Report on Business:

Albert D. Friedberg, savvy investor and president and CEO of Bay Street-based Friedberg Mercantile Group (founded: 1971), first called his clients’ attention to emergent economic catastrophe early in 2007. "Not since the days of the Great Depression," he wrote in his firm’s second-quarter report, "have we found conditions as ripe for a run on financial institutions as we do today." He referred to a serious global credit crunch as inevitable and imminent. Corporate default rates would rise dramatically, he said, and corporations would shed workers. Unemployment would rise dramatically. The long economic expansion would come to an end.

Mr. Friedberg writes his quarterly reports himself in his own inimitable way. When he errs, he candidly explains why. You can access the Friedberg archival reports free: Go to friedberg.ca. These reports document Mr. Friedberg’s assessment of the coming catastrophe – and trace his devastating critiques of government monetary and fiscal policy.

"Governments around the globe did not understand, and still do not understand, the real nature of the economic problem. For example, they do not realize that it was too much debt that caused the problem – and so they try, where possible, to encourage people to take on more debt to help resolve the crisis."

"Governments should encourage people to de-leverage – to save and to nurse back to health their overextended balance sheets."

"Governments think that short-term quick fixes can help re-start the economy and so they dream up silly tax cuts and wasteful projects instead of concentrating on long-term issues."

My comment: The people in government think that short term fixes will work because their time preference is low. Typically the next election. That is why they endorse inflationary monetary policy and fiscal stimulus to the detriment of the long term health of the budget or the currency. It will be somebody elses problem they reckon and quite frankly it is. Ron Paul acknowledged this during a recent interview. He suggested shrinking government, letting banks fail, and allowing the malinvestments to be cleaned out. He also admitted that in the current political environment this would be unlikely.

John Polomny
The Real Deal