What to do about Household Debt?

It’s a funny old economy we live in. The release of today’s national balance sheet accounts has aroused great concern about the rise of the ratio of household debt to personal disposable income to a new record of 148%. Mark Carney and our banks want – quite rightly – to discourage further borrowing to prevent a disaster for highly leveraged […]

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Lessons from the Eurocrisis: If the fire marshal is saying that you shoulda had a fire detector, it might already be too late.

In the current battle against an all-out conflagration in Euroland, markets are twitchy about European (and other) banks in the event that the firefighters don’t get ahead of the blaze.  If markets lose confidence in those large banks exposed to the problems in Europe (or anywhere else, for that matter), the next chapter in the financial crisis will be a […]

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Rejoice! Dividend Increases Await

An open letter to the world at large: “Bank shareholders rejoice.  Pension funds rebound.  Hark, the Globe and Mail comes bearing good news my brothers and sisters.   Yes, the drums beat steady.  The heart skips irregularly.  The palms sweat profusely.  Because soon, soon, the big banks will engage in our society’s number one passtime.  Well yes, of course, I speak […]

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The Banks and Supplementary Public Pensions

The Canadian Bankers Association are deeply opposed to meddling with a pension system which they say is working just fine.  Which is understandable, albeit self-serving, given their dominance of the high fee mutual fund industry and the significant profits earned on spreads between low interest GICs and bank lending. The banks do just fine out of leaving individuals without decent […]

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Mercurial Productivity

Here is some of what Terry Corcoran wrote in today’s Financial Post about Bank of Canada Governor Mark “Carney’s suggestion that Canadian business has so far ‘disappointed’ because it has failed to revive Canada’s lagging productivity”: Central bankers appear to know many things, and have big fancy computer systems and economic models to tell them what’s happening in an economy […]

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Exchange Rate vs. Inflation Target

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 relative buying power in […]

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Chartered Banks Go Loonie

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 RBC’s Patricia Croft on […]

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Canada Breaks Rank on Banker Bonuses

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 agreement to put some […]

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Capitalism: A Love Story

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 in a separate line.) While […]

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Indebted Canadians

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 household sector remains relatively positive.” […]

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The Financial Crisis

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

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Bank Mergers – The Left was Right

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 up their US and high risk foreign […]

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Bonds, lame bonds

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 ratings for the […]

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Warning: Credit Card Use May be Harmful (to Your Country’s Income Distribution)

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 […]

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Quantitative Easing Redux

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 for a given asset […]

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The Meaning(lessness) of Money — Why “Quantitative Easing” Won’t Do What People Think it Will Do

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 other securities in the open […]

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It’s the Demand-Side Stupid — Why Credit Ain’t Like Water

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 Credit Facility); the […]

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Laughing All the Way to the err…Bank

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 this editorial by Newsweek […]

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Bailouts and Bay St

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 to a […]

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Nationalizing the banks

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.  An on-line debate of […]

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Misaligned Priorities

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 workers. I don’t recall constraints […]

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The Battle for History II: Coyne’s Crisis

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, who is now […]

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Bay Street’s Stimulus Manifesto

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 hardly be a sensible response […]

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Banks Call for Tax Cuts

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 its provincial corporate income […]

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Milton and the Meltdown in Iceland

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 shaping up to be […]

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Monetary Policy: Pushing on a String

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 25 basis points. I’m surprised […]

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