The Navel Gazing has Begun

This weekend I picked up from the library one of the current crop of books now appearing that "analyze" the financial crisis. This one caught my eye because it was written by a Canadian, so it offers a "home team" perspective. Sure enough, there is lots of back patting about the strength of the Canadian banks and how Canada's fiscal policy was strong going into the crisis and would help us skirt the worst of the catastrophe. Funny, apparantly nobody told the Canadian stock market, the TSX, that we were so healthy... the TSX tanked worse than the US from July 2008 to December 2008!

I enjoyed the book. It had no great insights. But it was fun to get a bit of a Canadian perspective. And it was blessedly short at only 125 pages. I guess the rush to publish doesn't leave you much time to actually write many pages.

Here's a bit from the book that discusses Keynes that I enjoyed:

From 1940 to 1980, Keynesian economics were adopted by much of the industrialized world. With the arrival of Reaganism in the United States and Thatcherism in the United Kingdom, the prevailing philosophy turned against Keynes; opinion leaders insisted that governments should stay out of the way of business and avoid deficits under any circumstances. Within a few years Keynes' ideas became out of date as spats and corsets.

To disciples of Reagan and Thatcher, Keynes sounded suspiciously like a socialist, especially with his belief that government policy should direct money toward those at the lower end of the income spectrum during difficult times. This group, Keynes suggested, would be most likely to spend money on needed goods and services, lifting the overall economy.

Reagan and Thatcher took the entirely opposite view. You don't give breaks or cash to the lower classes, they lectured. You give them to the upper classes, and watch their expenditures trickle down to the great unwashed. What's more, governments should never interfere in the mechanics of business and finance under any circumstances. All markets are self-correcting, and every new regulation represents a barrier to the creation of wider wealth.

Here's another bit from the book that I enjoyed:

The world was never the same after the Great Depression, and the impact of this crisis will be similar, without doubt.

Over the last quarter-century, markets triumped over governments in the industrialized world. In some ways, this was a positive change; through the 1970s businesses such as energy, communications and transportation found themselves restricted by often nonsensical government regulations. Airlines in Canada had to ask permission from a federal ministry to fly passengers to destinations outside the country, and the sole provider of telephone communications in Canada could not alter its rates or aspects of its service without government approval.

The swing away from excessive regulation really began with the Reagan-Thatcher years in the United States and the United Kingdom, gaining momentum when Canada and other countries followed suit. Pendulums swing, and you may have noticed that they never stop in the middle; they move as far past the centre as their momentum can carry them. That's what happened with the deregulation wave. Now it's time for the pendulum to swing back toward the boring but comfortable middle...

You won't find any sudden new insight from this book. It is an extended magazine article on the current situation. It conveniently puts the broad picture into a little paperback book.

It is a fun, quick read. For Canadians, it is a chance to get to see some mention of the country and learn a few specifics that we usually don't see because of the flood of American media that ignores anything north of the 49th parallel.