The Progressive Economics Forum

In the context of student protests over Quebec tuition fees, my friend Luan Ngo has just written a very informative blog post on Quebec’s fiscal situation. While I encourage readers to read his full post, I do want to use the present space to make mention of three important points he makes: -On a per [...]

Canada’s business press has recently been filled with speculation that the Bank of Canada may soon hike interest rates based on its somewhat more optimistic economic outlook. But today’s Consumer Price Index report indicates that there is no need to raise interest rates. Statistics Canada reported that both headline and core inflation fell to 1.9% [...]

Statistics Canada reported today that consumer prices jumped in January (by 0.4% or 0.5% seasonally-adjusted), offsetting the drop in December. As a result, the annual inflation rate is now 2.5% and the Bank of Canada’s core inflation rate is 2.1%. Monetary Policy Both measures are well within the central bank’s target range, which should allow [...]

The federal government has failed to take up an historic opportunity to lock in ultra low interest rates on long term Government of Canada bonds. Normally – as outlined in annual debt management reports – the government follows a strategy which is intended to achieve two main goals -  low overall debt servicing costs, and [...]

Less than a month ago, the C. D. Howe Institute released Michael Parkin’s paper, “Overnight Moves: The Bank of Canada Should Start to Raise Interest Rates Now.” The next day, its Monetary Policy Council called on the Bank to increase the overnight interest rate. This call was terrible. The following week, Statistics Canada reported June’s [...]

Jack Layton unveiled the NDP’s policy platform today.  Among other things, it promises to eliminate the deficit (i.e. balance the federal budget) within four years.  I’m not sure it should. Several years back, I had the opportunity to take a directed reading course from John Smithin.  In addition to being a long-time member of the [...]

At long last, the federal government has decided to seriously address the housing price bubble that has increasingly concerned Canadians. On the heels of multiple warnings from the Bank of Canada that Canadians have taken on too much household debt for comfort (we hold the dubious distinction of having the worst consumer debt to financial [...]

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 [...]

What are banks for?  Typically, banks are described as intermediaries that take deposits and lend them out, earning what is called net interest margin on the gap between what is paid on the savings and what is earned on loans.  From where I stand, this description is wrong on three counts. First, it suggests that [...]

It’s always been my understanding that left-of-centre economists, on the whole, like it when real interest rates are low (but not negative).  Among other things, this encourages more companies to borrow (and hire more workers), reduces unemployment, reduces debt-servicing costs for government, and increases the power of labour. In July of this year, I blogged over my [...]

Here’s a new take on bringing economic theory to the masses — a rap battle between Keynes and Hayek. What’s amazing about it is the amount of solid (if not plain nerdy) content this video packs into such a short time. It’s fun to watch for sure (very high production values), but you get that [...]

Nine days ago, I posted about private non-financial corporations accumulating cash rather than investing in Canada. A week later, the Bank of Canada’s Monetary Policy Report (MPR) noted “the relatively high level of liquidity held by the non-financial corporate sector and weak investment” (page 19). By my count, the document expresses concern eight separate times about [...]

There seems to be a consensus that the Bank of Canada will raise its target interest rate tomorrow. I thought that last month’s rate hike was premature, so I see no reason for another hike this month. The argument for higher interest rates is that they are needed to ward off future inflation (even though [...]

Today’s Toronto Star features an op-ed by John Cartwright, President of the Toronto and York Region Labour Council. (I once had the chance to hear John speak at a press conference in Toronto and found him to be an oustanding public speaker.  But I digress…) In the piece, he argues that “we” (I think he means both [...]

Earlier this month, the Bank of Canada raised interest rates ahead of its original schedule to head off inflation. Some commentators are calling for further rate hikes in the near future. But today’s Consumer Price Index suggests that inflation is not an impending threat. Adjusting for seasonal factors, consumer prices were lower in May than [...]

This morning, the Bank of Canada raised its interest-rate target from 0.25% to 0.5%. Yesterday’s robust GDP numbers had the overwhelming majority of economic pundits arguing that it should and would do so. But just one week ago, when the stock market was plummeting due to the Euro crisis, most commentators and headlines suggested that [...]

