Post 220

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.


  • Pollitical Economy Christmas movies: wrapping things up.
  • Toy sales in the US are very weak.
  • US core inflation is proving resilient at the 4% level.
    • But gasoline prices are down almost 9% from last year.
  • Businesses in Canada are increasing their usage of credit cards and credit lines.
  • Prices continue to fall in China.
  • Rents may have peaked in the US.
  • Retail spaces in the US are shrinking, yet vacancy rates remain at very low levels.
  • The median home in Toronto is far out of reach of the median income.
    • It’s four times what the median income could afford.
  • In Financial Ructions I go on a couple of rants: Just in time for Christmas.
    • It seems to me that many economists/journalists can’t bring themselves to admit that policies that they have been recommending for years are what have led to the general global economic malaise that we’re all experiencing.

Pollitical Economy

Thank you to all of those who responded with their Christmas movie picks.

The most popular movies were:

  1. It’s a Wonderful Life (1946)
  2. How The Grinch Stole Christmas (1966)
  3. Home Alone (1990)
    • Can you believe that movie’s over 30 years-old now?

Tied for 4th place:

  • A Christmas Carol (1951)
  • Love Actually (2003)
  • National Lampoon’s Christmas Vacation (1989)

And here are the rest:

  • A Christmas Story
  • Elf
  • Die Hard
  • Miracle on 34th Street
  • The Grinch (Jim Carrey)
  • White Christmas
  • Scrooge (1970)
  • Charlie Brown Christmas
  • Holiday Inn
  • Home Alone 2: Lost in New York
  • It Happened on Fifth Avenue
  • Jingle All The Way
  • Lethal Weapon
  • Polar Express
  • Rudolf the Red Nosed Reindeer (1964)
  • Rudolf’s Shiny New Year
  • The Holiday
  • The Homecoming: A Christmas Story

I think I got everyone’s picks.

What I find really interesting is that there were some movies I had never heard of and/or had very low Tomatometer ratings.  I think nostalgia may have a lot to do with it as these movies take us back to our youth and the excitement of the Christmas season with our family; some of whom may no longer be with us.  So, no matter what, these movies will always be cherished as part of our Christmas season and memories.  My favourite movie didn’t get much mention: Scrooge, the 1970 musical with Albert Finney.  I watch it every year and our daughters acted out a short video of it when they were younger.  But I guess it’s not for everyone.

Thanks again for participating.


Love Actually

Coincidentally, the WSJ had an article about the movie Love Actually in the weekend edition: Dec 9/10 asking why it is such a popular Christmas movie.

  • Writer and director Richard Curtis felt that the great music may have been the glue that kept the movie from being a disaster.
  • Apparently, it was released the same weekend as Elf.
    • Total global revenues:
      • Love Actually: $248.1 million
      • Elf: $227.4 million

New Christmas Movies

And the Globe and Mail listed five Romantic Holiday movies “worth watching.”

  • A Biltmore Christmas
  • A Merry Scottish Christmas
  • Catch Me If You Claus
    • PM: Stupid title
  • A Royal Date For Christmas
  • Best Christmas Ever!

PM: The first three have good tomatometer readings.  The last one not so much.


According to the WSJ, Hasbro is letting go another 1,100 people or almost 20% of its employees.

  • This is in addition to 800 people let go in the beginning of the year.

The CEO said that:

  • “The market headwinds we anticipated have proven to be stronger and more persistent than planned.”
  • US toy industry sales were down 8% as of September (Circana)
    • Some of the biggest moving categories:
      • Building sets: +5%
      • Vehicles: +3%
      • Outdoor & Sports Toys: -15%
      • Action Figures & Accessories: -15%
      • Dolls: -16%
        • Even with Barbie?

Hasbro’s results from last October were weak with sales falling 10%.

By segment:

  • Consumer Products: -18%
  • Wizards of the Coast and Digital Gaming: +40%
  • Entertainment: -42%

Consumer Products Segment sales were down or flat in all regions:

  • North America: -17%
  • Europe: -23%
  • Asia Pacific: -25%
  • Latin America: 0%

The company is expecting sales to fall 13-15% (I’m not sure if that’s for the last three months of the year).

Here is my post from January:

Toys Out The Pram

Toy-maker Hasbro admitted to a challenging holiday consumer environment.

  • It’s cutting its staff by 15% this year.  

From my post back in October:

Hasbro is one of the world’s largest toy/game manufacturers, which was founded in 1923 and made pencil boxes before switching to toys in the 1940s.

  • Mr. Potato Head was the first toy advertised on TV: 1952
  • It launched the first action figure GI Joe in 1964
  • Some of Hasbro’s other brands include:
    • Easy-Bake
    • Marvel
    • My Little Pony
    • Nerf
    • Play-Doh
    • Power Rangers
    • Monopoly
    • Twister
    • Tonka.
  • And owns the trademarks Kenner, Milton Bradley and Parker Brothers.

And my post from October 2022

  • CEO Mr. Cocks (PM: friends call him Dick) has put in place a three-year cost-cutting program.

