By Tamsin McMahon - Thursday, May 16, 2013 - 0 Comments
Tamsin McMahon explains why there’s a growing chorus of opposition to the fiscal straitjacket
As head of the world’s largest bond fund, Bill Gross has the kind of voice that can move markets. For much of the last few years Gross, who runs the $2-trillion Pacific Investment Management Co., has been warning about the day of reckoning that would befall countries like the U.S. and Britain as they buried themselves under mountains of debt. In 2010, Gross declared British bonds were “sitting on a bed of nitroglycerine” and dumped his entire holdings of U.S. Treasuries with a prediction that soaring government debts would pose the greatest risk to bondholders.
This year, Gross started buying again. His flagship mutual fund is now made up of nearly a third U.S. Treasuries. These days, Gross warns that the biggest problem facing Western economies isn’t the spectre of rising government debt, but that the sweeping budget cuts countries are using to try to repair their balance sheets are killing investor confidence. Governments “have erred in terms of believing that austerity, fiscal austerity in the short-term, is the way to produce real growth,” Gross told the Financial Times last month. “It is not. You’ve got to spend money.”
Gross is part of a growing chorus of opposition to the fiscal straitjacket being imposed on many European countries in the aftermath of the financial crisis. When they were first embraced, such policies seemed like a logical solution to the reckless spending that drove half of Europe to the brink of collapse, a necessary dose of tough medicine to clear the way for future growth. But critics argue that years of tax hikes and spending cuts have instead left countries awash in unemployment, stagnant growth and mounting debt.
By Julian Beltrame - Thursday, December 13, 2012 at 9:17 AM - 0 Comments
OTTAWA – Canada’s largest private sector bank is taking a relatively bullish stance on…
OTTAWA – Canada’s largest private sector bank is taking a relatively bullish stance on the prospects for the economy going forward.
The Royal Bank’s latest quarterly outlook predicts growth will accelerate to 2.4 per cent next year and continue to expand to 2.8 per cent in 2014, following a year that saw the weakest growth since the recession and a virtual stall in the third quarter.
The forecast is slightly rosier than the Bank of Canada’s call for 2.3 and 2.4 per cent growth in the two years, and even more at odds with the consensus forecast of 2.0 in 2013.
The bulwark of the economy continues to be the resource sector — with Alberta and Saskatchewan supporting much of the growth in both years. Continue…
By The Associated Press - Monday, November 12, 2012 at 7:52 AM - 0 Comments
TOKYO – Japan’s economy contracted in the latest quarter, signalling that like Europe it…
TOKYO – Japan’s economy contracted in the latest quarter, signalling that like Europe it may already be in recession, further weighing down world growth.
On an annualized basis, the world’s No. 3 economy shrank 3.5 per cent in the July-September quarter, the government reported Monday. It was in line with gloomy forecasts after Japan’s territorial dispute with China hammered exports that were already weakened by feeble global demand.
The bad news will temper optimism over recoveries in China and the U.S., where some economists are predicting growth will top 3 per cent in the third quarter. China’s painful slowdown likely bottomed out in the third quarter, with recent indicators such as factory production and auto and retail sales showing improvement. And Europe, though it may have turned a corner on its debt crisis as the financial system stabilizes, is forecast to get worse before it gets better.
Japan’s outlook remains bleak, with most economists forecasting a further decline in economic activity for the October-December quarter, which would officially put it in a recession according to the common definition of two consecutive quarters of contraction.
Consumer spending fell 0.5 per cent in the third quarter, as subsidies for auto purchases expired, and corporate capital spending fell 3.2 per cent. Spending on reconstruction from the country’s March 2011 tsunami and nuclear disasters has also weakened.
The drop for the current October-December quarter may not be as severe as that experienced in July-September. Continue…
By John Geddes - Thursday, September 10, 2009 at 5:32 PM - 36 Comments
Well that’s a relief.
Just this morning I was blogging about how very hard it will be, or so I was told by fiscal guru Don Drummond, to wrestle the federal budget back into balance now that it has fallen so deeply into deficit.
But then came this afternoon’s not-for-attribution briefing at the Department of Finance, backing up Jim Flaherty’s big speech out in Victoria, and now I have a whole new perspective.
Not to worry. This will be a breeze.
“Taking into account revision to the private sector outlook, we now forecast a small but manageable deficit in 2014-15 of only $5.2 billion,” Flaherty reassured us in his speech, “—roughly one half of one per cent of our expected GDP.”
By Colin Campbell - Tuesday, January 27, 2009 at 4:26 PM - 1 Comment
Big spending, but a cloudy future still looms
While the government papers the country with stimulus money, exactly what kind of impact it will have is still anyone’s guess. There is no sure bet that the economy will spring back to life anytime soon. Indeed, most economists will admit that precisely how the short term economy reacts to these kinds of measures is, at best, hard to understand and predict. As Finance Minister Flaherty told reporters, “we’re in uncharted waters.”
The government notes that even with billions of dollars being pumped into the economy, the next two years will be bleak. Canada is, after all, somewhat at the mercy of the larger global economy and the speed with which countries like the United States and China can recover.
There remains much doubt as to whether or not people and businesses will start spending and lending like they did before the recession—clearly one of the finance minister’s chief aims. “There is no silver bullet to get capital markets going again,” says Glen Hodgson, chief economist with the Conference Board of Canada.
Another big concern is whether government will be able to break from its deficit spending as quickly and easily as it says it will. This budget plans for a return to a ‘small surplus” by as soon as 2013. “Those are very rosy projections,” says Kevin Gaudet, director of the Canadian Taxpayers Federation. He points out that national debt is projected to return to the same level it was in 1999-2000—$542 billion, up from just over $458 billion this year. That means higher debt interest (38 per cent of government revenue) that will burden future taxpayers.
The government, though, sees a light at the end of the tunnel. If all goes to plan, the stimulus will take affect over the coming two years, at which time the economy will begin to rebound. Canada, it points out, is in a far better position to weather short-term deficits than the United States and some European countries, which already carried big deficits leading into the recession. So as surpluses return, Canada’s new debts could, theoretically, be paid off relatively easily. As Flaherty summed up in his budget speech: “It allows us to meet our short term needs while serving our long term goals.”