•   
  •   
  •   

Money Economists say Ottawa needs a new playbook to tackle the next global recession

12:20  06 december  2019
12:20  06 december  2019 Source:   cbc.ca

Thomas Chabot's two-point game helps Ottawa Senators past New York Rangers 4-1

  Thomas Chabot's two-point game helps Ottawa Senators past New York Rangers 4-1 OTTAWA — The Ottawa Senators have finally found a winning game plan. Anders Nilsson made 30 saves as the Senators beat the New York Rangers 4-1 on Friday night for Ottawa's first three-game win streak of the season. The Senators have won seven of their last nine and are .500 for the first time this campaign. "I think we're playing some really good hockey," said Anders Nilsson, who stopped 30 shots. "You saw the way we played (Friday) and especially the way we played in the first period. We came out and had one of the best periods all year in the first and shut them down completely.

Economy Minister Peter Altmaier said Germany was not in a recession and could avoid one by taking the right measures. The economy contracted back in the third quarter of last year, and the subsequent rebound was not all that powerful. Looking ahead, one question is whether Germany will

The economies in China and many of its Asian neighbors are getting weaker, partly as a result of the trade war with the United States. Turbulence in global markets — and the news reports attached to that turbulence — could reduce consumer confidence, and lead Americans to pull back on their buying.

a screen shot of a video game: A man walks past a stock index board in Tokyo on October 2, 2008.© Provided by cbc.ca A man walks past a stock index board in Tokyo on October 2, 2008. An internal memo addressed to federal Finance Minister Bill Morneau in August outlined a range of fiscal and monetary policies the Liberals and the Bank of Canada could employ in the event of "economic shocks" — a range that includes lowering interest rates even further and relying on Employment Insurance.

The August memo, marked "secret," was released to CBC last month through the federal Access to Information Act. It's leading some economists to call on the government to prioritize some tools over others, and to consider at least one unprecedented economic strategy.

New cabinet must make the best of an uncertain economic outlook: Don Pittis

  New cabinet must make the best of an uncertain economic outlook: Don Pittis As Canada's federal Liberals buckle down to their new term, markets hint that stimulus by central banks has helped reverse the worst of the global economic slide. But the OECD says more help is needed.According to those trying hard to understand what markets are telling us about the economy, "not as bad as feared" is the new global watchword.

“ Recession -plagued nation demands new bubble to invest in,” joked the Onion, a In a speech last month Larry Summers, an economist at Harvard University, gave the idea new credibility when he Global growth in foreign-exchange reserves slowed dramatically in 2013. Yet rich economies are still

He now says a global recession is the “most likely” outcome with a 55% probability. But it is worth noting To avoid excessive attention to mini- recessions , this period of excess capacity should have a Translating this definition of a moderate recession into GDP growth rates for the next few years

The unredacted portions of the memo don't cite any specific recession warning signs — but the document does note that, since the 1970s, Canada has experienced four significant recessions, one per decade. Canada's last recession happened in 2008-09, triggered by the U.S. housing bubble.

"Of note, Canada has never experienced a significant recession that was not also suffered by the United States," the briefing note says.

"On average, since the 1970s, recessions in Canada resulted in the equivalent of 550,000 job losses and a 4 per cent decline in real GDP."

Now, the fallout from the United Kingdom's protracted political brawl over leaving the European Union, trade disputes between the U.S and other countries and the ongoing protests in Hong Kong have some business analysts predicting economic turmoil.

Statistics Canada reports pace of economic growth slowed in third quarter

  Statistics Canada reports pace of economic growth slowed in third quarter Statistics Canada reports pace of economic growth slowed in third quarterThe federal agency says real gross domestic product grew at an annualized rate of 1.3 per cent in the three-month period.

Most business economists predict the U.S. will fall into a recession within the next two years, a new survey finds. "Business economists continue to approve of current monetary policy," NABE President Kevin Swift said in a summary. "Nearly three-quarters of panelists believe that the Federal

Special report: The world economy . The next recessionAnother economic downturn is just a matter of time. When that might happen is hard to say . Studies of American business cycles suggest that the economy It might not take much to bring on the next recession . Though there is no settled view on what In the end politics may prove the greatest stumbling block to managing a new global downturn.