This morning, Statistics Canada reported that the annual inflation rate rose to 1.8% in April. Inflation and Wages While inflation remains low, it is eating up almost all of the modest wage increases that workers have eked out over the past year. The Labour Force Survey indicates that the average hourly wage rose by 2.0% [...]

Mark Carney saw a bogeyman on Tuesday morning. He was spooked into removing his conditional commitment to hold interest rates, which would otherwise have expired at the end of June. By signalling that it might raise interest rates ahead of schedule, the central bank drove the Canadian dollar from 98 US cents on Monday to [...]

The main question about this morning’s Consumer Price Index is whether it will propel the Canadian dollar to parity with the American dollar. Higher inflation would increase the chances of our central bank raising interest rates sooner rather than later. Higher interest rates would make the loonie a more attractive holding for international financiers. In [...]

Last Saturday the Globe and Mail (November 28, page B1) ran a multi-page spread on national government debt. It was a mish mash of large titles, large numbers and sensational assertions: “A World Awash in Debt”; “Climbing out of this hole won’t be easy”; “the numbers are staggering”, “debt would climb to about 300 percent [...]

For several months, it has been clear that there is no near-term threat of inflation and that the economy needs all the stimulus it can get. In this context, the Bank of Canada should cut interest rates as far as possible. Since January, I have been calling for a target interest rate of zero percent. [...]

The Consumer Price Index decline in March confirms that deflation remains a greater risk than rising inflation. The annual inflation rate fell to 1.2% nationally and turned negative in one province, Prince Edward Island. The recent revelation of the first annual decline in American consumer prices in half a century underscores concerns about deflation. While [...]

Having dropped its overnight interest rate to 0.5%, the Bank of England also announced a package of quantitative easing, of some £75 to 150 billion worth: It will create £75bn and use it to buy government bonds (gilts) and corporate debt over the next three months to boost the flow of money in the economy. [...]

Kudos to the Bank of Canada for significantly reducing its target interest rate from 1% to 0.5%. A month ago, it took the position that already-announced monetary and fiscal stimulus was sufficient to propel a swift economic recovery later this year. Today, in both word and deed, it acknowledged worsening economic conditions and the need [...]

Numbers Worse than Official Expectations Real GDP dropped by 1% in December 2008, as large a monthly decline as in the August 2003 blackout. The difference is that, whereas August 2003 was an aberration, December 2008 continues a worsening trend. During 2008 as a whole, the economy eked out 0.5% growth, which falls short of [...]

Consumer prices fell by 0.1% between December 2008 and January 2009, reducing the annual inflation rate to 1.1%. Prince Edward Island joined the other two maritime provinces in having the dubious distinction of a negative inflation rate. This decline mainly reflected falling gasoline prices. Lower fuel costs were partly offset by higher mortgage-interest costs due [...]

The Bank of Canada did not cut its target interest rate enough this morning, leaving it a full percentage point above the US central bank rate. As I argued last week, the Bank of Canada should have matched the American Federal Reserve and cut to zero. Astonishingly, the Bank of Canada’s press release acknowledges that [...]

The Bank of Canada should announce a target interest rate of 0% on Tuesday. This move would match the action taken by the US Federal Reserve a month ago. Recent experience suggests that the chartered banks would not pass along the entire cut. But such a dramatic announcement by the Bank of Canada would place strong pressure on [...]

The Bank of Canada got it right this morning in cutting the key interest rate by 0.75%. This bold action makes up for the timidity of cutting by only 0.25% last time. The central bank should be applauded for (finally) recognizing the severity of the economic crisis and going further than recommended by the C. D. [...]

It strikes me that progressive economists should talk less about the need for immediate fiscal stimulus, and more about the case for an extended period of public investment led growth. Of course, as we slide into recession, Canadian governments will likely shift from surpluses to deficits simply by not cutting spending as much as revenues [...]