By Stephen Gordon - Friday, May 3, 2013 - 0 Comments
It is frequently remarked that Canada fared “relatively” well during the economic and financial crisis. And it is also frequently remarked that current and projected short-term Canadian economic growth rates are relatively weak. Both statements are true. But it’s important to make the distinction between the level of economic activity and its growth rate. An economy that is still climbing out of recession has a lot more room to grow than an economy that has already fully recovered.
We’re used to measuring ourselves up against the U.S. economy, and sometimes the other G7 countries, but what about a broader comparison?
By The Associated Press - Thursday, March 7, 2013 at 9:25 PM - 0 Comments
WASHINGTON – All but one of the nation’s 18 largest banks are more prepared…
WASHINGTON – All but one of the nation’s 18 largest banks are more prepared to withstand a severe U.S. recession and a global downturn than at any time since the 2008 financial crisis, the Federal Reserve says.
Results of the Fed’s annual “stress tests” showed Thursday that as a group, the 18 banks hold fewer bad loans compared with last year, thanks to a stronger economy. The Fed will announce next week whether it will approve the banks’ plans to increase dividends or repurchase shares.
The Fed’s data show that one of the banks, Ally Financial Inc., would have a much lower capital buffer against losses than the others under the most severe scenario. Ally’s projected capital level is below the minimum that the Fed considers a bank would need to survive a severe recession.
But Fed officials wouldn’t say whether that means it would reject Ally’s request for issuing dividends or buying back shares, if Ally were to make one.
Last year, government-owned Ally — the former financial arm of General Motors — was the worst-performing bank in the Fed’s stress tests. It was one of four banks that failed the tests and were not allowed to raise their dividends or repurchase shares. The others were Citigroup Inc., SunTrust Banks Inc. and MetLife Inc., which has since sold its banking operations and is no longer tested.
Citigroup objected to any characterization that it had failed the 2012 test. It said it had enough capital to withstand the Fed’s crisis scenario, just not enough to do that and raise its dividend at the same time.
In a statement, Ally countered that it is well-capitalized and called the Fed’s analysis for calculating the bank’s potential losses “fundamentally flawed.”
“While Ally appreciates the Fed’s role in ensuring that financial institutions have adequate capital during stressed situations, using flawed assumptions could have lasting adverse impacts on the economy, including ultimately causing banks to reduce certain key lending categories,” the bank said.
The 18 banks were tested on how they would withstand severe downturns not only in the United States but also in Europe and in Asian countries including China and Japan.
Under the stress tests’ most severe scenario, the United States would undergo a recession in which unemployment would reach nearly 12 per cent, stocks would lose half their value and home prices would plunge 20 per cent.
The Fed said that under that crisis scenario, the 18 banks would suffer combined losses of $462 billion through the fourth quarter of 2014.
The Fed has conducted stress tests of the largest banks every year since 2009 in the aftermath of the financial crisis.
Next Thursday, the Fed will announce whether it has approved each bank’s request, if one has been made, to raise dividends for its shareholders. Its decisions will be based on how each bank would fare in a severe recession if it increased its dividends.
“The stress tests are a tool to gauge the resiliency of the financial sector,” Daniel Tarullo, a Fed governor, said in a statement.
Tarullo said significant increases in the amount and quality of banks’ capital cushions against risk “help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty.”
The 18 banks, along with hundreds of other U.S. banks, received federal bailouts during the financial crisis that struck in 2008 and triggered the worst economic downturn since the Great Depression of the 1930s. The banking industry has been recovering steadily since then, with overall profits rising and banks starting to lend more freely.
Many longtime bank shareholders are unhappy with their investments, because most banks’ stock prices still have yet to return to pre-crisis levels. But raising dividends costs a bank cash. The government doesn’t want banks to deplete their capital reserves so much that they’d become vulnerable to another recession.
Citigroup and Bank of America Corp. are each still paying shareholders only a token dividend of 1 penny, because the government hasn’t allowed them to raise it.