US Inflation: Core Strength

US inflation stalling at a higher level?

US inflation rate:

  • July: 3.2%
  • August: 3.7%
  • September: 3.7%
  • October: 3.2%
  • November: 3.1%

Core inflation excluding food and energy:

  • July: 4.7%
  • August: 4.3%
  • September: 4.1%
  • October: 4.0%
  • November: 4.0%
    • Car insurance: +19.2%
    • Shelter: +6.5%.
      • Rent: +6.9%

Some of the main components:

  • Food: +2.9%
    • Food away from home: +5.3%
  • Energy: -5.4%
    • Gasoline: -8.9%
    • Electricity: +3.4%
    • Utility gas: -10.4%
  • New cars: +1.3%
  • Used cars: -3.8%
  • Services (less energy services): +5.5%

Source: BLS


Apparently there is a Microsoft World Excel Championship that is held every year in Las Vegas.

  • There are The Road To Las Vegas qualification rounds.
  • The WSJ reports that one contestant is known as “the LeBron James of Excel.”
    • And that reigning champion is Ngai “the Annihilator.”
    • This year’s final had six math problems that were about:
      • Spaceship construction
        • Asteroid mining.
    • Sounds like fun.
    • But I think I prefer The Japanese Slippery Stairs Game Show.

The Importance of Families

In a WSJ opinion piece by Jason L. Riley, he discusses a paper from the Institute of Family Studies:

  • The crime rate is 48% higher in cities that have above median share of single-parent families than those with fewer single-parent families.
  • The percentage of babies born to unwed mothers:
    • 1960: 5%
    • 2019: 50%
    • Of course, just because a mother wasn’t married doesn’t mean that there was no father around.  But still.


Rob Carrick of the Globe and Mail reports that Canadian credit card balances are at an all-time high of $113 billion (Equifax Canada).

  • Of course, population growth (Statcan) would add to this but credit card balances are growing faster:
    • Population growth: 3.0%
    • Credit card balance growth: 16%

Average credit card balance:

  • Pre-COVID: $3,727
  • 3Q 2023: $4,119
    • PM: This is only up 10% and lower than the rate of inflation over that time.
    • I.e. $3,727 in 2019 is worth $4,327 in 2023 so in real terms balances have fallen.

According to Equifax, the percentage of people who pay their credit card balance in full each month:

  • Pre-COVID: 60%
  • Today: 66%

Equifax notes that businesses are increasingly reverting to their credit lines and credit cards.

  • Business installment loan delinquencies are up 13.5%
  • Early delinquencies (30 days +) on business lines of credit are up 16.3%

Luxury Spending

The FT reports that in talking about the economic situation, the president of luxury house Chanel said that:

  • It is difficult “everywhere, in every country.”
  • That the “situation will be tougher than what we saw in 2023.
  • They are seeing declines in first-time occasional buyers.

According to Bain, the percentage of ultra luxury spending done by the top 2% of spenders:

  • 2009: 35%
  • 2023: 40%

China Deflation

Consumer year-over-year price changes in China:

  • October: Down 0.2%
    • Food: Down 4%
      • Pork prices: Down 30.1%
  • November: Down 0.5%
    • Food: Down 4.2%
      • Pork prices: Down 31.8%

China’s Producer Price Index (prices charged at the factory gate, which eventually feed through to retail prices):

  • June: Down 5.4%
  • July: Down 4.4%
  • August: Down 3.0%
  • September: Down 2.5%
  • October: Down 2.6%
  • November: Down 3.0%


In a letter to the editor in the FT, Philip Hawley notes that Argentina has previously tried to reduce the government’s involvement in the economy.

  • In 1993 the state-owned oil company called YPF was privatised.
  • Hawley was involved in restructuring the company and in two years the number of employees at YPF went down from 60,000 to 6,000.
  • He said that around 30,000 were simply showing up for work once a month to collect a cheque.
  • The company was renationalised in 2012 (Wikipedia)

US Rent: Getting Easier?

The WSJ reports that apartment landlords are increasingly giving concessions to entice renters:

  • According to Zillow, around 1/3 of rental listings offered some form of markdown.

Retail Space: Shrinking

A WSJ article on the shrinking retail stores space in the US.

  • New retail square footage is the lowest it’s been since CoStar group started measuring this data back in 2006.
    • Average size: 3,200 square feet.
    • 20% of leases were signed by food and beverage companies.
  • According to CBRE, available retail space is the lowest it’s been in almost two decades: 4.8%.

Canadian Tourism: Almost Fully Recovered

Spending in the Canadian tourism sector (Destination Canada):

  • 2019: $105 billion
  • Expected in 2023: $109.5 billion.
    • Inflation adjusted the 2019 number is equivalent to $122 billion.

Median Home Far Out of Reach of Median Income

OSFI (The Office of the Superintendent of Financial Institutions) maintained the current rate for the Minimum Qualifying Rate (MQR) for uninsured mortgages.

