Why Are The Tories Pushing Canada Into Recession?

Remember how the Tories are the party you want to vote for in tough economic times because they're great managers and willing to make the tough decisions? Remember all that stuff?

Yeah, well, the Tories are poking holes in the Canadian economy faster than the rest of us can bail.

Two figures tell the tale. The first relates to the government's quiet austerity. At a time when, if anything, the economy faces contraction and deflation, the last thing you want to do is add momentum to that contraction and deflation. In fact the Tories promised a stimulus budget in the last election - they fought the election on that basis. But as soon as they were elected, it now turns out, the Tories scrapped the budget and started slashing. Is it any surprise that unemployment remains stuck at 7.4% and that the economy shrank in August?

Really, the only thing that has kept the economy on life support has been China's continued demand for resources and cheap money, that made it possible for workers with otherwise stagnant income (at best) to borrow & buy. But the Tories & Bank of Canada governor Mark Carney have put the kibosh on that strategy of ad hoc Keynesianism by making mortgages harder to get. There's still cheap money for the corporate sector - but they aren't buying and are, instead, simply banking hordes of cash. There's no stimulus to the economy from here.

The result: the housing sector, particularly the condo market are headed towards freefall with a 30 percent contraction in Toronto's condo market in the third quarter. Home sales nationally are off by 15 percent. With the industrial sector contracting, this is like solving the sickness of the economy by killing the patient. According to a CIBC report:

"A 5-per-cent per year drop in house prices, for example, would shed roughly a half-point off GDP growth through its wealth effect on consumer spending, given historical sensitivities," he added in his report. "The shift in the volume of construction will be even more consequential. If, as we expect, homebuilding returns to levels aligned with the longer-term trend in household formation, taking [housing] starts from the 220,000 per year range today to 180,000 by 2014, there will be a near 1-per-cent adverse swing in the contribution of homebuilding to GDP growth ... before allowing for any multiplier effects.

The same report forecasts growth of perhaps one percent, but given that August saw a .1 percent contraction, even that seems optimistic. If the housing market continues to contract, with house prices declining, that 1 percent prediction could easily be wiped out. The real question that arises is: why do the Tories want to push the country back into recession?

KPMG - Helping Tax Dodgers & Corporate Fraudsters Everywhere

The Ford Bros Circus of Stupid decided that the best way to figure out which services we ought to toss on the bonfire was to hire auditing firm KPMG. Well, that's not quite true. Doug Ford has said that they want to "outsource (privatize) everything that's not nailed down." But perhaps he thought it best to find a fig leaf of objectivity for his mission of slash and burn. KPMG is that fig leaf.

But if it's a fig leaf, it's a pretty flimsy one. KPMG has a long history of corrupt and incompetent business/auditing practices. Back in 2005, KPMG admitted selling illegal tax shelters in the USA that allowed corporations and rich bastards to avoid taxes, and thereby helping to make the kinds of cuts they are now recommending necessary. According to this summary:

KPMG admitted to setting up fake tax shelters for it's wealthiest clients, which helped them evade paying $2.5 Billion in tax dollars throughout the 1990's. If that wasn't enough, KMPG was accused with the obstruction of justice as investigators tried to piece together the facts of the accounting scandal.

Nine people from KPMG ended up being charged for tax evasion and obstruction of justice, eight of them were former partners in the firm.

KPMG was also accused - and remember they were hired for their skills and reputation as an auditing firm - of covering up a bribery operation at engineering corporation, Siemens. Somehow, the auditing firm didn't notice a slush fund worth nearly €2 billion.

Debevoise, the firm of independent US lawyers appointed by the Siemens supervisory board to investigate bribes paid by the company, reported back last week. According to the German publication Sueddeutsche Zeitung, they have uncovered €1.2bn of bribes paid by the Siemens telecommunications business between 1995 and 2006 and a further €300m of illicit payments made by its power generation arm.
Now Debevoise is set to look into the role of KPMG, according to sources close to Siemens. The supervisory board wants to know why the apparent bribes were not noticed by KPMG given their scale over many years.

Back across the pond in the USA, the mortgage company known as Fannie Mae launched a suit in 2006 for $2 billion against KPMG because of $6.3 billion in accounting errors that led to Fannie Mae firing KPMG back in 2004.

In 2005 KPMG had to pay out $22.5 million to the Securities & Exchange Commission for helping Xerox cooks the books to the tune of closing a $3 billion earnings gap - i.e. fraud.

And this is only the tip of the iceberg. Check here for more examples of KPMG's incompetence and corruption as an auditing firm, which has dutifully served its corporate masters to hide money, hide losses, hide bribery and just plain smooth things out for the rich and powerful. And we're supposed to take their recommendations seriously?