The only reason they have not done it up to this point is because the government moves slowly and online gambling is a relatively new phenomenon. People are going to gamble online regardless of whether the site is hosted in Belize, England or Canada. The government might as well get its cut of the market.  Having the government run the system also allows regulation and it reduces the likelihood that people get ripped off by shady foreign sites. People are doing it anyway so why not regulate and tax it.  

The rest:

The BC site was the first one in North America to legally offer online gambling. Everything before that was illegal or hosted in other countries.  I don’t think it is any coincidence that it launched soon after the American government passed a bill that would allow online casinos to open in that country. Remember when we opened the casino in Windsor and then they opened a casino in Detroit soon after?

 A poll on the CBC website is currently showing as 21% for and 79% against the idea of government run casinos in Ontario. It does remind the reader that it is not a scientific poll.  With those kind of numbers I can’t imagine there will be much demand for the site. It will likely close down soon after it opens due to lack of interest.

Oh, I almost forgot to mention, don’t try going to that site in BC because it crashed soon after launch due to the servers being overwhelmed by the traffic.  They are in the process of upgrading it so that it doesn’t crash right away when they re-launch it.

Ontario residents currently spend about $400 million each year on online gambling.(I saw this number on a number of news sites but couldn’t find a single outlet that cited the source. Go journalism) I am all for our government taking part of that untapped revenue stream and using it for government programs.  People are addicted to cigarettes but the government sells them and taxes them.  Alcoholics exist, but the government sells booze and taxes it. I don’t see this as being any different. I don’t do any online gambling currently but I will login to this site when it for a bit when it launches just to show my support and maybe play a few games. You know, make some money. See I have this system…

Edit: typos

Canadian Census 2011. It’s not the size of your form…

(May 7th, 2011 edit)
I am getting Google hits on this story from people looking for the penalty for NOT filling out the mandatory Canadian census form so I will add the actual penalty here:

3 Months in Jail and a $500 fine is the maximum penalty for not filling out the Candiand manditory census form.


(Everything past this point is the original post) 

The government is replacing the mandatory census forms with a short mandatory form and a long household survey.   First let’s look at the forms. 

Household survey for 2011:

Long form from 2006:

Short form from 2006:

The first thing we should notice is that the long version from 2006 is 40 pages with 61 questions. The short version from 2006 is 5 pages with 8 questions.

The new household survey for 2011 is 35 pages with 66 questions. There will still be a mandatory short census in 2011 which is about the same as the old short form.   

So in 2006 everyone had to fill out the short form of the census and the long census form was sent to one in three households.  They had to fill the form out in its entirety under threat of legal action. When asked about how many people had been jailed for not filling out surveys Clement (the minister in charge of all this) declined to answer the question. I was not able to find any stats on this and I imagine the number is somewhere around 0.

In 2011 everyone will still have to fill out the short census form and now one in five households will be sent the household survey to fill out.  There is no obligation for them to fill out this form.

I am having a hard time thinking of a single valid reason for the government to make this change.  So far they have used a very carefully set of rehearsed lines to backup their decision.  The party line is that Canadians should not be criminalized for failing to complete the census and that the questions were invasive.  There was even an anecdote offered that one immigrant started crying because they feared they would be deported if they did not fill out the forms properly. Anecdotes about single members of the population are always a great way to get around the fact that what you are saying has no real merit.

Jack Layton proposed that the government simply remove the threat of jail time for failing to complete the form. He figures the threat is “bogus” anyway so the government should scrap it.  He even volunteered to introduce amendments to the Statistics Act.  Seems like a reasonable thing to do.  I would likely alter that idea a bit however.  Remove the threat of jail time but add some type of fine for not completing the form if you are given one.  Now I am not sure how they would enforce this fine, maybe they withhold your GST rebate that year or maybe they just remove more money from your income tax.  It seems like if they were able to track the process well enough that they could threaten people with jail, they could easily fine people instead. 

Another idea would be to send the long form to everyone and make it totally voluntary. If you were only sending it to 1 in 3 people before I would guess that at least that many would end up filling it out and sending it in anyway.

You could make it available online so more people would be willing to quickly fill it out online. Of course I can see a tech support nightmare ensuing. Not to mention the security and access control… never mind I don’t trust the government to pull that off correctly before 2011.

I have not spoken about the head of StatsCan resigning and I won’t today but that has to be a good indication that this is a bad idea. 

Again, I see no good reason to change this process. They could of at least lied and said it was going to “Save us billions and help save the economy!” or something along those lines. Not to sound like a paranoid nut case but is it possible that they want less accurate stats so they can push through their policies based on weaker interpretations of those stats? I won’t go down that road. 

I am going to keep an eye out for a valid explanation for this move from the government but for now let me state that I am against the change.