  • Borrowers must qualify for the higher of:
    • 5.25%
    • Mortgage contract plus 2%.
  • A five-year fixed rate mortgage at RBC is quoted at 6.49%.
    • So a borrower would have to qualify for a rate of 8.49%.

You can use this handy dandy mortgage qualifier tool ‘here‘ to see if you would qualify for a mortgage:

  • To qualify for a mortgage, no more than the following percentages of your gross income should be used for debt payments:
    • Gross debt service ratio (house related debts): 32%
    • Total debt service ratio (including other debts like car loans): 40%

Using the tool, for the median home price in Toronto of $1,082,179 (TRREB), you would need to make around $280,000 to be approved at current rates.

  • The median income in 2021 in Toronto: $84,000 (2021 Census)
    • And would qualify for a home worth $275,000.
    • Good luck with that.

Financial Ructions

Taxing Unrealised Capital Gains

In a WSJ letter to the editor, Jonathan Putnam comments on the misguided government idea to tax unrealized capital gains.

  • As the government allows deductions so you’re only taxed on “net” gains he says the following:
  • “I hereby declare my future charitable donation of $50 million.  An unrealized deduction you say?  Why should I get the benefit today of a donation that may never occur?  Exactly.”

It’s Not Just The UK

The FT’s Martin Wolf discusses a report by the Resolution Foundation and the London School of Economics.

  • The report apparently has recommendations for fixing the UK’s stagnant economy.
  • Wolf says that the UK is suffering from:
    • Stalled productivity
    • High inequality
  • True, but so is the US and especially Canada.
    • This is because all of these countries subscribed to driving asset prices higher to encourage debt-fueled consumption economic doctrine believing that this was good for the economy.
    • It’s not.  It results in stalled productivity and high inequality.
  • He says he’s not surprised that 60% of Britons feel that the country is moving in the wrong direction.
    • Meanwhile, that number is 78% in the US.
  • He refers to the “dismal economic performance since the financial crisis.”
    • Yes, it was dismal everywhere because rather than clean-up the banking system and abandon trying to drive an economy forward by creating asset bubbles via the distortion of the price discovery mechanism (zero/negative interest rates), policymakers instead doubled-down on their productivity-destroying wealth effect policies which were and are directly responsible for the wealth inequality.
  • To improve productivity he says that labour, land and capital needs to be squeezed “out from sectors and firms where they are currently being wasted.”
    • Again, their wealth effect policies are responsible for this not happening.
    • Rather than embrace Schumpeter’s creative destruction, central banks instead decided to bail-out any company that could fog a mirror and now the world is afflicted with a record number of zombie companies (those that have not generated enough operating profit to simply pay the interest expense on their debt) and this was even before interest rates started rising.
      • As companies continue to roll-over their maturing debt, the number of zombies will rise further impacting global productivity.
      • Percentage of zombies in Canada’s (Grieder and Ortega):
        • 1980: 3%
        • 2018: 25%
      • And while they point out that Canada has a higher percentage of commodity companies than other countries, the same would have been true in 1980.
      • (More on zombie firms in Canada ‘here‘)
    • Studies show that the zombification for private companies is much lower than publicly listed ones.
      • The reason is that the survival rate for private companies is much lower i.e. if they’re destroying capital they quickly abandon whatever it is they’re doing because it’s their capital they’re destroying.
    • According to the Bank for International Settlements (BIS) the percentage of listed non-financial companies in 14 advanced economies that were zombies:
      • Late 1980: 4%
      • 2017: 15%
    • Again, this is long before interest rates started to rise and so the number is likely much higher now.
    • (Source: Financial Times)

Bad Remedies

An FT opinion piece by Chetan Ahya of Morgan Stanley with recommendations for China’s communist party in how to counter deflation.

  • Like most Keynesians he believes that the answer is quite simple; stimulate aggregate demand.
  • He quotes Ben Bernanke from 2002: “Sustained deflation can be highly destructive to a modern economy and should be strongly resisted.”
    • The only reason sustained deflation can now be highly destructive is because policymakers have tried to drive the economy forward by encouraging debt-fueled consumption and the value of the debt goes up in a deflationary environment.
    • As I’ve discussed many times, deflation should be the normal situation in an “unhampered” market system where productivity growth and competition results in lower prices for consumers.
  • He notes that a deflationary environment increases the burden on debtors.
    • Yet he seems untroubled by the burden inflation imposed on creditors for years.
    • At one point there was $17 trillion in debt yielding negative interest rates and inflation was positive.
      • This was a massive wealth transfer to debtors.
    • Of course, the biggest debtors and thus beneficiaries of this situation are governments.
    • There is nothing wrong with deflation except if it is caused by a shrinking money supply.
  • He says that getting people to increase consumption “could lead to a faster transition towards (a) more healthy inflation environment.”
    • Again, they believe that you can consume your way to prosperity.
  • Finally, he says that investment in China is too high.
    • It’s likely that it’s the type of investment and who the investment decision-makers are that is at issue.
      • Investing in real estate development is not productive.
      • And if the communist party is directing investment rather than those with skin in the game it will also not be productive.(Source: Financial Times)

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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