WISDOM, WEALTH AND THE LESSONS OF HISTORY

If a society wishes to endure it ought to rely on its wisdom more than on its wealth.   

The idea suggests we have to use our heads, employ intelligence and rely on analysis rather than risk being swept into a whirl-wind of indulgence.   

An essential component of wisdom is discipline, both personal and collective. Discipline speaks to self-control, to living within ones means, to thoughtful planning, and to the ability to make adjustments even when they are painful; discipline suggests a pre-occupation with a larger prize, more than that afforded by immediate gratification.

Following the Budget last year, some asked: how it is possible that financial whiplash could again be suffered so quickly; the music suddenly muted on our celebration of nascent wealth?

Others rightly express bewilderment that we have not taken care to prevent successive deficits of $200 million and $450 million for the past two years and a forecast deficit for the 2014-2015 fiscal year will be higher again.  We have also done little to resolve the accumulated debt of the first five decades of Confederation.    

The question is: are we any more enlightened than our 20^th Century forbears?

Finance Minister Does Not Understand Risk

The Budget Update, delivered yesterday, December 13, 2012, by the Finance Minister, acknowledges the mulitude of risks attacking the declining health of the Province's Teasury; otherwise, it ignores them.  He gives no advice to the Government either, as it trundles towards sanctioning an outsized and risky megaproject.  The Minister is not a decision maker.  He should go.

Many great projects get passed over because the risk/reward ratio is simply unattractive.  In business, it is a fact of everyday life.  On paper, an idea may first appear sound; the assumptions are reasonable, cash flow analysis is excellent, pro forma rate of return, on both equity and investment, are within an acceptable range, financing is available on reasonable terms.  Then a decision is made to scrap the idea! Why? What went wrong? The answer is sometimes even good investment ideas get placed on the backburner.  Regardless of how inherently sound they may be, they carry risk, sometimes too much risk. 

NL Finance Minister Gets Downgrade (PART 2)

Last time, I discussed the Dominion Bond Rating Service (DBRS) Report which confirmed the “A” credit rating of the Province. The Minister of Finance, in making that announcement, noted a comment by DBRS that, he said, was proof of why the Government should proceed with Muskrat Falls.

Uncle Gnarley obtained a copy of the full DBRS Report and caught Tom Marshall being selective; too selective for a Finance Minister.  Transparency is an important watchword; people have a right to know what their government is up to and how important agencies, like DBRS, feel about the fiscal management of our economy, especially the budgetary process, over which the government has substantial control. 

When government decisions go awry or they engage in bad management practices, the public should not be shielded from the result by 'bafflegab'.  It is part of the reason we are rightfully upset about the recent amendment to Bill 29, the Act governing public access to information. 

This week, let’s look at what DBRS had to say about the NL Budget, our current fiscal position and how the Muskrat Falls project will play a key role in economic forecasts.