It's the economy -- are we stupid?

Even if the majority of our political media are financially illiterate, that is no excuse for missing the story of the century. While debates about off-colour jokes or aboriginal slurs have taken centre stage in the Canadian electoral campaign, politicians in countries around the globe are being forced to make critical decisions that will affect, among other things, the Canadian economy and its key financial players. Yet neither our media covering the election nor our politicians are focusing on the tough questions. What are the short- and long-term consequences of this intervention, how much re-regulation will be required, how far and long should it go, and what is the price that taxpayers may ultimately have to pay? Are there any long-term alternative policies we should be considering? Look at Friday’s tumultuous events. The US and other governments have risked another half a trillion dollars to try and rescue the confidence and liquidity in the global credit markets. A special insurance policy was put in place in the United States to stabilize the money market mutual fund sector. Both the US Security Exchange Commission and the British regulators have frozen short-selling of 799 financial stocks; Canadian regulators are considering a similar measure. A mechanism similar to the Resolution Trust Corporation that was established in the 1980’s to handle the savings and loan crisis is being proposed to take bad assets off balance sheets of financial concerns. Even the Bank of Canada had Canada’s leading bankers in for a ‘frank discussion’. All impressive action in a very short period. But look at how it was achieved. Focus and the fear of failure forced politicians of all stripes to put aside their US campaigning and listen to a stern lecture from appointed officials that they had no more than one week to legislate…or else. In the words of one of the Senators attending the session last night, “we were given sobering news…’. US Treasury Secretary Paulson laid it on the line this morning when he called for “further, decisive action to fundamentally and comprehensively address the root cause of our financial system’s stresses,” adding that hundreds of billions of dollars may be needed to fix the problems. The same discussions are playing out in Britain (rescue of one of their largest mortgage lenders), Russia (a $120 billion injection) and in numerous Asian markets. Why should we continue to pay attention? Because this massive global government intervention is on a scale unprecedented since the Great Depression. Whether or not our politicians or media are up to the challenge of addressing these issues and laying out their plans, I have a sneaking suspicion that Canadian taxpayers and voters do realize what is going on around them. And that may well be the reason for the latest fluctuations in the Canadian polls.