Canada-US trade, oil prices, and the minimum wage

Two things that seem to have been dropped from the conversation about how Canada's economy will fare as it tries to disentangle itself from the US.

First of all, I don't think it will disentangle itself. Geography is powerful, and our supply lines and habitation patterns are oriented toward trade with the US. Changing those things just to enable the same level of output as what we already had before does not seem like the "investment" we're told is forthcoming from the next federal budget (see: green transformation for another thing that did not make sense for the same reason, absent artificial taxes on the "non-green").

So, PM Mark Carney is doing the right thing in the way he is handling the US trade negotiations - preserve what we can, and reach out to other countries to backfill some of the trade losses where possible as a mitigation strategy (but not a trade replacement strategy).

But, what's not being talked about what should be, at least in the places I am looking?

1. Oil prices. They have dropped significantly in the past year, yet rather than talking about how we can put cheap energy to use to increase our value-add (which is what the US, EU, and Russia see when they see cheap energy) we seem to be focused on investing in how we can ship it offshore. Energy prices are a moving target, so you need to have a long-term vision, but it's been an ongoing issue in Canada that we are far more oriented toward shipping commodities offshore than we are with turning those commodities into things that are more valuable - adding value and economic capacity - and using plentiful energy as an accelerator in the endeavour.
   
   
2. Minimum wage. The EU and the US have low-wage districts that provide them with flexibility. In the EU it is Eastern Europe; in the US it is the southern states. Canada has no such districts anymore - all provincial minimum wages are in a narrow band of agreement - which essentially means it's illegal to hire people in Canada if the business you're running is labour-intensive and can't support the minimum wage as a result. The EU and US have the option to grow the economy by having lower-value work done domestically in those places where it's allowed by the minimum wage. There used to be regular discussion about minimum wage when it was poised to increase but that seems to have gone away, despite being important.

I'm interested to know how much #2 plays a part in the difficulty that so many Canadian students and citizens are having finding entry level jobs, tied to the concern that temporary workers and international students seem to have taken so many of those jobs. Perhaps the minimum wage is so high that unconventional deals (illegal wages, kickbacks, pay-to-work, etc) are in play in those positions because the business requires lower wages to persist. Just speculation, of course, but it's based on real hearsay.

The post on COVID-19 that nobody asked for

The last thing anyone needs is another post on this topic. But, at this point it is therapeutic for me to try and connect and resolve the many conflicting pieces of information I've absorbed from the five sources of quality news that I pay for, together with the highly interesting and insane cross-section of information gleaned from free clickbait sources and back-alley slums of ill-repute like reddit.

Plus, it'll be interesting to look back and see how wrong or naive I was in retrospect.

What have I learned about COVID-19?
The fact that I've learned it doesn't mean it's true, but this is where I think it is at:

• When the virus first appeared in China, efforts were focused on quarantine and elimination of the virus.
• Most people who get the virus are no worse off than if they'd got a cold or the flu. Some people have an extremely serious infection that requires mechanical ventilation and intensive care facilities.
• Mechanical ventilators and intensive care facilities are in short supply around the world. This is reasonable.
• Global efforts are no longer focused toward elimination of the virus, but instead on controlling its inevitable spread so that it doesn't overwhelm healthcare resources such as available ventilators and intensive care units.
• If healthcare resources are overwhelmed, triage will determine who will live and who will die. More people will die than would die if resources were unoccupied. The deceased may include among them people who did not have COVID-19 but had another serious accident or illness at the wrong time - for example, a severe case of regular influenza or an unrelated heart attack that required intensive care facilities.
• Healthcare systems have generally have not been good custodians of the supply chain. Important tools in the pandemic toolkit such as masks and other protective equipment have not been stockpiled. Further, many are produced in China along with certain important medications and these supplies are now quarantined along with a large chunk of the Chinese population.
• With all of the above in mind, reducing the opportunity for all types of illness, injury, and accident while COVID-19 is a clear and present risk makes sense, and to me this is why shutting down events and travel makes sense. If you have a serious car accident travelling to an event when COVID-19 is in full swing, you may be out of luck.