Citigroup said Thursday that it has asked the Fed for permission to buy back $1.2 billion of its stock. The bank did not ask to raise its dividend.
Bank of America, Morgan Stanley, Wells Fargo & Co., Goldman Sachs Group Inc., BB&T Corp., JP Morgan Chase & Co., and U.S. Bancorp released the results of their own stress tests, using the scenario that the Fed had envisioned. They all predicted that their capital levels would be higher than the Fed’s estimate.
Citigroup, by contrast, predicted that its capital level would be slightly lower than the Fed’s estimate, though still meeting regulatory requirements.
Wells Fargo noted that the Fed doesn’t fully disclose its models and methodologies for the stress tests. “As a result, we are unable to explain the basis for any variances between our projections and the projections of the Federal Reserve,” the bank said.
Some experts say they aren’t sure that even a thumb’s-up from the stress tests carries much significance. The industry is no longer in dire shape, but it’s still under pressure. Uncertain legal fees and new regulations are restraining profits and revenue, and demand for loans has been generally lacklustre.
Chris Whalen, a New York-based analyst, argued that the Fed appears too eager for banks to return capital to shareholders. He said the industry still faces problems.
“Weak profitability and slow revenue growth should be the key areas of concern in the (stress test) analysis, but there will be no discussion of these factors,” Whalen wrote in a post shortly before the results were released.
The other banks tested were American Express Co., Bank of New York Mellon Corp., Capital One Financial Corp., Fifth Third Bancorp, KeyCorp, PNC Financial Services Group Inc., Regions Financial Corp. and State Street Corp.
By Erica Alini - Sunday, February 10, 2013 at 7:00 AM - 0 Comments
California got hammered by the recession. Now Gov. Jerry Brown has it roaring back — with help from America’s biggest oil field
Gabe Essoe is back to his busy self. “It’s eight days a week,” says the 67-year-old real estate broker from Pittsburg, Calif., a Bay Area town of 63,000 northeast of San Francisco. This year, he says, is going to be a good one. “I feel very optimistic in 2013.” Among Californians, Essoe is far from alone, something no one would have believed possible even two years ago.
Few states fell further than California during the great recession. The Golden State’s housing market collapsed amid a storm of foreclosures, but it wasn’t just housing. Public finances—both at the state and municipal level—were a mess. A host of cities, from Vallejo to Stockton to San Bernardino, unable to pay their bills, gave up and declared bankruptcy. But now, against all odds, California is racing back, golden, once again. California is adding jobs faster than any other state. And the state that in 2011 faced a budget hole of US$27 billion, announced in January that it will wipe out its deficit this year. Silicon Valley is booming, with twentysomething entrepreneurs snapping up vertiginously priced Bay Area property. Continue…
By Stephen Gordon - Thursday, November 29, 2012 at 2:11 PM - 0 Comments
The financial crisis of 2008-09 and the recession it caused didn’t do much for the reputations of many policy makers around the world, but they’ve been quite good for the careers of Stephen Harper and Mark Carney:
- Harper finally won a majority in 2011, and continues to enjoy high ratings in the polls for perceived competence. There are many dimensions where he scores much less well, but my understanding of the Conventional Wisdom is that if Harper can retain that reputation for competence when it comes to managing the economy, he will be tough to beat in 2015.
- Carney earned the reputation of being the best central banker in the world, at least in the estimation of the U.K. chancellor of the exchequer, who finally managed to persuade Carney to accept the appointment as governor of the Bank of England this week.
It is now commonplace to note that Canada’s recession was shorter and milder than those in the U.S. and Europe (Australia’s connections to the U.S. and Europe are weaker than Canada’s and it did even better) and these two men have either taken or been given credit for Canada’s performance. But are these reputations the product of making good choices or just sheer luck? As always, a bit of both.
I’m going to start with a short summary of what happened in Canada during the crisis, if for no other reason that I’ve never tried writing one before.
