Thursday 22 August 2013

Working in Ottawa today --Keynesian Revisited

I don't usually throw back into our collective faces what I have written in previous Pulps (okay, sometimes :).

Back a short eon ago when I had moved the publishing on these missives to this Pulp site away from a simple email distribution group I published an email written to Don (http://pulp.puckett.ca/2009/05/screw-you-gm-or-brief-keynesian.html) about the <bullshit> disparity between North American and Japanese automakers.  Yep...  Like the past always comes back to haunt the present, I bring you...  Canada Post.

In that missive I explained Keynesian economic theory a bit.  The theory runs a bit like this, and this is extremely simplified... do not pay Paul what you owe him today, merely pay the interest, the principal will shrink on its own by the going rate of inflation.  Instead go out and spend the monies that you borrowed from Peter, the debt to him will shrink too.  I read this back in the very early 80s and it scared the shit out of me then for the very reason I will explain.

bullshit bullshit bullshit. Yes, the trifecta of bullshits.

What I realized 30 years ago was that if corporations, banks, and institutional debtors in general adopted the logical strategy and did not fund their debts, then they would continue to push them forward into the distant future and make them someone else's problem, but eventually the debt will need to be serviced and if the entity's growth had not matched the going rate of return, someone would get shafted.  Moreover if it became a widespread practice it could spell an economic crash that no Glass Steagal style legislation could touch.

I had discussed with my friend, the late Hughes M., at the time (we both worked at the Lethbridge Community College -- shout out to my friend Andy that used to work in Environmental Sciences and now works for the man at some TV station, Yo, Andy!  Hughes downplayed the risk really for two reasons.  One, he'd rather shoot hoops, and two he didn't have any interest in economics.

When corp execs realize this bit of flimflammery they may (and often do) put it together that they need not worry about things like employee pensions.

Um.. Uncle Daniel, you were mentioning Canada Post?  Yep.  Buried in the back pages of the Globe last week sometime was an article written by someone that actually read CP's last financial statement.  And..  Surprise surprise, Canada Post projects that it has enough cash flow to meet its obligations until the early part of 2014. 

This means Canada Post will in all likelihood be seeking help from the Gov't in meeting its pension obligations.  That means you and I.  So while you and I are saving our funds into our RRSPs, TFSAs and mattresses, these bastards were spending the money that should have been banked to meet the future payroll obligations.  It makes no sense to believe that you could pay a Postie to walk down my street with revenue from today's mail postage and also pay the pensions of all previous Posties.


Do you know what happens if we didn't pay our employees?  Our employees could go after the officers and directors of the company, because even in a limited liability corporation, although ordinary creditors can't go after the shareholders, officers, and directors, employee wages are an exception.  So I ask the question, how are pension funds any different from wages?  I see no difference, they are merely deferred wages that arose from negotiations between the Posties and Canada Post.  Let 'em go cap in hand to the Gov't, but let's see some accountability for those that made the bad decisions.

Have a good day, plan for your own future.

3 comments:

  1. Economics is so... yawn

    ReplyDelete