Harper says that weak Western economies put Canada at risk - Macleans.ca

Harper says that weak Western economies put Canada at risk

Cites “almost non-existent” job growth in other countries


We already knew that weak growth in the U.S. and Europe might slow Canada’s economy down, but it’s not every day the Prime Minister calls it a “very dangerous situation.” In an interview with QMI Agency, Stephen Harper said he wants Canadians to understand just “how fragile the global recovery is.” He cited “next to non-existent,” job creation in Europe, the United States and Japan as a threat to Canada’s so-far robust recovery.


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Harper says that weak Western economies put Canada at risk

  1. I would tend to agree with the PM. When the US dicontinued the tax incentive for housing in April, the housing market slowed by 1/3 in May, yikes!

  2. So when things go well it's the Conservatives doing. Even though Harper and Flaherty we're trying to break down the very system that insured Canada fared better than the other G8 countries.
    However when things start looking grim again, it's not Canada's fault, it's everybody elses.

    I thought this government was susposed to be accountable?

    • Whoops, they "were trying"

    • This is too partisan and backward looking to be worth even thinking about. You should be glad the Canadian PM is so forthcoming. I suspect he is the only one with guts enough to post a warning.

    • 1. What did Harper and Flaherty do to tear down Canada's financial regulations? Please give me specifics.

      2. It is everybody else's fault when they maintain poorly regulated financial systems and unsustainable levels of debt. However, we are impacted because we trade with and have investment relations with other countries.

      3. The Conservatives can legitimately take credit for some part of the recovery, because stimulus funds were channeled towards the kind of spending that has the biggest multiplier effect (infrastructure spending). They could well have implemented a different plan and experienced a milder recession.

      • They didn't DO anything because they didn't get want they wanted, this was back before the CPC got into power.

        I know full well that it isn't the government's fault if the US and Europe seem to be caught in this quagmire, I'm not blaming them.

        The CPC does deserve credit but I think they take too much, but again, the problem here isn't the CPC, it's the attitude by whomever is in power to overstate their success and dismiss their failures.

    • Banking, smoke and mirrors By: Frances Russell

      23/06/2010 1:00 AM
      That $57,000 Muskoka "lake" in the $1.9 million "Experience Canada" media centre isn't all that's fake about Canada's image as host country for the G8 and G20 summits.

      The real charade is Canada's preaching to the world about the strengths of Canada's banking system — and using that "strength" to lead the opposition to an international bank tax — while giving Canada's banks a massive bailout.

      The financial media have virtually ignored Ottawa's $200-billion low-interest line of credit to help Canada's banks weather the recession and the Canada Mortgage and Housing Corp.'s $125-billion purchase of questionable mortgages and other rotten paper held by the banks when the crash came in the fall of 2008.

      Both were part of the 2009 federal budget.

      As she says, why did most of the financial media & MacLeans not report on this. I think I know.

  3. I do think there are some risks to the Canadian economy that Harper is underplaying. Our recovery has been driven by higher levels of consumer debt. Over the long haul, we need to find a way to encourage Canadians to save more, and pay down debt (though in the short-term it is good that Canadians are spending).

    • I agree.
      I've been spending a lot these last few months, but I;m just about ready to go into super saving mode.

    • One of the most effective methods would be to reduce income tax and increase consumption tax (the GST). That way people don't get taxed for earning, just for spending.

      But try to sell that option to people.

      • I'd buy that option if essentials were left off the list of items nailed with the consumption tax. As it is, however, the poor are now faced with a higher grocery bill, meaning even fewer essentials. Make kids starve so that I can save a percent on my income tax just isn't my cup of tea. Sorry.

        • No reason they couldn't be. A consumption tax can be operated just as progressively as an income tax can.

      • It is a bit more complicated than that. Consumption taxes do dissuade consumption, however they also reduce a person's disposable income (as would any tax). People with lower disposable incomes spend a higher percentage of their incomes. So even if there is a net increase in saving, it is probably small. Of course higher tax revenues can mean increased government saving (ie. smaller deficits or larger surpluses) in theory. The problem is that governments often spend most of that increase in revenue.

        Canada's savings rate collapsed precisely around the same time that the GST was introduced. Certainly there were other things going on at the time, but it is hard to argue that the GST increased savings.

        1982: 20.7%
        1983: 17.2%
        1984: 17%
        1985: 16%
        1986: 13.7%
        1987: 12.1%
        1988: 12.6%
        1989: 13.3%
        1990: 13.3%
        1991: 13.6% (GST implemented)
        1992: 13.3%
        1993: 12.1%
        1994: 9.6%
        1995: 9.4%
        1996: 7.2%
        1997: 5%

        I suggest that low interest rates have a far greater impact on the savings rate by making debt cheap and lending unprofitable.

        Interest rates in January of each year
        1983: 10.17%
        1984: 10.23%
        1985: 10.21%
        1986: 9.78%
        1987: 7.68%
        1988: 8.98%
        1989: 10.54%
        1990: 10.96%
        1991: 9.94%
        1992: 7.25%
        1993: 6.91%
        1994: 4.18%
        1995: 8.9%
        1996: 5.41%
        1997: 4.44%

        2009: 1.37%

        • Canada's savings rate collapsed precisely around the same time that the GST was introduced. Certainly there were other things going on at the time, but it is hard to argue that the GST increased savings.

