The Liberal party is seemingly leaderless and has so far been unable to attract attention with any credible policies of its own, or even a decent attack ad. Bloc leader Gilles Duceppe is unlikely to be looking for estimates for the cost of moving his family and possessions to 24 Sussex Drive. As for the NDP, although they have a number of highly talented and credible MPs, who work tirelessly on behalf of their constituents and the country, (Linda Duncan and Charlie Angus, to name only two), they are weighed down by a rather tired and lacklustre leader.
The other big reason the opposition has so far put off an election is financial. No party thinks it can mount an effect campaign against the Cons, simply because Harper’s party can probably outspend all the others combined by a factor of twenty to one, not including the campaign money spent by the government itself, under the guise of official government business.
So why does Harper need to call an election right now? The answer is deceptively simple, yet no one is talking about it. Quite simply, Harper’s financial bubble is about to burst. When it does, none of the professional spin-doctors in the Prime Minister’s Office (PMO) or Fox News North will be able to protect him, his party, or Canada, from the fallout.
Election, or economic collapse?
The big question, of course, is what will come first, the election or the bubble burst.
As more and more people are coming to realise (except perhaps politicians and economists), the price of oil controls the price of everything. Today, oil hit a new high since the first troubles in the Arab world, at $106/bbl. Translate that into dollars/litre…, and the answer is both familiar and frightening.
The price of oil had been somewhat stable – going up, certainly, but at a relatively slow rate, until the Tunisians started to demand some form of democracy. Today, we are witnessing a domino effect. Troubles in Libya have halved that country’s exports, and this one percent shortfall in production vs. demand has been a major contributor to the current massive energy price inflation.
If the troubles were confined solely to Libya, the problems might be surmountable. However, other Persian Gulf countries are witnessing mass unrest. Bahrain, whilst not an oil producer, is the home to the US 6th fleet. Kuwait is seeing demonstrations. Iraq is a never-ending story. Very recently, Oman is also threatened with change. While most of Oman’s oil goes to China, the Chinese are trying to protect themselves by attempting to buy oil anywhere they can, including, significantly, Mexico.
But the worst is only just beginning. Saudi Arabia, which claims the world’s largest oil reserves, is now facing revolution. Global oil consumption is around 85 million barrels per day, of which the Saudis contribute slightly more than 10%. Libya, by contrast, produces only 2%. “Revolutionaries”, for want of a better term, are calling for a “National Day of Rage” in the Kingdom, possibly next Friday, March 11. If this goes ahead as planned, we might find that “three-eleven” will be as much a part of our vocabulary as 9-11 and 7-7.
If there are significant disruptions in Saudi oil exports, definitely prepare for the worst, as oil futures options for June are now being offered for $200/bbl.
Food prices are now at their highest point in history, according to the United Nations Food and Agriculture Organisation (FAO). The biggest contributors are rising world population, severe crop damage in the last year, probably as a result of climate change, and the price of oil. A fifty cent increase in the price of a loaf of bread might not be a big deal here, but it is certainly a big deal in most OPEC countries. However, a fifty cent increase in a loaf of bread, a litre of milk, a pound of hamburger, a pound of potatoes, a case of Coke, etc., and it will start to become a big deal here, especially with the fifty cent increase in a litre of gasoline.
The final prick in Harper’s bubble is the Canadian housing situation. CTV Ottawa is reporting that this bubble too is getting stretched dangerously high and thin (remember sub-prime mortgages?) The report cites a Bank of Montreal study, which states that housing prices are rising faster than personal incomes. This trend, the bank considers, is “worrisome,” as it could lead to destabilisation of the market.
Although the report itself avoids labelling the current trends in incomes compared to house prices as a bubble, it states that a sharp rise in interest rates (which might happen as capital becomes scarce during the next recession) could have serious consequences to the buyers’ ability to pay. Because of various factors, including the popularity of fixed rate mortgages, the authors do not anticipate major problems, as “the normalization of interest rates could take several years, with Canadian interest rates rising a moderate 2-to-3 percentage points. By then, incomes *should* catch up to prices.”
However, with “Recession Part 2” just around the corner, it is not likely that most people’s incomes will be increasing.
Recessions – not good times to have elections
Elections held during economic hard times do not usually favour the incumbents. For this reason alone, it will be to Harper’s advantage to take his chances now, while the chances for re-election, even as a minority, are relatively better.
The House of Commons must pass the budget for the ruling party to remain in power. Despite its minority status, the Harper Government has always thrown a sop to at least one of the opposition parties, allowing them to claim that there is enough “good” in the budget to make it acceptable. In the next budget, however, be prepared for PMO Finance Spokesman Jim Flaherty to table a budget that will be absolutely intolerable to the opposition parties, putting them in the position where they have to defeat it. The defeat will then trigger either an immediate election, or another, indefinite prorogation.
The future of the minority Harper Government, and the country itself, will be in the hands of the opposition parties. Will they fall into the trap of defeating the budget, or will one of the leaders be farsighted enough to hold his nose (again), allow the government to stay alive for a few more months, and then defeat it when the time is right?