What I don't understand: why not inverse quarantine?

I don't fully understand why we are roping everyone into the cancellations and restrictions that are now becoming widespread. There is a clear profile of the type of person that is vulnerable and they are in the minority: older people with existing health conditions. These are the people who have the most self-interest in protecting themselves, and they are also the reason that everyone else should be trying to avoid catching the virus - not so much for themselves as for someone who is vulnerable that they may pass it on to.

Why wouldn't we get in touch with the most vulnerable people, have those people quarantine themselves with supports to ensure they have what they need for the duration, and let it blow through everyone else as quickly as possible - the vast, vast majority of whom will not suffer greatly though may be contagious for 2 weeks? Perhaps it is too large of an effort to orchestrate reliably and quickly, but it seems that most people are hyper-aware of this issue so the communication would surely not be a problem. If there is a vulnerable person that does not know that they are at risk from this virus by now, I would be extremely surprised.

I can't help think, in the back of my mind, that this has largely become one big exercise to see how quickly and deeply governments can bring people under control should a more serious emergency or outbreak warrant it in future. How often does this opportunity come along with commensurate public support? The largest social experiment ever conducted - so much will be learned from this.

Ontario schools closed for 3 weeks - where do the kids of healthcare workers go?

March Break - an annual week off school in March - was to begin next week. It happens every year and parents plan around it. Parents have now been told that schools will be closed for an additional 2 weeks after March Break to reduce the chances of propagating COVID-19. Fair enough, but I can't help wonder what this does to healthcare workers with children not old enough to stay home alone. A great government support would be to do everything it can to provide free, priority daycare for children of healthcare workers. If this virus kicks off, the last thing you will want is healthcare workers torn and stressed between home and work-life issues.

The logic of closing down schools for 2 weeks after March Break appears to be that children returning from March Break travel to locations where the virus is more prevalent than in Canada will not have a chance to spread the virus among their classmates on their return. After 2 weeks, it'll be clear who does and does not carry the virus but immediately after March Break it will not.

Donald Trump and US Election 2020

It seems to go without saying that Donald Trump's prospects of re-election look worse at the moment than they did at the beginning of the year. I'm not sure they were ever that great - he won in 2016 by an extremely slim margin and lost the popular vote. It's hard to imagine that he has brought more people onto his side in the last 4 years, but there's no accounting for public affinity for an opponent who is older, appears confused a lot of the time, and will not bring out the youth vote... and that is what you have in Joe Biden.

If you look at the core of this COVID-19 issue and the havoc it has wrought in general to the economy and healthcare system so far, you see a fundamental issue of over-dependence on China both in the supply chains of every day products and in medical supplies that are critical to the health of the country. It really does seem feasible at this point that even the US military may not be able to function completely without the Chinese supply chain being intact, which seems unimaginable.

So, all I want to say here is that Donald Trump has made reducing dependency on China a central and highly-visible part of his presidency for the duration. He has been attacked from all angles for doing it, and primarily by his opponents (some of whom had a direct hand in implementing the over-dependencies). There is political gold to be mined for Donald Trump if done in the right way and at the right time, though I'd still have doubts in his ability to sway such a polarized population.

Donald Trump and the ban of EU travel

It was wrong to impose such restrictions without letting his counterparts know it was coming. But the immediate cries of "this won't work!" were really strange. China did it, and was praised for it. Granted, the US will not be able to be so draconian and complete in their shutdown. But how do the EU naysayers know that it won't work, and what position are they in to say so with all of their most prominent countries grappling with this virus more severely than is the US?

The US has some unique healthcare struggles with such an apparent lack of integration or common goal of public good within its fragmented healthcare system, and I have to wonder whether border restrictions may really be the best (if not the perfect) approach for that type of system.

