how to raise the economic growth rate

The Bank of Canada has reduced it's forecast of the growth rate from 2.0% on an annual basis to 1.5%.An earlier blog here talked about the fact that this forecast would be subject to the assumption of a certain price for a barrel of oil and a certain price for natural gas.It would be subject to a certain volume of exports of oil and natural gas.My forecast of 1.75% growth was dependent on increased exports of oil and gas to largely Asian countries(China and Japan,for example).This depends on the building of new installations for liquefied natural gas for one thing.Canada needs one or two new liquefied natural gas installations to bring the price of natural gas up and the volume of exports.

Another way of increasing the economic growth rate is to reduce our large consumption taxes ,that is, the G.S.T. or the P.S.T rate in Ontario.This increases the disposable income to consumers and increase expenditures on a broad variety of consumer goods .This has a multiplier effect on the gross national income.And so the economic growth rate moves upwards.

an independent C.B.C

Many countries have a government run communications company which includes a television network or at least a television station.Canada has the C.B.C(Canadian Broadcasting Corporation).It was originally set up because it was considered that no one investor had the capital to build a national network.It would be done with government funds.The number of stations in the network is not known but it is known that the number was reduced after a large government cutback.
The C.B.C is still funded almost(but not totally) by the federal government.But it is not a typical government department;it is a crown corporation.Thus it is supposed to have more independence and it 's own mandate, separate from what the government of the day believes.In theory, it was supposed to work that way but in practice the C.B.C always had to knuckle under come budget time.There would simply be a reduction in the number of employees or worse stations if the C.B.C did not behave as the "bosses with bucks" told them to.I believe(but I am not sure) that the C.B.C was started in the 1950's.At that time a government-run television network was a good idea.The size of the Canadian economy was around $500 billion (a half trillion) and capital was scarce.Now the economy is about three times bigger and capital is not such a scarcity.Foreign capital is forbidden under the Broadcasting Act so any investment must be Canadian.

I feel that because of the pressure put on the C.B.C to get budget funds they have become ,in effect, an arm of the government and work hand in hand with the government.Now is a good time to get some capital for the C.B.C and pay off some government debts.This might add a new set of voices that can bring some logical opinions before the Canadian public.

The Canadian media and other things

An  earlier blog talked about the Canadian media.It mentioned that a few hands controlled most of the stations in the Canadian networks.Bell Media controls most Canadian stations and even a few specialty channels.Second would be C.B.C which recently lost a few stations in a budget cutback but still has quite a few stations,including the C.B.C French stations.There would be a toss-up between Telemedia(in Quebec) and Global T.V. lastly would be Corus with one or two stations.Radio stations are owned mostly by three or four networks.I myself have fairly good information on this area as I used to work for the C.R.T.C.Consequently I realize that there is excessive consolidation in the Canadian media.This results in one or two opinions only on each important matter and lack of diversity in Canada on many issues.

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russia-an emerging nation

Russia is one of the BRIC countries.These are the emerging countries with the highest economic growth rates.Information on these countries is sparse.The actual growth rate is not clear.After the break-up of the Soviet Union the population is not clear but a reasonable estimate is 150 to 200 million population.Estimates are better for the size of the economy;it should be about $1.5 trillion;this is very close to the size of the Canadian economy although our growth rate is slower now than that of Russia.Consumption in Russia is a greater part of the economy but Russia like Canada needs foreign capital.Canada has ready access to American capital just as Russia has easy access to European capital.In particular,Germany has put a lot of capital into supplying natural gas and oil.

However  Russia has a problem getting as much foreign capital as it needs.It's reputation for justice in both criminal and security(investment) cases is suspect.This makes foreigners leery about investing, at times.This is something it shares with Canada.Canada is notoriously lax in securities or the investment area.In the case of both Nortel and Bre-x there has been a tremeduous loss of wealth to shareholders with nobody from either company going to jail.Conrad Black was caught "redhanded" on video taking company records and not sentenced in Canada;he was instead sentenced in U.S.A to six years in jail.

It is likely that both Canada and Russia would have more eager foreign investors with a more tight legal system.A system that guarantees justice to investors.This might also allow tighter restrictions on foreign capital that does come into either country.

 

now is the time to buy gold

how slow a slow down

• I heard the most recent forecast for the Canadian economic growth rate for 2013 by the I.M.F.They are forecasting a growth rate of 1.5% down from the earlier forecast of 2.0%.I myself have collected I.M.F. information when I was in the federal civil service.It is not that accurate because the people collecting it are not paid to do so.Nevertheless their forecasting record is pretty good.It is likely that they will be within the normal forecasting error.Noone would be surprised to see the growth rate come in at 1.7% after this forecast.
• At the same time I have to admit that I do not have a working econometric model to use.In addition,my data is not that accurate for most of the important inputs used to come up with an accurate growth rate for 2013.However I think that the I.M.F. prediction is dependent on the price and volume of exports for both oil and natural gas.A price of $95 a barrel for oil and $5 for natural gas will skew the growth rate upwards.Heavy exports of oil and natural gas (and this depends on finding new customers besides U.S.A.) will also likely skew the economic growth rate upwards.More investment will go into drilling and exploration for both oil and gas.Then it is likely that our growth rate may even hit 1.75% for 2013.This will help us until the price of other commodities start to recover and they will.

 

The media -Canadian and otherwise

For years the Canadian media has not been very profitable.In fact.a decade or so there was only one network-the C.B.C.CTV was merely a number of independent television stations.They decided to get a network licence and form a national network.Doing this meant that the individual stations would now get a share of national advertisers.This meant a big jump in ad revenues for a number of years.But advertising for non-subscription television started to plateau.Consequently for about three to five years before Global TV went bankrupt both networks and the smaller Chum broadcasting were making almost no profit.At that time there were few independent television stations.One was CHCH in Hamilton;it was going to be bought out by WIC broadcasting but I believe it went bankrupt.However it still is an independent but no longer very profitable.