By Aaron Wherry - Monday, November 5, 2012 at 1:26 PM - 0 Comments
Kevin Carmichael checks one of the Harper government’s favourite rallying cries.
While a valid bragging point in the aftermath of the financial crisis, Canada no longer is an economic standout among its peers. The International Monetary Fund identifies 35 countries as “advanced economies,” ranging from Australia to the United States. According to the IMF, Canada’s gross domestic product will expand by a little less than 2 per cent in 2013. That bests only European economies coping with the recession in the euro zone. Australia, Estonia, Hong Kong, Iceland, Israel, South Korea, Malta, New Zealand, Norway, Singapore, the Slovak Republic, Sweden, Taiwan, and the U.S. all are forecast by the IMF to outpace Canada next year…
Mr. Flaherty can accurately say that Canada’s growth is projected to be strong compared to a group of recessionary European countries. He can no longer accurately put on positive spin on Canada’s mediocre economic performance by seeking out favourable international comparisons. At best, Canada is in the middle of the pack.
By Lyndsie Bourgon - Thursday, August 16, 2012 at 2:37 PM - 0 Comments
Even in the best of times, Britons’ feelings for the European Union were lukewarm at most. In the worst of times — and things are looking remarkably bleak on both side of the English Channel – the treaty-sanctioned ties that link Britain to Brussels, it seems, are beginning to feel like a straight jacket.
And as in many strained relationships, even the little things can set off a scene. That’s what just happened last week. The most recent outburst of British frustration at the ways of the Continent wasn’t about Greece’s fiscal profligacy or Germany’s inertia. It was about a piece of labour legislation in Brussels.
“New EU employment ruling could stifle British business” warned the Telegraph last week about a new proposal that would require businesses to measure employee happiness before and after a layoff. The rules, drafted by Spanish MEP Alejandro Cercas, would make it mandatory for workplaces across the Union to assess mental health after redundancy. The results of such tests would then be used to determine if an employer should provide retraining, interview coaching and general job-seeking counsel to former employees.
Never mind that the directive is still moving through the legislative process and may never see the light of day, British businesses are up in arms. The idea is “burdensome” and “ridiculous,” a rep for manufacturers’ organization EEF told the Telegraph. It is “the last thing the British economy needs,” Tory MP David Nuttall echoed on the Daily Mail.
By macleans.ca - Monday, July 9, 2012 at 1:10 PM - 0 Comments
Poverty down in Canada, Brodeur re-signs with Devils, and drownings mar Canada Day
Taking care of ourselves
Add another star to Canada’s exceptional economic performance during the Great Recession: poverty ﬁgures have actually improved. According to recent income data released by Statistics Canada, the percentage of Canadians living in poverty continues to fall—despite a global financial crisis—hitting an all-time low of nine per cent in 2010. That’s down from 12.5 per cent a decade ago. Single mothers, typically the most prone to poverty, actually reported a slight increase in after-tax income in 2010 compared to the previous year, thanks to generous government transfers and higher employment earnings.
Moving right along
The U.S. Supreme Court’s approval of so-called “Obamacare” is a crucial step forward in America’s ceaseless battle over health care. Lack of basic medical coverage for 30 million Americans has fed into the country’s overall sense of economic insecurity and, flawed though this plan may be, it is time for the U.S. to join the rest of the developed world in ensuring basic health care for all of its citizens. If Mitt Romney, the presumptive Republican nominee, chooses to make it a ballot question in this fall’s presidential campaign, so much the better: elections are precisely the venue for issues of this magnitude.
By Aaron Wherry - Thursday, June 28, 2012 at 3:46 PM - 0 Comments
The Conservative party has redesigned its website and added a section on the history of “Canada’s Founding Party.” In addition to claiming Confederation (achieved when the province of Canada was governed by the Great Coalition) and women’s suffrage as “conservative achievements,” the official party story generally covers more recent events, such as the following.
