The Progressive Economics Forum

The Canadian dollar is again becoming more overvalued. After dipping as low as 92 US cents at the end of October, it rocketed up to 96 US cents so far today.
Meanwhile, the OECD has released another month of purchasing-power data. Although the loonie’s average price on foreign-exchange markets edged up between August and September, its [...]

Debate is heating up about whether the Bank of Canada should or will intervene in currency markets to lower the Canadian dollar (as I have been proposing for three months). Today’s two-cent drop in the exchange rate may indicate that currency traders are anticipating this possibility.
Over at Worthwhile Canadian Initiative, Stephen Gordon objected to recent comments from [...]

Canada likes to think of itself as the country that emerged from the financial crisis squeaky clean. Too bad it is abdicating a leadership role in creating a safer financial system going forward.
The issue is bonuses paid to top executives in the financial sector. It looks like the Europeans and Americans have hammered out an [...]

Last night, I saw the North American premiere of Michael Moore’s latest movie at the Toronto International Film Festival. Ironically, it was held in the Visa Screening Room, which grants preferential access to bearers of Visa Gold, Platinum or Infinite credit cards. (The unwashed masses who use MasterCard, AMEX or lower grades of Visa waited [...]

The conventional wisdom seems to be that the  financial situation of Canadian  households is generally sound and certainly much better than that of our profligate and heavily indebted American neighbours.  The Bank of Canada argued in its end of 2008 Financial System Review that  “(O)verall, despite a modest deterioration, the financial position of the Canadian [...]

Here’s an extremely well-written and cogent commentary on the state of the banking system and the grim consequences  for the rest of us, especially in the UK, by novelist John Lanchester, from the London Review of Books. He’s at work on a book on the same topic

http://www.lrb.co.uk/v31/n10/lanc01_.html

My personal theory as to why the Canadian banking system survived the great global financial crisis relatively unscathed is that calls by the big Canadian banks in the late 1990s to allow mergers were successfully resisted. Had the big banks been allowed to merge to pursue their global ambitions, they would have ramped [...]

Below is a dispatch on bond rating agencies from my former CCPA colleague, Stuart Murray:
Here is some more grist for the blog.  Bloomberg just published a very interesting and informative article on the role of the bond rating agencies in the current meltdown.
http://bloomberg.com/apps/news?pid=20601109&sid=au4oIx.judz4&refer=home
The pitchforks are out for Moody’s and S&P, as they gave glowing [...]

Ah plastic. What’s not to love?

Convenient? Check.
Light in the pocket? Check.
Monthly bill summaries? Check.
Free short-term credit? Check (provided you pay your bills in full, on time).
Benefits (free car rental insurance, points, cash back etc): Check

AND…

Take from the poor and give to the rich? err… wait a minute.

Unfortunately, credit cards — especially those feature-laden cards that [...]

A couple of weeks back, I posted on the topic of “quantitative easing,” the policy of having the central bank aggressively purchase government (and possibly corporate) debt in the open market ostensibly to increase the money supply.
I argued that at best, quantitative easing was a pricing operation that worked at the margin by increasing demand [...]

There has been much talk, of late, about the ineffectiveness of conventional monetary policy — i.e., lowering the target for the overnight interest rate to incite borrowing and hence economic expansion — and the need for monetary authorities to consider something more dramatic, like so-called “quantitative  easing” — the active buying of government debt and [...]

In the last few months, governments here and abroad have made every effort to “turn on the taps” of credit — in Canada, we have more than half a dozen such programs (and counting) under the banner of the EFF (Extraordinary Financing Framework), including (but not limited to):

the IMPP (InsuranceMortgage Purchase Program);
the CSCF (Canadian Secured [...]

It has to be the single most successful lobbying effort in a long time. And no one will notice or care.  In Budget 2007, the Conservatives did something courageous and which tax experts had long called for : they proposed measures that would have denied firms a tax deduction on money borrowed in Canada, invested [...]

The Canadian Bankers’ Association must be happy.  They’ve somehow managed to convince pundits south of the border, and even a few here who really ought to know better, that they’ve somehow been able to weather the economic and financial storm with absolutely no help from the federal government.
The most recent evidence for this position is [...]

In his latest rabble.ca column Duncan Cameron takes on a piece of the federal budget that got little play in the media:
Budget 2009 and the Bay St. bailout
Duncan Cameron
Why did the Liberals support the Conservative budget when the analysis is clear: the Finance Minister ignored the vulnerable, punished women, did not provide a serious stimulus [...]