The latest GDP figures show Canada's economic growth in the third quarter slowed due to a drop in exports. Statistics Canada reported last week that Canada's real gross domestic product grew at an annualized rate of 1.3 per cent in the last three months, compared with 3.7 per cent in the previous quarter.

The briefing note gives Morneau an overview of the tools he and Bank of Canada Gov. Stephen Poloz could use in the event of an economic downturn. They include reducing interest rates below zero — so-called "negative" interest rates — increasing government spending, offering more grants to businesses and households and increasing the money supply through quantitative and credit easing.

The memo outlines the "proposed sequencing of policy tools should Canada experience a recession." The details are blanked out in the document obtained by CBC News because, since they contain advice by or for a government institution or cabinet minister, they are exempted from access laws.

Rob Vanstone: Hockey's culture change is long overdue

  Rob Vanstone: Hockey's culture change is long overdue Robservations … • The exit of Bill Peters, who resigned as the Calgary Flames’ head coach on Friday , is a progressive step for hockey. The message has been transmitted, far and wide, that players at all levels must be treated respectfully and that coaches must be accountable. At long last, the players have a voice and some leverage, whereas once upon a time the coaches and general managers held all the cards. A culture change in the sport is long overdue. • Alas, smelling salts are still required in some cases. Consider Ron Francis, who on Saturday issued a prepared statement that referenced “physical incidents involving two players and Bill Peters.

Unlike those economies , it should avoid recession this year. Although one ratings agency has stripped France of its AAA status, its borrowing costs remain far below Italy's and Spain's (though the spread However, the fundamentals are much grimmer. France has not balanced its books since 1974.

Economists are good at measuring the past but inconsistent at forecasting future events, particularly recessions . That’s because recessions aren’t caused merely by concrete changes in the markets. Beliefs and stories passed on by thousands of individuals are important factors

Stimulus disappointed last time

Economists who spoke with CBC News said the Department of Finance and the Bank of Canada can't expect the playbook they used the 2008-09 recession to work next time.

Conference Board of Canada Chief Economist Pedro Antunes said strategies such as lowering interest rates (already at record lows) and quantitative easing weren't as effective as expected during the last downturn — and won't help pull Canada out of the next economic downturn, either.

'Quantitative easing' involves central banks buying assets such as government and corporate bonds from commercial banks and financial institutions, increasing the supply of money in the system. The goal is to lower interest rates and leave financial institutions flush with cash, which (in theory) should allow them to lend more to stimulate economic activity.

"We really didn't see that having a big impact globally or in Canada, in terms of driving investment," Antunes said. "It was more of a consumer-led kind of recovery."

Antunes and other economists said stimulus backfired in the last recession: instead of expanding their businesses and hiring more people, businesses seemed to hoard the injection of new money created through the monetary policy of central banks.

Bank of Canada keeps key interest rate target on hold at 1.75 per cent

  Bank of Canada keeps key interest rate target on hold at 1.75 per cent Bank of Canada keeps key interest rate target on hold at 1.75 per centThe central bank's overnight rate target has been set at 1.75 per cent since October of last year.

Some economists would say , not without some justification, that these are all actually the same Wage growth also remains tepid, and there are vulnerabilities galore across the global economy I think the American economy could easily avoid a recession over the next four years given the right

A recession ends when growth returns, but it can often take some time for society or the bureau to recognize it. Why do some people think a recession is But economists and historians generally define the Great Depression more broadly, with many saying it ended in 1941, when the economy

Although the briefing note touches on this point, Antunes said he would have liked to see infrastructure investment — which spurs private sector spending and job creation — play a more prominent role in the government's recession toolkit.

The Fraser Institute, however, argues that since it takes years for infrastructure projects to get built, they're not that useful in fighting recessions. The centre-right think tank points out that, before workers are hired and the first shovel hits the ground, such projects have to go through feasibility studies, design changes, legislative funding allocations and consultations with Indigenous communities, provinces, territories and municipalities before they even make it to tender.