On January 23rd, 2006, Canadians voted for change. Two weeks later, Prime Minister Stephen Harper and his cabinet were sworn in to lead the new Government of Canada. When the global economic recession threatened, the Harper Government took timely and prudent action to ensure Canada remained on track for long-term stability. And when faced with another general election in October 2008, Canadians trusted a Conservative Government to continue leading Canada on a path for economic success.
The sequencing of these last two sentences is interesting because it was actually during the September and October 2008 campaign that Mr. Harper said it was his belief that “if we were going to have some sort of big crash or recession, we probably would have had it by now” and that “the only way there is going to be a recession” is if the Liberal party were elected to form government.
By Aaron Wherry - Friday, June 8, 2012 at 2:41 PM - 0 Comments
Before QP yesterday, the Conservatives used four members’ statements—from Shelly Glover, Randy Hoback, Bernard Trottier and Pierre Poilievre—to lament that Thomas Mulcair would prefer to bail out the “sumptuous European welfare state countries and the wealthy bankers that lend to them”—a “reckless” plan that would apparently “kill jobs and put a huge burden on the economy here at home.” Finance Minister Jim Flaherty then criticized Mr. Mulcair during QP, in response to questions from the NDP leader, and after QP, in a scrum with reporters. Today, another members’ statement—Mr. Poilievre, again—was dedicated to bemoaning it all.
All of this seems to have been inspired by the leader of the opposition’s questions in the House on Wednesday. Mr. Mulcair noted that the Prime Minister had, in an interview with the CBC, expressed concern about the global impacts of the European economic situation, but that, in April, Mr. Flaherty had refused to go along with other G20 countries in contributing to an IMF initiative to backstop Europe. The following is the closest Mr. Mulcair comes to endorsing a Canadian contribution to the IMF’s fund.
Mr. Speaker, the Prime Minister pretends to be concerned now, but two months ago in Washington the Conservatives were singing a different tune. At the G20 meeting in April the Minister of Finance led the effort to block an international plan to resolve the European economic crisis. He told European countries “to step up to the plate” and fix the problem on their own, as if our fate were not intimately connected to theirs, and he gets applause for that from the peanut gallery. When will the Conservatives stop lecturing European countries and put forward a real plan to protect and create jobs here in Canada?
Of the developed economies, only Canada and the United States are declining to participate. Mr. Flaherty’s concerns are, at least partially, related to the IMF’s governance structure. Germany has publicly registered its concerns with Canada’s reluctance.
By Aaron Wherry - Wednesday, June 6, 2012 at 8:05 AM - 0 Comments
How I would phrase it is that fiscal discipline and growth are not only both necessary, they are both essential. If you take those two phrases and say by fiscal discipline you mean cutting, and by growth you mean spending, then yes they are incompatible. But I don’t think it’s that simple of equation. I do think that all economies need a sense of fiscal discipline especially over the midterm and if you are in the middle of a debt crisis you can’t borrow your way out of a debt crisis. That’s logically impossible. But at the same time you do need, as we are doing in Canada, you need to undertake a range of measures, not just fiscal discipline, to ensure growth. We have an ambitious trade agenda, we are revamping our science and technology policies to get better results, as you know we’re doing labor market reforms, were doing regulatory reforms. These are all things that need to be done to increase the growth capacity of our economy. Where I occasionally get troubled is when I hear some leaders who are in the midst of, let’s face it – very, very difficult fiscal and public opinion situations, things that are nowhere close to the kind of situation we experience, when I hear some leaders talking that way, and they say growth, it sounds like they are looking for some easy way to deal with the problem when in fact the changes you have to make in terms of growth policies are often politically very challenging as well.
