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The Progressive Economics Forum

Archive for August, 2007

Exchange Rates as Policy Target: The Japanese Case

How do we explain the behaviour of the Japanese yen — which has not only avoided the major appreciation (against the U.S. dollar) that other major currencies have experienced (most acutely including Canada’s), but is actually down by over 15% since 2005 (despite Wall Street’s financial wobbles)? Japan has the world’s third largest trade surplus, […]

Cameron on Stelco

The following column by Duncan Cameron is from rabble.ca: With the takeover of Stelco by U.S. Steel, Canada loses its last domestically owned steel producer. Despite urgings from the Steelworkers, the Canadian Autoworkers, and the Canadian Labour Congress, our provincial and federal governments have been unwilling to adopt a strategy to provide national direction to natural […]

2007 Economic Outlook and Policy Forum

I have just returned from the annual conference of the Canadian Association for Business Economics in Kingston. On Monday evening, we heard from Pierre Duguay, a Deputy Governor of the Bank of Canada. Without specifically mentioning Jim’s Globe column, he suggested that some people mistook the Bank’s intervention in financial markets as a deviation from […]

Exchange Rate Appreciation and Manufacturing Investment

An interesting article just published by my friend Robert Blecker (American University) reinforces our concerns regarding the long-run impact of the loonie’s recent appreciation on the size and competitiveness of Canada’s manufacturing industry. Here’s the formal citation & abstract: The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time-Series Analysis Author: Robert A. […]

The Dangerous Shortage of Government Bonds

Here’s an interesting sidebar to the current hissy fit roiling financial markets:  It has turned out that Canada’s public debt is now dangerously low. Huh? We all know that where debt is concerned, private is good and public is bad.  That’s why we cheer on consumers as they pump up their indebtedness to a record ratio […]

Free University Tuition – A radical position?

A friend just pointed a UN treaty (the International Covenant on Economic, social and cultural rights), to which Canada adhered in 1976, which states that signing parties should strive to tend towards free tuition for post-secondary education. It is in fact one of the “nine core international human rights treaty” (dixit UN website). The relevant […]

Levitt’s Been Thunderstruck: Is Economics on the Highway to Hell?

A couple of months ago, Robert Oxoby of the University of Calgary posted a joke paper comparing AC/DC’s original lead signer, Bon Scott, with his successor, Brian Johnson. The paper presented the results of an experiment in which test subjects responded less “rationally” to financial incentives in an “ultimatum game” when listening to Scott’s “It’s […]

Danny Williams and Oil Royalties

In April 2006, Newfoundland Premier Danny Williams walked away from proposed Hebron development because the multinational oil companies were not offering sufficient benefits for his province. The national media and federal government heaped scorn on this decision. A couple of days ago, Williams secured a new deal that gives the province a 4.9% equity stake […]

Been There, Done That, Got the T-Shirt

Forgive me for greeting the latest financial meltdown with a big yawn. We are facing a combination of two textbook cycles, neatly overlaying each other: 1. Classic speculative cycle:  something catches the eye of speculators, they drive it up in price in search of (utterly unproductive) speculative profits, the rising price produces a self-fueling speculative […]

Bank of Canada Rides Over the Hill

Nice to see the Bank of Canada swinging into action the last couple of weeks, pumping many billions of dollars of liquidity into financial markets to ease the sub-prime-inspired credit crunch, and making very hard-nosed statements about its intention to “defend” its desired interest rate regardless of where the markets want to go. Now that’s […]

Credit Crunch

Whereas Jim Stanford’s latest Globe column argues that central banks should be as willing to intervene on behalf of manufacturing as on behalf of hedge funds, Andrew Coyne’s column in today’s National Post argues that central banks should intervene as little as possible and not bail anyone out. At least Coyne’s position is consistent and […]

Competitiveness vs. Comparative Advantage

This post is in response to the following excellent comment from Stephen Moore, the man who will trounce Ralph Goodale in the next federal election (or at least do better than I did): April 2007 testimony before the parliamentary committee on International Trade saw Industry Canada, DFAIT reps and others stress the importance of the […]

Ontario’s Income and Property Taxes

To put some figures on yesterday’s commentary about the social-service download to municipalities and low provincial-income taxes, I checked the latest Equalization tables (which are publicly available from Finance Canada). In 2005/06, Ontario collected $22 billion of personal-income taxes. At national-average rates – an average dragged down by low-tax Alberta and by Ontario itself – […]

Too Little, Too Late

Premier McGuinty has pledged to relieve Ontario municipalities of $1 billion in disability-support payments and prescription-drug benefits if his government is re-elected. Municipalities will continue to pay for a further $3 billion of provincial social-service programs. During the Great Depression, Canada’s patchwork system of municipal relief proved totally inadequate. Subsequently, provincial governments established social-welfare programs and uploaded […]

The Big One?

