November 2, 2006 –
On a continuation of the eventual possible $40 to $50 billion of destruction of wealth in the Canadian stock markets caused by the proposed taxation of royalty income trusts by the Canadian government, the bigger story is not that this happened, as many economists would intelligently argue that such tax loopholes should be closed, but the fact that Canadian PM Stephen Harper had deceived millions of Canadians during the last elections by promising not to do the very thing that he announced he would do yesterday — tax the trusts.
The sad thing, and what makes PM Harper’s lies of a much greater magnitude, is that many elderly Canadians voted for Harper based upon this promise. Based upon their faith in this man as being an honorable man who could be trusted, many put 100% of their savings in these income trusts. Yesterday, for their reverence for the Prime Minister, they were rewarded with cumulative losses of billions of dollars in a couple of hours yesterday after Harper broke his promise.
True – this may have been a necessary step for the sake of Canada’s economic health, but Harper should have been responsible enough to figure that out during his election campaign and tell the people the truth back then. When Mexico’s President Vicente Fox suffered several key resignations from his cabinet and trusted confidantes due to the fact that they claimed that they did not recognize the man who was President as the same man they supported during the election, Fox responded, You act one way when you’re trying to get elected. You act another way, after you’re elected. I think it’s time heads of state all over the world start acting the same way before and after they get elected – with honesty and integrity (though I know this will never happen).
Canadian income trusts were exceedingly popular with seniors in Canada, and unfortunately, Harper’s broken promise struck the harshest blow to those least able to afford it – the elderly and retirees. True, since the new laws most likely will not be enacted until 2011, most people reacted irrationally. But the actions of irrational people who act without full knowledge of a situation (which by the way, these types of people will always far outweigh the rational ones) always drag down the rational people as well.
The wisest thing to do, for both foreigners and Canadians, is most likely to hold on to these trusts until a short bounce results when people regain their sanity. However, when it comes to money, many, if not most, people act not with logic, but react on emotion. The fact is that when fear and anger drive people’s decisions, there is no stopping the wave of selling. And certainly, many rational elderly Canadians sold off their income trusts at huge losses as their losses accumulated by the minute yesterday and their visions of comfortable retirements were sinking faster than Atlantis.
Harper’s broken promise reminds me of the actions of Hungarian Prime Minister Ferenc Gyurcsany this past May, who stated in regards to the Hungarian economy: “It was totally clear that what we are saying is not true. And at the same time, we did nothing for four years. Nothing. Instead, we lied morning, evening and night. I don’t want to do it anymore.”
Now just this month, on October 7th, Gyurcsany’s guilt apparently had dissolved. Despite his admissions just four months prior in clear black and white for his fellow countrymen to read, he stated:
“I must reject accusations that the first Gyurcsany government falsified data, that it knowingly misled or deceived the people.”
To begin with, who refers to themselves in the third person? But that’s beside the point. How does “we lied morning, evening and night” for four years reconcile with his statement that he never falsified data? Gyurcsany replied that he was misquoted in May, even though the statement above contains his exact words. He claimed that in stating that “we lied morning, evening and night” for four years that he was only referring to how his economic policies were misguided and doomed to fail.
No wonder the European union was formed, and now Canada, the U.S. and Mexico want to make it much easier for citizens to travel cross borders in a “unified North America”. Instead of having to tell multiple lies, the formation of these one continent governing bodies can allow multiple governments to meet and figure out the most convenient single lie to disseminate.
Am I the only one that questions what has happened to the great honor, integrity, and reverence that should accompany the position of a head of state?
In 2004, U.S. President Bush had this to say about Gyurcsany:
“I told the Prime Minister I appreciate a man who sticks by his word. When the Prime Minister gives you his word, he means it. He is a strong leader for Hungary. He is a strong ally for the United States. More importantly, he is a strong visionary for free and peaceful societies.”
I’ll agree with George Dubya there, because when Gyurcsany said that he did absolutely nothing for four years and lied morning, noon, and night, I believe that when Gyurcsany gave his word regarding this behavior, that he truly meant it. Just this past June, President Bush met with the Hungarian PM in Budapest after the PM confessed he “did nothing for four years. Nothing.” I wondered if Bush still told Gyurcsanythat he was a “strong leader”.
For precisely the reasons I present in this blog entry, I have advocated never accepting government reports and corporate reports on the surface level as truthful. Dig well below the surface into the rabbit hole when it comes to “official” government statistic and corporate released numbers. As was the case with Enron, Worldcomm, Livedoor, and many other global corporations too numerous to count, accountants lied and CEOs lied about the financial health of their corporations. In the case of governments across the world, it is evident that many times their word is worthless or worse yet, full of lies.
For this reason, I never rely on financials and government economic reports to make my investment decisions. And neither should you.