By Aaron Wherry - Wednesday, May 2, 2012 at 8:45 AM - 0 Comments
Since 2008, and throughout the European debt crisis, I have been telling my international counterparts that it is important to overwhelm the problem and get ahead of the markets. This is what the United States did in 2008, and it is what Canada did in 2009 by deploying a fiscal stimulus of roughly 4 per cent of GDP over two years in response to a crisis originating outside our borders. These bold actions paid off. Rating agencies have reaffirmed Canada’s strong AAA credit rating, and we are now on track to return to balanced budgets over the medium term. By contrast, actions taken by the eurozone have fallen short of overwhelming the problem. The “muddle through” approach has led to an erosion of confidence in public leadership and too many missed opportunities.
Ultimately, the adequacy of the actions taken will be judged by the markets. Repeated expressions of confidence by politicians are futile if the markets continue to cast their vote of non-confidence. The markets’ confidence in political leadership will only be restored when it is clear that politicians are willing to see the full scope of the problem, to focus on the key issues instead of pursuing sideshows such as the financial transactions tax, and to set out and implement a plan for tackling these issues.
By Leah McLaren - Friday, March 30, 2012 at 10:31 AM - 0 Comments
With retailers moving to the internet, town centres are suffering. But some see a chance for revitalization.
Rub-a-dub-dub / three men in a tub / And who do you think they’d be? / The butcher, the baker, the candlestick maker / All put out to sea!
So goes the classic nursery rhyme, and what a prescient little ditty it’s proved to be. For years now, there’s been despairing talk of the death of the high street in Britain—sad news for a nation that’s historically prided itself on charming villages furnished with independent booksellers, local florists and quaint teashops draped in bunting. But the truth is, apart from a handful of twee postcard tourist towns, the storybook British high street went the way of the dodo years ago. Over the past couple of decades most British town centres have evolved into a parade of the same mobile phone providers, pharmacies, chain grocers and charity shops, so that if you were to close your eyes on the main drag of Bristol and open them again in Blackpool, you might not, for the first few seconds, notice you were anywhere different at all.
Now, however, even these much-criticized “clone towns” are under threat. According to a new report by retail analysts at Deloitte, as many as four out of 10 British shops are expected to close in the next five years, part of a trend that sees retailers moving off the street and online, as Internet shopping gains popularity and renders hands-on browsing virtually obsolete.
By Chris Sorensen - Thursday, February 16, 2012 at 8:40 AM - 0 Comments
Thanks to unorthodox measures, the economy is bouncing back
As of this week, more than 27,000 Icelanders have signed a petition urging outgoing four-term President Ólafur Grímsson (who famously stood in the way of the U.K. and Netherlands collecting billions owed by one of Iceland’s failed banks) to seek an unusual ﬁfth term in ofﬁce—not an insigniﬁcant number in a country of just 320,000. And why not? Just over three years after Iceland’s economy imploded, the country is already showing early signs of recovery while the U.S. economy stagnates and countries in the EU grapple with painful austerity measures and a mounting debt crisis that threatens to rip the eurozone apart.
The remarkable turn of events in Iceland has, not surprisingly, caused some to wonder whether the country’s unorthodox handling of the 2008 ﬁnancial crisis—refusing to bail out the banks and jealously guarding and even expanding social programs—represents a model for other countries faced with a similar calamity in the future. The International Monetary Fund, which lent Iceland US$2.1 billion, even co-hosted a conference with the government on the subject in Reykjavik last fall. “The suffering that so many of our citizens are facing is unnecessary,” wrote Nobel prize-winning economist Paul Krugman, who was one of the conference’s invited guests. “If this is a time of incredible pain and a much harsher society, that was a choice. It didn’t and doesn’t have to be this way.” Or does it?