There is a point in a good party when you decide either to stop and get home at a decent hour, or you throw caution to the wind and decide that there is no time like the present. In the current mess of the financial markets, how is it possible that any sane banker would […]

The Minister Responds

Today’s National Post includes a letter from BC’s Minister of Economic Development, Colin Hansen, in response to my TILMA op-ed. It is great that the Post has facilitated some debate on this important issue and that the Government of BC feels compelled to participate in this debate. The fundamental point of disagreement is whether TILMA […]

Drummond on Corporate Taxes and Investment

For years, Don Drummond of TD Bank has publicly observed that business investment in Canada is lagging far behind soaring profits and called for further corporate-tax cuts to spur investment. He never seemed to perceive a contradiction between the fact that corporations are not reinvesting their record-high after-tax profits and the claim that even higher after-tax profits […]

The National Post on TILMA

On Friday, the National Post’s lead editorial suggested that inter-provincial trade barriers are significant enough to validate the Quebec-separatist view that “Canada is not a real country.” The following edited response from yours truly is printed as a “Counterpoint” in today’s edition. UPDATE (August 16): BC’s Minister of Economic Development has responded to my op-ed. […]

The Other National Newspapers on TILMA

Following the National Post’s complete endorsement of TILMA on Friday, The Globe and Mail and Toronto Star ran columns on Saturday that were relatively skeptical of this agreement. As both columns note, the joint statement released by the Premiers in Moncton leaves the door open to making the Agreement on Internal Trade more like TILMA […]

Hedge funds and bailouts

The term “hedge fund” sounds so innocent because hedging is protecting against risk. But hedge funds are precisely the opposite: largely unregulated, they are pools where millionaires put their cash, to then have it leverage (borrow) lots more money, in order to make speculative bets in the financial markets in a way that makes the […]

London’s Super-Rich

The following passage is from “Why England is Rotting” in the June 11 issue of Maclean’s: London’s role as a financial centre on its way to eclipsing New York City has provided a vision of prosperity which, it is assumed, trickles down to the population at large.  But it is a city in which increasingly only […]

Herding cats: climate change edition

The premiers cannot agree on how to cooperate to reduce greenhouse gas emissions. One might think that ten middle-aged white men might have more in common, but no. In all cases, vested economic interests trump climate goals, even though, as the Stern review points out, the cost of doing nothing will be much greater than […]

Air travel and forest offsets

Moonlighting from his CCPA gig, Ben Parfitt has this to say about airlines, climate change, forests and offsets in a feature article for the Georgia Straight: The airline industry, among others, is banking heavily on offsets taking flight. So, too, it appears, is the British Columbia government. No fewer than three people currently report directly […]

Estimating Dr. Day’s conflict of interest

Sharpen your pencils, open your spreadsheets, everyone. It’s contest time! Following up on a recent post noting the major financial conflict of interest of the Canadian Medical Association calling for more private health care options, we can expect more ideological rhetoric to come in the next year as new CMA President Brian Day takes the […]

Wage and productivity growth debate (en francais)

PEF Steering Committee member Mathieu Dufour passed along this message: For the French readers amongst you, there is a debate currently going on in Le Devoir about the disconnect between wage and productivity growth. I first wrote an Op-Ed stating said disconnect and asking how long we were going to ask people to increase their […]

Financial Meltdown

As background to the “flight from risk” which underpins the growing financial crisis in the US and Europe, see the latest annual report from the Bank for International Settlements published in June, especially the chapter on financial markets in the advanced industrial countries. The BIS is a kind of central bank for central banks. http://www.bis.org/publ/annualreport.htm […]

An Ambivalent Labour Force Survey

My take on today’s release follows: Job Numbers As Statistics Canada noted, “Employment was little changed in July.” Employment growth in Alberta and Ontario was largely offset by job losses in the other eight provinces. As a result, the Canadian labour market created 11,300 new positions in July, far fewer than in previous months. Some commentators […]

The Premiers’ Meeting and Internal Trade

Last week, while I was out of the country and away from this blog, the Government of Saskatchewan formally rejected TILMA. The news release announcing this decision quite reasonably unveils working groups to address the few inter-provincial problems that may exist, but strangely refrains from outlining any of the strong arguments against TILMA. However, media […]

The secrecy of the SPP

Linda McQuaig takes on the Security and Prosperity Partnership: Since the SPP initiative was officially launched in March 2005, the public has been effectively shut out of the process. There’s been little awareness, let alone public debate, about what’s going on. The key advisory body in the SPP is an all business group called the […]

Alberta Distortions

I am big on big investment spending.  I’ve argued for years that weak business investment undermines our job creation, our productivity, our incomes, and our competitiveness.  I’ve proposed lots of policy measures to stimulate more investment spending: public as well as private. But what’s happening in northern Alberta is enough to nauseate even a Soviet-esque […]