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The optimism of Stephen Poloz

May 20: Plus, the true cost of fossil fuels, a record year of auto recalls, and a high-stakes jewellery heist


 

MORNING-PLAYBOOK-STORYThere’s lots in the news today, including expectations of an announcement that B.C.’s government has made a deal for a liquefied natural gas plant off the northwestern B.C. coast, which was recently denied Aboriginal consent by the Lax Kw’alaams. Meanwhile, Canada’s biggest telecommunications companies (including Rogers, which owns Maclean’s) have lost an appeal over CRTC rules that restrict how long phone companies can draw out customer payment plans for phones. The ruling is expected to bring more competition to the industry as consumers are released from three-year phone plans.

Today will bring wholesale trade numbers for Canada for March, and minutes from the U.S. Fed from the latest monetary policy meeting, which will be scoured by eager interest-rate watchers. Japanese first-quarter GDP numbers are also out this morning, indicating growth was at 0.6 per cent in the first quarter, and 2.4 per cent annualized growth, much better than expected. Earnings this morning include Target, Lowe’s and Staples.

The optimism of Stephen Poloz. After the first-quarter GDP came in flat, the Bank of Canada governor is saying this should (hopefully) be the quarter that the economy picks up—but there are few certainties. Poloz has repeatedly said that the oil rout’s impact would be “front-loaded,” hitting hard and fast, then giving way to increasing manufacturing and export growth in the second half of the year. Is this happening? Statistics Canada released numbers last week that said manufacturing sales had increased by 2.9 per cent in March, pushed up by car and aerospace parts, after dropping the previous month. But numbers from RBC released at the beginning of the month said the manufacturing industry as a whole contracted for the third consecutive month in April, and orders were at a record low. There has been a lot of uncertainty to the south, too: After bursting out of the gate for 2015 on strong jobs and retail numbers, recent economic numbers from the U.S. have been tepid, and predictions for when an interest-rate hike will come have been repeatedly pushed back. It’s all a big “who knows?” “Of course, I must underscore how uncertain the outlook is,” Poloz noted.

But are oil prices actually cheap? No, according to the IMF. A working paper puts the true cost of land and air pollution and climate change on health costs and infrastructure, which governments must pay, at a $5.3-trillion global subsidy—just for this year. This equals $10 million a minute, the Guardian notes, more than the global combined budget for health care. Notably, only about a quarter of this estimated cost comes from the impact of climate change (remember, the report is for this year, not future years), with coal representing the largest subsidy, both for its ubiquity and its high environmental impact. The report recommends taxing energy costs to more accurately reflect the true costs of fossil fuels. You can read the report here.

The biggest airbag recall in history. Fatal flaws in airbags made by the Japanese airbag manufacturer Takaka will result in almost 34 million cars being recalled for repairs, and the company will have to submit parts to the federal regulator for inspection. The recall affects 11 vehicle brands, with six fatalities and more than 100 injuries connected to the flaw in the airbags in the U.S. So far, no incidents have been explicitly linked to cars with the Takata airbags in Canada, but BMW, Nissan and Chrysler have recalled vehicles. Basically, instead of working as they should, they explode, sending metal shards flying into the passengers. The human toll of these screw-ups has been enormous. The news follows a massive recall by GM due to faulty ignition switches, which have been officially linked to more than 100 deaths (and counting), and injuries of hundreds more, stretching back for at least a decade. The New York Times has an impressive multimedia feature on what has been a record-breaking year for recalls.

A high-stakes jewellery heist gets busted. Everybody loves an elaborate, high-stakes jewellery heist involving a roving gang of enterprising, highly specialized criminals facing down a gang of enterprising cops. (Maybe it’s because of all those movies.) And this weekend, it was one point for Scotland Yard, after they nabbed nine people over an Easter Weekend heist in London’s jewellery district. The gang had stolen what is believed to be millions of pounds worth of cash and jewellery, after boring through a half-metre-thick concrete wall, underground, into a vault. It was a vindication for the police, after they were accused of amateur policing for failing to follow up on an alarm triggered by the theft. For those who love a good heist story, my particular favourite is the New Yorker profile by David Samuels of the “Pink Panther” gang, who are renowned for their jewellery thefts, although they have often favoured less elegant means, such as driving a car through the wall of a store.

Need to know:
TSX: 15,121.02 (+12.90), Tuesday
Loonie: 81.75 (-1.43), Tuesday
Oil (WTI): $58.52, Wednesday (8:45 a.m.)


 

The optimism of Stephen Poloz

  1. The Bank of Canada could fire the entire crew tomorrow and Stephen could simply call up a top guy at Goldman Sachs or the Fed and say what is up. Everything the BOC does is duplicated by the big private banks in Canada anyway: the whole scheme is a lie, a grotesque waste of Canadian tax money: has anyone ever asked how much the renovations on the Bank of Canada building in Ottawa have cost.

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