Everybody’s Talkin’

I was going to call this text Summertime Blues, after the classic tune by Eddie Cochran. Partly because I was lucky enough to attend the Dutch Mason Blues Festival in Truro last Saturday. I haven’t done that kind of thing for many years, not to mention overnighting in a 1987 camper van.

Truro is deep ag, farming country, livestock, pick-up trucks. The town itself is utilitarian, but it sits next to one of the wonders of the ocean, something I first heard of when I was eighteen, around the same time I was attending summer festivals.

That marvel is called the Bay of Fundy. The bay is legendary in oceanography because of its tidal range, which is the highest in the whole world, over fifty-five feet. This effect was attributed by the Micmac Indians, original inhabitants of the area, to the splashing tail of a  giant whale. The cetacean was trying to destroy a dam that held the water in, as a giant jacuzzi for Glooskap.

A rising tide lifts all ships.The Bay of Fundy, which floods and ebbs 115 billion metric tons of water in a tidal cycle, twice the volume of the Chesapeake Bay.

For those of you not steeped in American Indian lore, the god Glooskap was part of the mythology of the Algonquin, Micmac, Passamaquoddy, and Wabanaki tribes. He was one of two brothers, the other being Malsum. Both were sons of mother earth, but where Malsum was evil and destructive, Gloopsak was wise and good. This pendulum swinging between good and evil cross-cuts every religion, because it mirrors human nature.

However attractive the story may be, the truth is that the enormous tides in the bay are due to a resonance effect—the time between two high tides is the period the water takes to fill the bay. This sets up a standing wave, analogous to what you can do with string instruments. Get the full story here, and if you hover over the last picture, you can see the tide flip from high to low.

When I flew out of Canada, I got stuck in a loop worthy of Franz Kafka, and I kept thinking of Dylan’s line that ‘you have to pay to get out of going through all these things twice.’ I don’t want to bore you with the details, but I will say that if you fly Air Canada, be prepared not to fly. I’ll be giving them a wide berth in the future.

While I was stuck, I read an article in The Globe and Mail on the woes of the Canadian economy that made me want to title this the ‘Bay of Funding.’ However, I settled for Everybody’s Talkin’  because it best described all the crap currently going on with the economy in these dog days of summer. And anyhow, I like the  song.

What I found is that Canada has exactly the same issues as Europe. Within the federal system, different states contribute to the economy in vastly different ways, much like the situation in southern Europe and northern Europe. States like Ontario are strong positives, Nova Scotia is a sponge for federal funds. Furthermore, a number of basic services are constitutionally guaranteed across the whole of the country.

Of course Canada can devalue its currency, but then so can the European Central Bank. In both cases the overall set of states will do better, but that doesn’t mean the internal balance will improve. Added to that, Canadian states are not required to comply with balanced budgets, which means that countries like Ireland and Portugal are at the very least displaying a proactive stance toward better financial governance. Canada even has its own little Scotland, the push for independence in Quebec.

Whether austerity is the key to recovery is highly debatable. Canada doesn’t seem to think so. Neither do I, neither does Krugman, and I think in time this will become evident, as nations wallow in pseudo-recovery. As an example, improvements in the Portuguese economy will be eclipsed by austerity in Spain, which will immediately cripple one of Portugal’s key export markets. Then the French, then the Germans.

Peugeot was the first automobile corporation to fold. With markets in Southern Europe contracting rapidly, small car manufacturers are hitting the wall. Renault and Citroen also experienced sharp declines in France. One of Bill Gates’ heroes, Alfred P. Sloan Jr., revolutionized the U.S. car market with three broad strokes: the full body chassis (as opposed to the open carriage), the annual model, and financing. These elements made GM the automobile powerhouse of the world.

Sloan couldn’t persuade banks to finance the dealership returns that constituted the down payment on a new car, so GM created a bank that would do so. All that manufacturing value chain is being rapidly destroyed in Europe. When it starts to really hurt German business, which relies on exports, Europe will either unite or disintegrate. And that will happen next year.

No summer festival is complete without a hippie hearse. But in twenty-thirteen, who will the requiem be for? The European nations who joined under a single currency, or the UK and US banks who vowed to destroy it?

Because this kind of domino effect extends within big blocks, and then across them. In Europe, no nation is immune. It really is like the spread of mad cow disease. Like BSE, or the medieval plague, austerity is contagious. Not only that, but people are afraid to spend money, even if they can, much as citizens stayed indoors during the Black Death to avoid human contact.

All the British and American commentators are busy burying the euro, with hundreds of different plans to do so. Everybody’s talkin’. There’s even an exit strategy contest sponsored by the head of UK clothing store Next. Who just happens to be a conservative peer and a member of the House of Lords. It will be a huge irony if the markets achieve what politics couldn’t, i.e. the eurobond.

The India Road QR links for smartphones: point your camera and click.

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