Bail-out to where?

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  financial sector.  The question […]

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“Severe and Unusual Stress” — A Definition In Search of A Situation

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 lot, I think, about the true […]

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Revised TD Bank Report

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 figures. The April 15 […]

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TD Bank Echos CLC (Updated)

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 of the TD paper […]

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The Budget and the Bank

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 has been the increasing tendency […]

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Corporations piling up cash and surpluses while household deficits grow

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 haven’t looked at […]

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Canada-US Tax Treaty

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 an op-ed in Saturday’s Financial […]

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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 monetary policy’s exclusive focus on […]

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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 bubble, and then something happens […]

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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 my kind of central bank. […]

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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 avoids the double standard identified […]

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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 would boost investment. In a […]

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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 While cautiously stated, it’s not […]

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No Increase in Consumer Prices

A month ago, I noted that if the Core Consumer Price Index remained unchanged from May to June 2007, the annual core-inflation rate would jump to 2.5% because this Index had fallen from May to June 2006. Today’s release from Statistics Canada reveals that this is exactly what happened. Since the monthly Index remained constant at 109.9, the annual rate […]

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CIBC on Employment Quality

Benjamin Tal of CIBC produces a quarterly Canadian Employment Quality Index. The releases from today (July 11) and February 11 provide amazingly different spins on amazingly similar figures. The basic facts are virtually unchanged: - Most new employment has been self-employment as opposed to jobs paid by an employer. – Most new employment has been full-time as opposed to part-time. – […]

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Banks on the Labour Force Survey

When the Canadian Labour Congress comments on the Labour Force Survey, the interests we represent and the policy agenda we hope to advance is quite explicit. When banks comment, they are generally treated as neutral observers. However, banks are powerful economic actors with major economic interests. In April, full-time, paid jobs disappeared, unemployment rose and people withdrew from the labour […]

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52,000 Manufacturing Jobs Lost Since January

Today’s Labour Force Survey indicates that Canada lost 28,000 paid positions in April and that more people are unemployed. But Statistics Canada’s release began as follows: Estimates from Statistics Canada’s Labour Force Survey (LFS) showed little overall change in employment in April. This follows strong employment gains since September 2006. Meanwhile, the unemployment rate remained at an historic 33-year low […]

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Palley Targets Inflation Targeting

Other than the occasional call for Canada to adopt the US dollar, discussion of Canadian monetary policy mainly consists of the C. D. Howe Institute and the Bank of Canada praising inflation targeting. As Thomas Palley reminds us, another perspective exists: The Case Against Inflation Targeting A few months ago the Federal Reserve seemed to be inexorably moving toward adopting […]

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A critical look at microcredit

So why is it that microcredit is as celebrated on the right as the left? wondered someone in the comments to a recent post on Muhammad Yunus, winner of the Nobel Peace Prize. Certainly, it has appeal in elite circles because it reinforces the storyline of hard-working people pulling themselves up by their bootstraps through grit and entrepreneurship. Focus on […]

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For whom the Nobel tolls (a real one)

Some econo-bloggers have been having fun with the fact that Muhammad Yunus, founder of the Grameen Bank and father of micro-credit, won the Nobel Peace Prize. Yunus, an economist who would not be shortlisted for the (kind of) Nobel Prize in Economics, wins a real one instead. I saw Yunus speak in Ottawa over ten years ago, and he was […]

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Bubble seeks air

This makes me nervous: Mortgages getting risky: CIBC HEATHER SCOFFIELD Globe and Mail Update TORONTO — Household credit is stable, but that statement masks the growing popularity of untraditional and risky mortgages, a new study by CIBC World Markets says. Household credit is growing steadily at an 11-per-cent annual pace, pushed by a 10.9-per-cent rise in residential mortgages for year […]

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Bank mergers coming soon?

With a Harper government, I had a sinking feeling that bank mergers were going to come up again. We grant chartered banks a huge privilege – the expansion of credit, or the creation of money, an essential utility-like function of a modern economy – that leads to enormous profits on the part of the banks. And yet we are repeatedly […]

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