          The GST was a replacement for the MST, and did not come with a corresponding decrease in income tax. In order for it to work, income tax has to come down as the consumption tax goes up.

          I suggest that low interest rates have a far greater impact on the savings rate by making debt cheap and lending unprofitable.

          I would think that record bank profits would disagree with your 'lending unprofitable' statement.

          Clearly there are a number of factors involved, not the least of which is cultural. If nothing else, a consumption based taxation system would do interesting things to the underground economy.

          • I should clarify what I mean by the profitability of lending. Banks can always make a profit by lending central bank money, because they can just tack on a few percentage points. However, at low rates of interest, individuals are far less likely to deposit money over the long term (which in turn means banks have less money to lend out). Instead people are more likely to spend money. So you get more activities financed by debt, and in particular, debt that isn't backed by deposits.

  4. Abolish the Bank of Canada (the Central Bank)
    Make money creation (means of exchange) the prerogative of the Government/Parliament
    Back the Canadian dollar with a commodity (Gold/Oil/Land etc.)
    Regulate banks and financial institutions
    Ban Credit default swaps

    All the above will bring a healthy, stable and prosperous economy.

    Watch "The Money Masters": http://video.google.com/videoplay?docid=-51531956
    Watch "The New World Order": http://www.youtube.com/watch?v=I9pK-yoU69s
    Watcht "The meaning of Austerity": http://www.corbettreport.com/articles/20100622_au

  5. ….this dude minority pro con leader of sheep supposes we are all beneath him in knowledge….a sign of control….economies in the west are not at risk? let us count… there are grow ops and polygamy…non-judgemental assertions of course… oh yes! china already owns the tar sands thanks to fast eddie our farmer turned premier…

  6. How does having a Goldman Sach's stooge like Mark Carney as the governor of the Bank of Canada make it more independent than making parliament responsible for making national currency?

    How much do we pay annually on interest payments to private banks other than Bank of Canada, something like over $40 Billion?

    • 1. What has Carney done that you wouldn't do?

      2. Are you a socred? Anyhow, interest is a good thing – it allows borrowers to compensate lenders for the risk of default. Interest rates also encourages more people to lend money in the first place.

      • 1. I am neither the Governor of the Bank of Canada, nor would I know how to parse through the current Governor's decisions to answer that question. Sufficient to say that I am skeptical of the notion that central banks are immune from politics (broadly defined) and make for enlightened technocrats. Perhaps only the scale has been shifted from the nation-state to something more global and fractious.

        2. Looking into socred ideas more and more each day, and I always enjoy the rantings of John 'kingofthepaupers' Turmel. I don't see why banking cannot be a function of government. The current system has not stopped 'quantitative easing', so why shouldn't we treat our national currency as a public dividend to be credited interest free? More significantly to my original point, why should the Canadian taxpayers have to repay the debt on interest accumulated by money borrowed from private banks by its government? I didn't sign off on any of these deals, and I shouldn't have to be on the hook for the compound interest.

  7. Hopefully other world leaders listen to Prime Minister Harper's advice or this recession could easily become a depression due to the wasteful borrowing of guys like Obama and the Europeans. China will not bankroll these closet socialists indefinitely.

  8. Overwhelming debt loads in leading developed nations that have become even more indebted through their attempts to stimulate their economies means that they are out of ammunition when the next financial crisis occurs. The crisis of 2008 was founded on a debt crisis that was solved by increasing the amount of debt; the US debt now stands at $13.1 trillion and their economy has now reached the point of continuous structural deficits.

    The only way to work ourselves out of this mess is to put an end to fiat currencies that can be printed at will. Just look at the example of the Weimar Republic of the 1920s if you want to see where we are headed.


  9. 2008 was not a debt crisis, it was a financial crisis sparked by a bubble in subprime loans. US debt as a % of GDP was reasonably low. It is of course much higher now, though the inflationary pressures you are afraid of are not manifesting themselves despite large deficits and historically low interest rates. A sovereign debt crisis is where a country defaults on its debts (or is imminently going to default and negotiates a restructuring plan).

    Nor is it clear that stimulus spending has actually increased the deficit. The cost of TARP turned out to be quite low – about 79 billion. The loans to the auto companies are actually being paid back. At the same time, without those supports the economy would have fallen further in 2008 and 2009, bringing down revenues with it. I agree that the US has a need to pare down debt over the long run – though returning to full employment may be the best way to do that. According to the CBO the deficit would be about 4% of GDP at full employment.

    In the short run the scariest risk is another financial crisis driven by a coordinated wave of global austerity. If everybody slashes their deficits and raises their interest rates at the same time the effects of each individual country's policy will snowball into declining exports. Many Canadians have been misled by our own experience in the 1990s, assuming that Chretien's deficit-slashing drove economic growth. What happened was that the central bank sterilized Canada's deficit cuts by lowering interest rates. That, in turn, drove the dollar down and spurred rapid export growth. The global economy can't do that because:
    A. interest rates are low across the board
    B. currency values are relative – everybody can't depreciate at the same time

    A few of the big economies – perhaps the US and China – need to allow the Euro to depreciate as Europe gets its fiscal house in order. Of course that won't go over well in either the US and China. Moreover, it may expose some of the structural weaknesses in the growth of the latter (China would be a good place to look if I was hunting for a bubble).