There’s no question that Iceland has come a long way in a very short period of time. GDP is up three per cent, unemployment is below seven per cent (though still high by Iceland’s standards) and, last year, the government returned to the international ﬁnancial markets with a US$1-billion sale of sovereign bonds. It’s a far cry from just over three years ago when normally peaceful Icelanders were rioting in the streets—the end result of efforts to remake the island’s economy into one that was built on ﬁnancial wizardry instead of ﬁsheries. Privatized in 2000, Iceland’s banks relied on their somewhat unknown, though not necessarily bad, reputation and high interest rates to sell foreign bonds, and were then tapped for loans by ambitious local businessmen who bought huge stakes in overseas assets. As the industry took off, Icelanders ﬂocked to work in Reykjavik’s outsized ﬁnancial district and drove Land Rovers through the streets. Several banks also began offering savings accounts to foreign depositors, a move that would later come back to haunt the tiny country. By the time the credit crunch hit, Iceland’s three largest banks held debts worth a staggering 10 times the GDP. The fallout wasn’t pretty.
By Aaron Wherry - Saturday, February 4, 2012 at 1:41 PM - 0 Comments
Stephen Harper, Sept. 15, 2008. “My own belief is if we were going to have some sort of big crash or recession, we probably would have had it by now.”
Stephen Harper, Sept. 26, 2008. “The only way there is going to be a recession is if they’re elected, and that’s why they’re not going to be elected.”
Stephen Harper, yesterday.“I don’t see a lot of evidence that we’ll have a recession or a crisis this year, but on the other hand I don’t want to be too complacent about that.”
By Erica Alini - Tuesday, January 31, 2012 at 2:01 PM - 0 Comments
Canada’s GDP numbers for November came out this morning, and it was a rude awakening. The economy slowed down unexpectedly in November, with output dipping 0.1 per cent, as opposed to the consensus forecast of 0.2 per cent growth. “While it initially appeared that the Canadian economy smoothly decelerated late last year, it now looks like Canada stumbled as it approached the 2011 finish line,” CIBC quipped in a note.
Dragging down overall output was a 2.5 per cent drop in oil and gas extraction activity, possibly due to low oil and gas prices and softening demand for exports. Notably, construction in both the residential and non-residential sector was down 0.3 per cent.
The November slowdown is expected to bring down quarterly growth from a projected two per cent annualized expansion. Recession–defined by economists as two consecutive quarters of negative growth–isn’t necessarily upon us. But with Europe teetering on the brink of fiscal disaster, global demand cooling, and the Canadian housing market possibly due for a downturn–which could shave as much as one per cent off of GDP, according to some estimates–is it really time for the Harper government to pull the breaks on public spending?
Another concern is that, with rates already at record lows, there’s little the Bank of Canada can do to soften the impact of deficit cuts with expansionary monetary policy. As Stephen Gordon noted yesterday, there are steep costs associated with introducing austerity at the wrong point of the business cycle.
By Aaron Wherry - Tuesday, November 22, 2011 at 7:06 PM - 13 Comments
The Scene. Adherents to the faith of smaller government take note, for the Harper government has successfully identified and eliminated one of the prime inefficiencies standing between us and true freedom.
“This government cannot say how many jobs were created after having spent $47 billion of Canadians’ money,” lamented the NDP’s Peter Julian this afternoon of the government’s trademarked action plan. “The program was so badly monitored that no one knows if it was effective.”
Of this, Mr. Julian can claim the authority of the auditor general, who apparently found no attempt by the government to determine precisely how many jobs it “created” (in the messianic parlance) with its billions in bridges, roads and hockey arenas.
But just because the government can’t—indeed, won’t—add, doesn’t mean Mr. Julian can’t subtract. “We now know that 72,000 full-time jobs were lost last month thanks to the policies of this government,” he asserted with his next breath. “Now that the truth is out, when will this government put aside bogus and unsubstantiated job claims and take real and immediate action to create jobs here in Canada for Canadian families?”
