The rationale for a target zone is that banks can't really charge zero interest. Otherwise the administration fees on money market funds would actually cause the safest paper equivalents to lose the principal. But in the wake of yesterday's decision, the actual target rate for interbank loans was at 0.17%, even lower than the long term loan rate in Japan which is 0.3%. And the rate in London is at 0.2%. When money is that cheap and no one is borrowing. not even banks from each other, something is wrong with our fundamentals. And given how interconnected our economies are, long term slag in the US or the EU is bound to affect Canada -- our AAA rating is not in danger by a long shot but we'll need to get more creative and not just rely on resources or a low dollar like we used to.
How was it possible that things have gotten to this? Well a lot of it has to do with politicians and media pundits offering simplistic solutions to the most complex problems and stripping off people who might find appeal in one concept or policy plank, but would retch if they knew what the whole platform was. Add up enough peels and you get a majority and carte blanche. And what should be priorities get shackled off for other things of less importance. Eventually, the chickens come home to roost.
Certainly investing in the military industrial complex and law enforcement over and above the priorities of ordinary people who don't have the power to object or fight back (and the power brokers banking that they never will) is part of the problem. But so is the problem of charisma.
There are people out there who remember when Mrs Thatcher was called "Scrooge with a painted face" -- a reference to her slashing school lunch programs in the UK. Investing in education is meaningless if kids or teenagers go to school hungry.
Similarly, it's hypocritical for the "pro-life" crowd to fight to restrict or even ban abortions while at the same time slashing funding to programs such as WIC (the Women, Infants and Children nutrition program) -- in effect telling women, you have to have the baby and you're on your own raising it. That is the exact opposite of humanity -- and why while I'm pro-life I will never join any pro-life group that undermines parents' rights to raise their children with dignity.
It's almost impossible to listen to talk radio these days without laughing. Most shows on the right and even many on the left are so out to lunch they don't even take five minutes to check all of the facts. If they did, their positions could be mollified just enough that there could be the beginnings of some kind of consensus that could bridge the chasm that now exists.
Reading through the classic tome Democracy in America by Alexis de Tocqueville, I found this interesting section about what is often called style over substance or being just plain bombastic. One paragraph that explains such morons as Glen Beck or Rob Ford on the right; Keith Olbermann or Dick Daley on the left:
[T]hey hope to catch the eye of the crowd at once and easily keep it fixed on themselves, an object in which they often succeed. For the crowd seeks nothing in poetry but objects of vast dimensions; it has neither the time to measure the object set before it accurately nor the trained taste to sense how easily they are out of proportion. Writer and public join in corrupting each other. (Vol II, Part I, Ch. 18)The second volume was written in 1840 (Part I was 1835). Over 170 years later, it adequately explains the sinkhole politics have become in much of the free world.
At least there is some satisfaction that at long last cuts in military procurement is actually on the table and will take place in drastic form in the US if the poison pill kicks in on December 23rd. It will no doubt anger the right but one has to start somewhere and it needs to be in the areas where both the right and left find "third rail" issues.