F modified

The first time I met Jim Flaherty it was during a snowstorm, in a Scarborough hotel, just days after he’d been appointed the federal minister of finance in the winter of 2006. We snared a table in the restaurant and ordered breakfast. For a few minutes we small-talked, watching children launch into the bilious-looking pool below. Everything – air, napkins, waitresses – smelled like chlorine.

I was surprised at two things. Jim ate his breakfast, including bacon and eggs, with his fingers. Second, he asked me for pointers on how he should carry out his new job. Interesting, since I was sitting with a guy who’d been Ontario’s treasurer, a politician for ages, and would soon be the second in command of Canada.

As you might imagine, I was a font of wisdom.

Flipping on my Berry, I asked him to do a podcast with me. Sure, he said. Here’s the unedited interview from February 25, 2006:

Months later our relationship went totally off the rails. As he prepared his first budget I canvassed the country through my political blog and other media, filtered thousands of responses, and in front of reporters presented him with a dozen proposals, including pension-splitting and creation of the TFSA. Big mistake. The minister didn’t want any suggestions. Or public input. Or anything to do with a blogging MP. I could scarcely believe the change.

The passing months hardened attitudes. The prime minister warned me to behave, which meant ceasing to write online; stop talking to people across the country; and no more putting constituents above party. He accused me of being a ‘media star’, and as we sat face-to-face in his office one evening he said: “Journalists make lousy politicians because they think they always need to tell the truth.” Things were not going well.

Soon after, in a closed-door caucus meeting, the PMO orchestrated my ouster. Before that happened, F stood, took to the microphone, looked squarely at me and said, “Garth Turner needs to know he is not leading an alternative government.” And in a few minutes that was quite clear. I was out on my ass.

I mention this in the spirit of full disclosure. Jim Flaherty and I have had our moments. Today, after eight years, he quit. Why would he do that?

One answer might have come during a speech two hours earlier by Stephen Poloz, the boss of the Bank of Canada. It was dismal enough to send the dollar careening lower to the 89-cent level, and flash an alert to trading desks across the nation. “The possibility of secular stagnation needs to be taken seriously,” he said. Stagnation? When the US economy is weeding higher?

And then this report: “Poloz said a combination of low demand and investment, and high savings that have been directed to less productive uses such as housing, may keep growth well below normal levels over a long period and mean low interest rates could prove to be less stimulative than in the past.”

So, six years into ‘Canada’s Economic Action Plan’ we have the possibility of deflation, a dollar which has plunged, no new net job creation for six months, record household debt, economic stagnation and a housing market which cheap rates have turned into an income-sucking gasbag.

And now Poloz has been forced to utter more words of defeat. When asked if he rules out the possibility of having to cut rates further, even though it will create more debt and ultimately more trouble, he said: “If the balance of risks were to shift so that the risks on the downside for inflation were increased, then we would need to reconsider.”

Needless to say, a rate cut would be the ultimate admission the minister of finance failed. Comatose economic growth. Lost jobs. The spectre of deflation. And yet a population sucked into unholy gobs of indebtedness as they use in-the-ditch mortgages to speculate in leveraged real estate. The latter was encouraged, of course, by F’s greatest misstep – giving us 40-year insured mortgages and zero-down financing even as the US housing market imploded.

Today the federal debt is $685 billion. It was $549 billion when Jim and I we ate eggs. He says the budget will be balanced soon, but years of fat deficits have taken a toll. Now, if the Bank of Canada’s right, we may need more stimulus to get out of a new screwup.

Without a doubt, the prime minister knows he needs a reboot. Twenty months remain before the next federal election, and it’s time to bury a strategy that cost the country $140 billion yet no longer works. If the deflation monster isn’t offed soon, there’ll be one mess of angry homeowners in the autumn of 2015. Then again, it’s probably too late.

Farewell, elfin deity. At least one of us is still around to lead the country.

NOTE: thanks to the vigilance of my Webmaster, William Stratas, the audio file above was retrieved tonight from his archives. It was originally broadcast in 2006 on Odeo.com, the precursor of Twitter.