What a difference a year makes.
A year ago anybody who proposed nationalizing the banks in Canada, the United States or the U.K. would probably have been dismissed as a looney lefty.  Now widescale nationalization of major banks is being raised as a serious alternative in leading articles in the Economist and the New York Times.  [...]

So Industry Minister Tony Clement is now insisting that cuts to workers wages will be a condition of any bail-out package for the auto industry.  This comes after an economic statement that was going to remove the right to strike and legislate public sector wages, and before a budget that could also include wage cuts or constraints for [...]

The Maclean’s cavalry has ridden over the hill to help Bill Robson defend the conventional wisdom against Keynesian fiscal policy.
Here are four problems with Andrew Coyne’s “Special Report” (which I am having trouble finding online) in the latest edition of Maclean’s magazine:
1. Coyne presents as evidence of failed deficit spending a 1991 paper by Christina Romer, [...]

Yesterday, the chief economists of the chartered banks called on the federal government to permanently cut taxes now and balance the budget after the economic crisis by cutting spending. An obvious but unstated implication is a smaller government when the economy recovers. While this outcome would undoubtedly suit the ideological preferences of bank economists, it would [...]

Last week, The Toronto Star ran a front-page story, “Cut tax or risk jobs, banks say,” on the Canadian Bankers Association (CBA) pre-budget submission to Queen’s Park.
While acknowledging the elimination of Ontario’s corporate capital tax and the slashing of federal corporate income taxes, the bankers argue that it is also imperative for Ontario to cut [...]

I was intrigued by what is happening in Iceland, so the following is a piece I’ve written on it.  It has some introductory macro-economics in it, which I think it is good to keep in perspective as we consider the frantic attempts being made to prevent an economic depression.
The economic and financial collapse of 2008 is [...]

The Bank of Canada today announced what appeared to be a dramatic cut (witness the splashy headlines) in the target for the overnight rate — a 50 basis point reduction. Bank of Canada to the rescue? Think again. The move was greeted with yawns from the banking community, which lowered mortgage rates by a mere [...]

The 110 page U.S. Emergency Economic Stabilization Act of 2008 is certainly better than Paulson’s original 3 page proposal, but it falls so far short of what is needed that I wonder whether it will do more harm than good.  
Despite its growth in size, it is still little more than a bail-out-come-swap financing deal for the [...]

Well. Finally. Some clarity. Sort of. Earlier this month, Bank of Canada governor Mark Carney made appearances before the House of Commons Finance Committee and the Senate Banking, Trade and Commerce committee to discuss the Bank’s latest monetary policy report . Transcripts are now available and with a little reading-between-the-lines, they tell us a [...]

As foreshadowed by Andrew, TD Economics has addressed the concerns raised on this blog about its April 15 report by replacing this document with a revised April 16 version. The new endnotes cite the CLC publications and acknowledge that they were “inappropriately left out of the original verson [sic] of the report.”
TD has also amended its [...]

Today, TD Economics released a very interesting paper on the Canadian labour market in 2007. I was pleased to see it highlight many of the same general trends that Andrew and I emphasized: the sharp decline in manufacturing jobs, the increase in part-time work, the rise of self-employment, and wages barely outpacing inflation in Alberta.
Parts [...]

Over the years, federal budget legislation has acquired the feel of U.S. omnibus bills (the Farm Bill is probably the quintessential example). To some extent, this is to be expected. Ever since the “disastrous” Trudeau era, the imperial Department of Finance has not-so-quietly re-asserted its domain over the federal bureaucracy.
One manifestation of Finance’s power [...]

I was in Washington last week for meetings of economists from central trade union bodies, mainly from the OECD countries. While the main purpose of the meetings was to draft the annual union statement to the upcoming G-8 summit in Japan, we had a full day of meetings with researchers and senior officials from the [...]

The New York Times has an article today about how, unlike households, American corporations are piling up cash. 
Unlike most American consumers, whose failure to save has exasperated economists for years, the typical American corporation has increased its savings so sharply that it probably has enough cash on hand to completely pay off its debts.

While I [...]

On Friday, the Finance Minister and the Treasury Secretary signed the Fifth Protocol of the Canada-US Income Tax Convention. The Canadian government lined up several business organizations in advance to provide endorsements, which have dominated the media coverage. One of these organizations, the C. D. Howe Institute, made the case for the amended treaty through [...]