Over-reaction and stockpiling

I went to the supermarket on the evening of March 12th to pick up a few things, but none of them were must-haves. It was worse than the height of Christmas. All aisles packed with shoppers and shopping carts going queued around the perimeter of the store waiting to be checked out. I've never seen anything like it, and I can't imagine what could be so urgent for so many people! I left.

I went back the following morning at 7:00am. Not as bad as March 12th but definitely abnormal - more on the scale of a busy Saturday afternoon, though with very few checkouts open.

India

I am absolutely amazed that this virus hasn't kicked off in India yet. but here you have it - as of today, only 73 cases and 1 death in an extremely crowded country of 1.3 billion people.

But life goes on...

For the most part, people I interact with on a daily basis are going about their day and getting things done. There's such a sharp contrast between portrayals in the media of absolute chaos at every turn and the calmness of every day life.

Digital disruption and its effect on Canada and profitable business

There has been a lot of coverage of the trouble that retail in the Western world is in, and Amazon is largely on the pointy end of the wagging finger. Generally, though, it's an intervention of highly digital, Internet- and data-driven companies against more traditional companies that have a higher dependency on widely distributed physical assets.

Canadian revenue diversion to US

From a Canadian perspective, I think we should be worried about these things in relation to the replacement of things that keep funds within the Canadian economy with things that send funds down to US-based companies instead:

• Newspapers: it's understood that newspapers are suffering, and this is largely due to a collapse in readership and therefore print advertising. Readership is generally older and naturally in decline, and this is not the demographic that many marketers want to target.

• Advertising: what's not so apparent is that much of this Canadian-made print advertising is largely being replaced by US-based digital companies such as Google and Facebook, which despite all appearances are really advertising companies. Google makes money from intercepting searches for things that you are looking for an steering you toward companies that pay to feature prominently in the search results, and again from anonymized data that can be used to sell things to your market/demographic. Facebook can target advertising to you directly based on the massive amount of detail it knows about you from the interactions you have on its platform, and every "like" advertises a product between friends, which is a far more trusted relationship than is the relationship you have with an anonymous corporation.

• Streaming: the collapse of Canadian-operated retailers like HMV and video rental outlets is largely being replaced by US-based streaming services like Netflix, iTunes, Amazon/Google services, or other foreign companies like Spotify. Worse, few of these services seem to collect Canadian sales tax.

It all seems like a significant diversion of revenue and value-added employment outside of the country, and Canada was already over-weighted on non-value-added commodities.

Unprofitable companies killing off profitable companies

It used to be that disruptive companies would enter an existing market, change the way that things were done, and become massively profitable as a result. And this has been the case with companies like Google, Facebook, and Apple. Apple's case is especially interesting, as they are the only smartphone manufacturer making windfalls despite having less than 20% of the market share.

However, what about companies like Amazon and Uber? As far as I can tell, these companies have largely been operating at a loss and threatening or killing off traditional retail and taxi companies and the jobs they sustained in the process.

In international trade, this is frowned upon and is known as "dumping". From Investopedia:

Dumping, in reference to international trade, is the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market. As dumping usually involves substantial export volumes of the product, it often has the effect of endangering the financial viability of manufacturers or producers of the product in the importing nation.

But I'm not clear why this is desirable domestically. Sure, it's private money and I assume these investors can do what they want with it. But where is the wisdom in not intervening in cases where sustainable businesses are being killed off in favour of businesses that despite considerable disruption and employment shrinkage haven't proven that they can be profitable? With the way that tech funding works, the goal will be to blow out the incumbents and take as much of the market as possible so that a strong position is demonstrated and the early investors can cash out their winnings in an IPO.

The shoe that hasn't dropped yet is the one that drops when the incumbents are largely gone or incapacitated and an effective monopoly is in place for the new digital companies. That's the missing piece in the story of how these new companies become profitable and we don't know what that will look like.

What happens next is anyone's guess, but perhaps it'll be come to known as Gig Economy 2.0 - living in a rented car that you also use to operate your ride-sharing business, with the car's rightful owner working an entirely separate job to pay off the 84-month loan he took out to buy the car. The "gig economy" meets "financial engineering".