"I think the evidence is overwhelmingly clear that it's almost impossible to do that in a short period of time," said Jason Clemens, the Fraser Institute's executive vice president. "And so, by the time those projects get shovels in the ground, the recession is over."

The Liberal government isn't helping matters by racking up back-to-back deficits, which could tie its hands when the next recession hits, Clemens said.

The sections of the briefing note that are not blacked out say nothing about how the Liberals would manage deficits and debt during a recession.

Canadian economy shed 71K jobs in November — biggest loss since the financial crisis

  Canadian economy shed 71K jobs in November — biggest loss since the financial crisis The unemployment rate jumped to 5.9 per cent, up from 5.5 per cent in October. © Provided by Global News CANADIAN UNEMPLOYMENT Economists on average had expected a gain of 10,000 jobs and the unemployment rate to hold steady at 5.5 per cent, according to financial markets data firm Refinitiv.Instead, the data showed job losses spread across industries and job types, with both full-time and part-time positions axed, CIBC economist Royce Mendes wrote in a note to clients.

And if a global recession is pushed further into the future by even larger dollops of borrowed money from the financial system, will the next recession quickly become a crash of similar or even larger proportions than the one seen in 2008? Some analysts argue that such gloomy warnings ignore the

The next recession may be coming in a year or two, so this is the time to start preparing your finances accordingly. If you might need a line of credit at some point, apply now, when banks are flush and looking for business. Financial institutions are reluctant to offer credit lines during recessions .

Clemens said the government should rely on automatic stabilizers like Employment Insurance — which ramps up spending when the number of jobless Canadians increases — to keep the economy on an even keel.

'Helicopter money'

But David Macdonald, an economist with the Canadian Centre for Policy Alternatives, said EI doesn't always help the people who need it most because some Canadians — the self-employed and workers who don't receive enough hours — don't qualify for benefits.

That's why he and at least one European economic think tank are calling for an "unprecedented" response to the next recession: central banks, working with finance ministers, giving money directly to businesses or citizens. Governments typically deliver such benefits to citizens, not the Bank of Canada.

"Everyone gets $100 or $200 a month, or lower-income families get more and upper-income families get less," Macdonald said.

Economists acknowledge this "helicopter money" concept is an extreme form of economic stimulus. Still, it's been suggested by former U.S. Federal Reserve chair Ben Bernanke as a strategy to fight deflation.

"This is something that's starting to be discussed but hasn't been implemented," Macdonald said. "But I think these are the types of things that the Bank of Canada is certainly thinking about going into the next recession."

Where's the plan for Alberta and Saskatchewan?

Economist and columnist Erica Ifill notes the toolkit doesn't seem to have anything to say about the sorts of targeted regional strategies the government or the Bank of Canada could undertake to stimulate regional economies.

"I don't see in the briefing note the economic position of the West and any analysis around that," Ifill said. "I'm really concerned with the West suffering, as they are right now, that the federal government is not looking at them as a specific case."

a man wearing a suit and tie: Prime Minister Justin Trudeau makes an announcement on the Trans Mountain Expansion Project with Minister of Finance Bill Morneau in Ottawa June 18, 2019.© Provided by Canadian Broadcasting Corporation Prime Minister Justin Trudeau makes an announcement on the Trans Mountain Expansion Project with Minister of Finance Bill Morneau in Ottawa June 18, 2019.

Ifill is calling on both the federal government and the Bank of Canada to consider economic stimulus packages tailored for Canada's regions.

A Department of Finance spokesperson downplayed the significance of the memo, saying that economic growth in Canada remains stable and unemployment is low.

"This note provides an update on the department's work on the general mechanics of the federal government toolkit to respond to potential slowdowns in the economy," said ministerial spokesperson Pierre-Olivier Herbert.

Ottawa sees lower economic growth over next five years as deficit continues to widen .
Ottawa sees lower economic growth over next five years as deficit continues to widenIn his fall economic update on Monday, Morneau said Canadian GDP growth is expected to grow at an average 1.8 per cent between 2019 and 2024. The projection is within the range considered healthy by economists, but still points to ongoing tensions over international trade that could send the global economy into a period of tepid growth.

—   Share news in the SOC. Networks

Topical videos:

usr: 8
This is interesting!