Jim Flaherty would at least stand to respond to this. Continue…
By John Geddes - Monday, November 14, 2011 at 9:40 AM - 3 Comments
FROM THE MACLEAN’S ARCHIVES: a 2011 profile, Chuck Norris’ jokes with Carney’s name, and the governor’s anxiety levels in a graph
Upbeat stories to spin were in short supply at last week’s G20 summit at Cannes. The host, French President Nicolas Sarkozy, narrowly avoided disaster on his home turf when the destabilizing prospect of a Greek referendum on the country’s debt crisis faded. U.S. President Barack Obama remarked on how European decision-making in the face of economic calamity struck him as “laborious” and “time-consuming,” before heading back to Washington, where laborious, time-consuming efforts to cope with America’s deficit continue. Prime Minister Stephen Harper, though, claimed bragging rights on the Riviera thanks to the naming of Mark Carney, the governor of the Bank of Canada, to head an increasingly powerful body called the Financial Stability Board. “His appointment,” Harper said, “is both a tribute to his personal qualities and a reflection on Canada’s superior performance in monetary, fiscal and financial-sector policy areas.”
MORE ON CANADA’S STAR CENTRAL BANKER:
- How Carney was touted as a possible candidate to lead the Liberal Party
- Paul Wells on Chuck Norris jokes rewritten with Mark Carney’s name
- Carney’s rising anxiety levels about household debt—in a graph
- Why Harper turned to Asia: ask Carney
- Andrew Coyne interviews Mark Carney
- Andrew Coyne’s profile of Mark Carney
- Carney’s second job at the Financial Stability Board: What it is, and what the gig entails
By Andrew Coyne - Monday, November 14, 2011 at 9:40 AM - 7 Comments
Carney understands that policy isn’t just about making new rules
At 46, Mark Carney manages to look both younger and older than his years. This is fitting, as his approach to the economy combines a commitment to old-fashioned central bankerly verities—sound money, prudent risks—with a modish flexibility as to how these are to be secured.
That has been an unavoidable necessity in what we should perhaps now refer to as his day job, as governor of the Bank of Canada. Gone are the days when central bankers could simply focus on keeping the so-called monetary aggregates—M1, M2, all the gang—to a fixed annual growth rate, as monetarists had advised. While this approach had succeeded in reining in the Great Inflation of the 1970s and ’80s, it eventually fell victim to Goodhart’s law, named for a former adviser to the Bank of England: namely, that the moment you target any particular measure of the money supply it loses its usefulness—because people in financial markets find ways to innovate around the constraint. Central bankers have since had to steer by a variety of other measures, even as the overall objective—stable prices—has remained unchanged.
The lesson of that experience, that policy does not consist in simply issuing a set of rules, but rather exists as a continuing process of interaction between the regulators and the regulated, appears to inform Carney’s views on the causes of the financial crisis, and how to prevent another—a subject that will be his focus in his new, part-time job as chairman of the Financial Stability Board, the international body tasked with coordinating and overseeing the reform of global banking regulations. In speeches and interviews the governor has given, a number of related themes and concerns emerge. Among them:
By Chris Sorensen - Monday, October 31, 2011 at 8:00 AM - 0 Comments
If you have a tough time telling the difference between the plodding U.S. economic recovery under way and the dark days of 2009—you’re not alone
If you have a tough time telling the difference between the plodding U.S. economic recovery under way and the dark days of 2009—you’re not alone.
Tom Porcelli, chief U.S. economist at RBC Capital Markets, recently coined the term “flash recession” to describe brief periods like last August, when the sputtering U.S. economy appeared to completely go off the rails. “You had essentially zero job growth and you had virtually no consumer spending—that’s a recession,” Porcelli said during an interview earlier this month with Yahoo! Finance. While Porcelli acknowledged one month of negative economic growth doesn’t meet the traditional definition of a recession, he argued that the current recovery is being driven more than usual by rising and falling consumer sentiment, while longer-term indicators like unemployment, stuck at around 9.1 per cent in the U.S., refuse to budge.
That would also explain September’s sudden spike in positive data—rebounding auto and chain store sales—as a flash recovery. And if Porcelli is correct, gauging the health of the U.S. economy just got a lot tougher. That’s because it now requires figuring out what’s going on inside the heads of millions of jittery U.S. consumers at any given moment.
By Aaron Wherry - Tuesday, October 25, 2011 at 10:39 AM - 6 Comments
The Prime Minister talks to Postmedia about the global economy.
