Some time ago, fresh out of business school and full of the enthusiasm and joyous cluelessness of youth, I hung a picture of Alan Greenspan on my wall. Admittedly, it was a 2-inch square IKEA frame with a photocopied portrait, but I did mention I was just of school did I not. Also, I was aware that it was kind of insane. But hear me out.
I was an enthusiastic free marketeer – growing up in a deathly stifling then-socialist Sask would do that to you – and Greenspan was the perfect candidate to run the world’s largest economy. He was a student and colleague of Ayn Rand, who is to free markets what Kanye West is to crazy. If you’re not familiar with Rand, try Atlas Shrugged, her 1,200 page fine-print beast of a novel; an imperfect but starkly profound vision of how free market economies are the basis for human progress, the fountainhead, so to speak, and the only correct moral path if individuality and human freedom are the standard. More on that in a second. And yes the above is both an inadequate description of Rand’s work and catnip for those that loathe her, but nevertheless I don’t care and am moving on.
Greenspan had previously written papers and given lectures on the perils of government management of virtually anything, how all things economic were best left to the free market to sort out. The arguments were pretty convincing to idealistic young minds, and I was not alone in celebrating this rather odd (for a 20 year old) good news that Greenspan was promoted to chair of the US Federal Reserve. (Dateless wonders, as Homer Simpson wisely put it.)
Greenspan seemed resoundingly fit for the job because he was a master of all economic knowledge and statistics. Not just a monetary historian, he was famous for studying, for example, the number of vacuum cleaner sales in each state, and the trends of such, because it was a potential indicator to him (of what, I’m not sure; not for plebes to judge; just watch the Maestro in awe (his nickname, I kid you not) and learn).
So anyways, long story short, the economy under his watch went very well for years, until they did not; the economy went to hell in spectacular fireball fashion with 2008’s Global Financial Crisis. The reasons why things blew up are of course many and nuanced and complex, but one of the biggest was his blind spot with respect to free markets. He got hit by a truck that he refused to believe could exist. But it did.
One of the main drivers of the GFC was Wall Street’s highly lucrative practice of bundling bunches of crap mortgages into packages and selling them to investors around the world. From a boots on the ground view, something smelled very bad, because lenders were pushing mortgages on virtually anyone with a pulse – including new homeowners from the now-legendary NINJA group – No Income, No Jobs or Assets. These people had zero chance of paying off the mortgages, but it didn’t matter – house prices only went up!
This disgusting practice was made possible in large part by the blessing of ratings agencies, whose job it is to honestly evaluate the creditworthiness of counterparties. Bundling and reselling these mortgages was such excellent business that they clamoured to be a part of it, and none of them wanted to rain on the party, so they rubber-stamped billions and billions worth of these crap bundles (Collateralized Debt Obligations) as Triple A rated (the highest quality), under pressure from Wall Street, which was making a fortune peddling them (famously documented in the film The Big Short).
Greenspan simply refused to believe that ratings agencies would act that way. In a free market, ratings agencies would be forced to be objective and accurate, the theory went, because their business was only as good as their credibility. To sell junk as Triple A investments simply could not happen, in his eyes, because it would be economically suicidal, and would be irrational.
As mentioned earlier, there were many causes for the GFC, but this was a big one, and it happened on Greenspan’s watch (while he left before the epic meltdown, it all built up under him).
What does this have to do with anything? It’s an explanation, a personal one, of why one might harbour suspicions about highly-pedigreed economists that are blinded by ideology. While my example is from the right-wing, Canada is currently living the same experiment from the left. Mark Carney has spent a decade or more firmly in the camp of a certain ideology (WEF, UN Climate Special Envoy, creator of the global anti-hydrocarbon GFANZ alliance). A great deal now rests on whether he will be blinded by ideology, as Greenspan was, or whether he will renounce a significant portion of that which he has built his name (and wrote his book) on.
That’s one perspective through which to view Canada’s current dilemma, on one plane of thinking. Here’s another thought exercise, from another plane altogether.
