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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: PaulM who wrote (16603)	8/25/1998 11:50:00 PM
From: Eashoa' M'sheekha	Read Replies (1) \| Respond to of 116762

Politicians ignoring severe structural problems The Vancouver Sun Michael Campbell Vancouver Sun Can you imagine the outcry if the government had instituted an immediate wealth tax of nine per cent on all your assets and threw in an extra nine per cent tax on your income? That's precisely what has happened as a result of the decline of the Canadian dollar against the U.S. dollar since the end of March and despite the many claims to the contrary there is no reason for this trend to end. Some people, including the prime minister, have suggested that we have to remember that the story isn't as bleak when we compare ourselves with other currencies. Unfortunately the facts are that we have declined against every G-7 country this year with the exception of Japan. I guess he was referring to countries like Indonesia and Malaysia. If the goal is to ignore reality and make yourself feel better, I'm not sure, but I bet we're the strongest third world currency on the planet. Our problem is that most of our trade and travel takes place with the United States and that's why analysts focus on our relationship with the U.S. dollar. Of importance to consumers is the fact that 77 per cent of our imports come from the States and those prices are rising. We have been told this decline is due to the Asian crisis, currency speculators and more recently the Supreme Court ruling on Quebec separation. There's no doubt that all of these factors have played a role in the short term, but they don't explain the long-term decline. Have you ever noticed how quick politicians are to blame outside forces for their own dismal economic results? Until our leaders realize the link between their tax and spending policies and the dollar's decline don't expect things to get better. At the risk of over-simplifying, the dollar is backed by nothing more than the international perception of our country's economic and financial stability. We don't even have the majority of our gold reserve to act as a kind of last resort back stop because the Bank of Canada sold most of it earlier this decade. In other words, we've had to fall back on the spectre of our huge government debt and an uncompetitive tax regime. We have a tax system that has discouraged savings and investment. Compared with the the U.S., our businesses have not invested in technology or machinery, with the result that our comparative productivity has declined during the last couple of decades and our job-creation numbers are significantly lower. I don't feel that many people understand that we live in a country where the main weapon in our quest for economic prosperity has been the systematic devaluation of our currency. Our export industries needed that devaluation to compensate them for the higher costs associated with an uncompetitive tax and regulatory system. The devaluation simply lowered the costs of our labour, land and other domestic inputs, while government-related costs soared. In short, we could compete as long as you took a significant pay cut. Since the beginning of the decade that cut has averaged 20 per cent against the U.S., Germany, Japan and Great Britain. We have a severe structural problem that not only do our leaders refuse to acknowledge, they in fact exacerbate it with their weekly pronouncements of "business as usual."