In the case of financial-sector reform, as you know, substantial progress has already been made. Obviously, there are some in the financial sector who don’t necessarily like the proposals, and there are some legitimate complaints, and in Canada, we pay attention to what the financial sector says. But that said, one of the things we know is the financial sector can’t just write its own rules. The crash of 2008 made very clear that there must be credible regulatory systems on the financial sector or it can lead us in a position where we don’t want to be. That is being done, that has to be done.
By Aaron Wherry - Thursday, October 13, 2011 at 2:50 PM - 13 Comments
The Prime Minister calls on Europe and the G20 to get their respective and collective houses in order.
Events in the summer of 2011 have made it clear that global economic challenges are by no means behind us. What started as a sovereign debt crisis in smaller countries in Europe has now spread, causing extreme stress in the European financial sector and threatening global growth. Unfortunately, this time, the policy response to our shared challenges has not been as strong and co-ordinated as it needs to be. This slow response has resulted in missed opportunities, with each missed opportunity increasing the cost and difficulty of resolving the crisis.
We cannot afford any more missed opportunities.
Last month, Scott Clark and Peter DeVries noted that Mr. Harper was among those leaders calling on “surplus” countries “to increase their expansion of domestic demand” and thus wondered whether the Prime Minister was willing to participate in a global stimulus package (to the tune of $41 billion).
By Aaron Wherry - Wednesday, October 12, 2011 at 2:30 PM - 7 Comments
While the Conservatives have spent the last three years lamenting for the possibility of “opportunistic,” “unnecessary,” “unwanted,” “costly,” “needless” elections that could imperil the national economy and hurt the unemployed, the Finance Minister volunteered yesterday that, in hindsight, the Prime Minister probably wouldn’t have plunged the country into an election in the fall of 2008.
One of the most testing times in my career in public service was the recession that began in the Fall of 2008. In fact, we were in the midst of an election when it hit with full force. Had we been aware of the crisis on the horizon, the Prime Minister would have been unlikely to call the election. Nevertheless, that was the situation. So I found myself campaigning for re-election in Whitby-Oshawa while juggling an increasing number of phone calls with the G7 finance ministers as we all became more aware of the breadth of the worldwide economic crisis.
It was during that campaign, of course, that Mr. Harper offered his assessment that if there was going to be a recession it would’ve happened by then.
By Aaron Wherry - Wednesday, October 12, 2011 at 12:07 PM - 17 Comments
Stephen Gordon questions those calling for the government to take action on jobs.
My reading of the data of which I’m aware suggests that current rates of job creation are consistent with those observed during the last expansion, and have been so for a year or so. Calls for the government to “do something” are misplaced; the labour market has been functioning normally for quite some time now.
By Aaron Wherry - Tuesday, October 11, 2011 at 2:04 PM - 52 Comments
Brian Topp considers the Occupy Wall Street protests.
There are false roads open – like the fantasist right-wing populism of the American Tea Partiers. And there are better roads open – like modern, prudent, determined and fearless social democracy, of the kind Jack Layton was talking about. Perhaps we will go down that first road, brought to us in Canada in our mild Canadian way by Stephen Harper and his team. Hopefully we will go down the other, on offer in Canada through Mr. Layton’s team.
But the Wall Street occupiers are there to let the Wall Street revellers and bonus-hunters know that their own particular party – and the whole approach to government that made it possible in the United States and here in Canada – has just about had its day.
By Aaron Wherry - Wednesday, October 5, 2011 at 8:45 AM - 3 Comments
While the NDP was pleased to see its motion pass the House unanimously, the Prime Minister promptly dismissed it yesterday as “extremely vague.” Worse than that, Stephen Gordon thinks the motion misunderstands economic reality.
Policy recommendations about employment should be based on a realistic assessment of current labour market conditions. And when you put things in historical perspective, current conditions are at least as good as one might expect after two years of recovery.