American networks(according to the Broadcasting Act) could not own television stations in Canada.They could however distribute on the Canadian networks.They charged for the distribution based on audience coverage.The bigger the audience the bigger the fee.Audiences for American network shows started at first to rise and take over audience away from Canadian networks.Lately there are not the new and popular shows that keep coming onstream;their audience share seems to have plateaued.However Canadian network audiences  still declined as the new specialty channels picked up audience.Many of the new channels were owned by the cable companies;companies such as AMC,History and Discovery channels.

The first trend that emerged in this environment is consolidation of the smaller companies into fewer and bigger companies.For example,Bell Media bought  CTV and a chunk of Chum Broadcasting.It now owns also  a few specialty channels such as B.N.N.This also happened in radio as smaller stations got bought up by companies like Corus Entertainment.

The second trend that occurred is that Canadian television networks started to take donations from large donors such as governments.The idea behind donations is that ,of course,there are no strings attached.The media is free to voice it's own opinions but in many cases the money comes with strong viewpoints attached leaving many viewers scratching their heads at opinions expressed by the Canadian media.

Mexico -an emerging country

My previous blog made a few comparisons between Canada and Mexico.Most Canadians would see little commonalities, but on closer scrutiny there are some easy comparisons to our southern neighbour.The communications industry is one area that is not too comparable.Here there is trouble getting good data on the Mexican communications industry but one thing is clear;one man has a tremenduous influence on this industry.His name is Carlos Slim.He was listed in almost all publications as the richest man in the world.Estimates of his wealth vary between $35 and $50 billion.His main source of wealth is the communications industry and primarily but not exclusively the Mexican communications industry.He controls other companies in Central and Southern America.So in Mexico he certainly has almost complete control of the media (including newspapers).He is a very slick and competent operator.The smaller newspapers and television stations have some independent opinions and stories but Mr.Slim's opinions would likely prevail.
In Canada there are three main television networks -CTV,CBC and Global.There is another one in Quebec(the formerTelemedia);other than this there are companies like Corus that own some television but mostly radio stations.There was another network that started to blossom but was bought out largely by Bell Canada;that was the CHUM network.It now is part of CTV owned by Bell Canada.Statistics Canada has very good data on television networks.For example,CTV was owned by the Thompson family and sold to Bell Canada for exactly the same price.They made no profit on the sale of CTV.That's because according to Statistics Canada ,CTV made no profit for three to five years before Bell Canada bought it.Also according to Statistics Canada none of the television networks made any profit for the last three to five years before Global went bankrupt.So how does the networks make money now?It is not clear but maybe from donations from governments.

So the comparison is not great here because Canada has control of the media in several hands since it is an oligopoly. Mexico seems to be almost a monopoly.However the governments that donate money to network coffers will usually ask for their networks receiving money to have almost the exact same opinion.That opinion would differ only slightly form that of Carlos Slim -the richest man in the world in 2012.

Mexico-an emerging country

Statistics are hard to get on the right size of the economy but there are estimates of between $1.0 to $1.2 trillion. It is slightly smaller than Canada but it seems to have a larger growth rate.Again good estimates are hard to get but on average the growth rate seems to be between 3.5to 4.5 %.Mexico has a larger population;it is about 100 million .Whereas estimates place the Canadian population at about 37 to 39 million.Not quite a third of the Mexican population.Obviously the income per capita in Canada is larger.Canada has a larger manufacturing and technology sector.Of course, that depends on how you define it.Mexico (under the NAFTA agreement)picked up a lot of assembly plants.This may lead to true manufacturing but proportionately the Canadian manufacturing sector seems larger.A large part of the Mexican economy comes from tourism and agriculture and mining.Mining is substantial in Canada but a big difference is that Canada relies heavily on income from oil and gas.One thing in common is most assuredly the strong bonds that are forged with their common neighbour- The United States.  

The Ontario tax scene

Ontario has been considered the engine for the Canadian economy for a long time.However for the last three or four years Ontario has been ladened with no to slow growth.In fact,Ontario has received equalization payments from the federal government because it is according to their formula, a have-not province.It was always considered a have province previously.This year,for example,economic growth is predicted at 1.6%to 2.2% .One of the main reasons that economic growth is so low is that  businesses are burdened with a heavy tax load.It is especially heavy on small businesses.
The Canadian economy is about $1.7 trillion in size;just a little smaller than the economy of France.Ontario has always been about 40% of the Canadian economy.With it's recent stagnant economy it may be only about 38% of the Canadian economy.However our estimate will remain at 40% and 40%of $1.7 trillion is about $680 billion.Other sources have put the Ontario economy y at $700 billion.The G.S.T. tax is 5% of all goods and services and so produces about $35 billion in tax revenues.In addition, the P.S.T tax which is only in Ontario produces another$56 billion in Ontario.Revenues from these two taxes comes to $91 billion;this is $91 billion that is removed from the Ontario economy.It is considered that these two taxes make up 80% of the total tax revenue.20%

comes from other sources such as income tax,excise tax and other sales tax.G.S.T. and P.S.T are the big revenue producers.
In total,about $100 billion is removed from Ontario total income.This is almost 15% of total income (of $700 billion) removed from Ontario consumers.They cannot spend this money on Ontario businesses.This reduction of total income has caused in large part the slow down in the Ontario economy and has been especially hard on small business which is the driver of job creation in Ontario.