Tara Henley, independent/ex-CBC journalist, published a fantastic interview the other day. of an average Canadian that has had a fascinating career in the field of social work. John, the interviewee, worked with the homeless for decades, and became some sort of subject matter expert on how to decode what people’s actions are actually saying. Extreme behaviour, rage-filled behaviour, can have many root causes, some of them unresolvable, some of them highly open to de-escalation if those that hold power actually listen. He gives examples of dealing with people from broken homes, some with mental disabilities, that act out in bizarre, destructive ways – vandalism, crime, you name it. John’s job was to find two things: one, to find means by which they can communicate – and we often don’t forget or realize that some people have never developed this skill – and then secondly to find out what it is they wish to communicate.
When there is a power differential, this problem is vastly more difficult, and usually winds up in a very negative situation. The easy way is to deal with the bad behaviour. John the interviewee: “Probably 25 years ago, I had a man who was threatening to kill me. Okay, he’s threatening to kill me, but I had a whole team of people. I had police at my beck and call. I had all the power. He had none. He had no ability to actually hurt me. So, I did not need to stoop to insulting him, degrading him, calling the police, throwing him on the ground violently, any of that kind of stuff. I had the power, I was safe.”
John’s point is that whomever holds the power has a responsibility to at minimum listen and understand what’s actually going on, and not just react to the rage on the surface. Often, listening and understanding can point everyone on a much more productive path.
We’ve just had a decade of not much listening from Ottawa, and a lot of lecturing. For example, I’ve heard firsthand reports of face-to-face meetings with Steven Guilbeault, who was apparently “was even more arrogant in person than it seems in the media.” He did not listen; he lectured. Everyone, particularly the energy industry. And he’s still right there in the government.
That’s the paradox currently facing many in the west. What happens next? Let’s look at the precedents. Trudeau 1.0; then Trudeau 2.0; now a new guy that copies and pastes Trudeau 2.0’s cabinet and has written a LOT about his world-class/hydrocarbon-hating climate agenda…Anyone wonder why there is a sense of mistrust? What are the odds of the new ruler of the land listening to the angry people with the pitchforks? Does he understand or care why they hold them, or does he send in the troops?
On the other side of the coin are a lot of voters who said Let’s give the guy a chance. There are a few signs of potential peace. Last week, word broke that Carney had very productive conversations with both Danielle Smith and Scott Moe. Think of these people as walking representatives of a great many people that are ready to snap.
There are other hopeful clues. A news clip indicates that both Carney and BC Premier Eby are supportive of dredging Burrard Inlet to allow fully laden Aframax oil tankers – a big deal considering oil animosity we’ve seen for a decade. Such mutual support would have been inconceivable 5 years ago. As Danielle Smith pointed out the other day, anyone that voted for either the Conservatives or the Liberals voted for cross country utility corridors, some 85+ percent of the population, since both parties heartily endorsed the idea.
A CTV News article documents what Carney says are his five priorities: Building Canadian “resilience” (increased productivity, increase investment, build “nation-building projects”), new cabinet focused on relationships with all provinces and FNs, cost of living measures, spending on national security, and a temporary immigration cap.
Those are all sensible and hard to object to, on the surface, but require a suspension of disbelief for many – how does this all square with a decade of Carney commentary, with the same old faces in cabinet…
The only certainty is that this is all exhausting, it is here, and it is real for the foreseeable future.
On one side of the divide we have a sort of Gilligan’s Island, except that the 7 stranded castaways have been there for 10 years. They just blew their last chance to get off; an attempt to signal astronauts was thwarted when Gilligan kicked the burning signal logs around. It happens. They won’t get another chance for years. But this time it’s different: Gilligan loses it, makes a little raft, and heads out to sea. The Skipper shouts, “Little buddy! You don’t know where you’re going! You’ll never survive! There will be other better opportunities!” Gilligan shouts back over his shoulder, paddling furiously, “F__ you and f___ your optimism and f___ your bananas. Time for action.”
It’s hard to say what happens next. It does seem binary though: either all parties work together in a way that truly works for all provinces – meaning the rage is heard and understood – or things blow sky high, and we play right into Donald Trump’s hands as a fractured nation with various parts willing to cut deals they would not have imagined a decade ago. It’s going to be some year.
Come see the lighter side of energy, and think of it as you never have before in The End of Fossil Fuel Insanity – the energy story for those that don’t live in the energy world, but want to find out. And laugh. Available at Amazon.ca, Indigo.ca, or Amazon.com.
Read more insightful analysis from Terry Etam here, or email Terry here.