In Saturday’s Globe and Mail, Brian Milner summarized Vitaliy Katsenelson’s historical analysis of American stock markets. He distinguishes “bull markets” from “range-bound markets”: . . . growth patterns may be similar. What separates the two are stock valuations, which soar to such unrealistic heights during raging bull periods that it takes years for them to come back down to normal […]
Read moreThe United Steelworkers’ union has just issued the following release: SHAREHOLDER ALERT: PCS STOCK UNDERPERFORMING COMPETITOR DURING STRIKE SASKATOON, SK — United Steelworkers’ (USW) Western Canada Director Stephen Hunt said Thursday that investors should use their influence to urge Potash Corporation of Saskatchewan (PCS) management to negotiate a settlement with Steelworkers on strike at three mines near Saskatoon. “PCS stock […]
Read moreWell. Finally. Some clarity. Sort of. Earlier this month, Bank of Canada governor Mark Carney made appearances before the House of Commons Finance Committee and the Senate Banking, Trade and Commerce committee to discuss the Bank’s latest monetary policy report . Transcripts are now available and with a little reading-between-the-lines, they tell us a lot, I think, about the true […]
Read moreWhat is going on out in Canada’s wild and woolly financial system? First, the Bank of Canada convinces the Department of Finance and the Conservatives that it “needs” expanded powers to purchase a broader range of securities (see my earlier post for why their arguments are not very convincing). And then, earlier this week, a small notice on my Scotiabank […]
Read moreFinancial market speculation masquerading as investment is driving me crazy. The business press fails to understand the distinction between buying an asset the delivers a stream of income in the future (a dividend) and buying an asset because of anticipated higher resale price in the future (a capital gain). It is a fundamental difference, and while I have little objection […]
Read moreWell, it does take one’s breath away that the IMF now estimates that the financial crisis will result in $1 trillion in losses, about four times the total booked as losses to date by large financial institutions. I’m not entirely assure of the appropriate denominator to judge the percentage impact of this crisis on total financial system assets, but global […]
Read moreI was in Washington last week for meetings of economists from central trade union bodies, mainly from the OECD countries. While the main purpose of the meetings was to draft the annual union statement to the upcoming G-8 summit in Japan, we had a full day of meetings with researchers and senior officials from the International Monetary Fund, and also […]
Read moreI was on CBC’s The House this weekend on the US economy and its implication for Canada and the federal budget. My co-commentator was Chris Ragan, of McGill and CD Howe. We are in general agreement as far as diagnosis goes, though he seems more optimistic than I about Canada’s ability to stay clear of the Tasmanian devil that is […]
Read moreI am glad that Jim Flaherty’s budget did not actually come through with a rumoured exemption for capital gains income. Recall that the Conservatives’ 2006 platform had promised a ridiculous and unworkable exemption from income taxes on capital gains so long as the winnings were “re-invested.” This high-profile broken promise still clearly niggled the Harper government, and expectations were high […]
Read moreCheck out this brilliant video on You Tube, everything you need to know about finance and the sub prime crisis. http://www.youtube.com/results?search_query=long%20johns%20sub%20prime&search=Search&sa=X&oi=spell&resnum=0&spell=1Â
Read moreRandall Wray, in a paper for the Levy Institute, provides a nice history of the sub-prime debacle, and connects it to the economics of Hyman Minsky (whose name has resurfaced in the wake of the current connundrum) in Lessons from the Sub-prime Meltdown: This paper uses Hyman P. Minsky’s approach to analyze the current international financial crisis, which was initiated […]
Read moreA good piece by novelist John Lanchester from the London Review of Books – on the City (London finance), inequality, and the credit crisis. http://www.lrb.co.uk/v30/n01/lanc01_.html
Read moreSo argues top Financial Times columnist Martin Wolf in a piece that will warm Jim Stanford’s heart: “What seems increasingly clear is that the combination of generous government guarantees with rampant profit-making in inadequately capitalised institutions is an accident waiting to happen – again and again and again. Either the banking industry should be treated as a utility, with regulated […]
Read moreThe ride of the Canadian dollar is on every good policy wonk’s mind. Labour is concerned about its impact on jobs. Manufacturers are concerned about what exchange rate volatility means for their bottom lines when their sales are in one currency and costs in another. (Note: like border line-ups, exchange rate volatility is a real cost of transacting across the […]
Read moreThanks to Pierre Habbard of TUAC for this Quote: “His memoir also confirms Mr. Greenspan’s strong support for free markets and his deep antipathy to regulation. But I don’t see how you can have it both ways. If you are a complete believer in the proposition that free markets are self-regulating and self- correcting, then you logically should let markets […]
Read moreThe business pages are covering this rather arcane issue more and more intensively. The Canadian market for so-called non bank asset backed commercial paper or ABCP has more or less frozen up, leaving some $40 Billion in stranded assets. Much of this seems to be held by large pension funds and other large institutions, with the Quebec Caisse exposed in […]
Read morehttp://www.guardian.co.uk/comment/story/0,,2177006,00.html An interesting column – roots of the crisis are seen to lie in the continual injections of financial liquidity required to keep growth going in a global economy with a serious underlying deflationary bias, the result of excess capacity in manufacturing. “Merely cutting the cost of borrowing will do little to remedy the long-term weaknesses of the advanced economies” […]
Read moreI’ve pasted in below quite an interesting analysis of the current financial crisis, by Pierre Habbard of the Trade Union Advisory Committee to the OECD. The Charts have gone missing but are not essential. Financialisation and the “sub-prime†financial crisis – Issues for future regulation TUAC Secretariat Paris, 5 September 2007 The phenomenal growth of the derivative […]
Read moreI have to renew my mortgage in a couple of weeks, but am wrestling with whether to go with a fixed or variable rate. A few months ago, when my credit union called, they guaranteed me a 5.8% fixed rate for three years, with the caveat that if rates went down by the time the current term expired they would […]
Read moreI have just returned from the annual conference of the Canadian Association for Business Economics in Kingston. On Monday evening, we heard from Pierre Duguay, a Deputy Governor of the Bank of Canada. Without specifically mentioning Jim’s Globe column, he suggested that some people mistook the Bank’s intervention in financial markets as a deviation from monetary policy’s exclusive focus on […]
Read moreHere’s an interesting sidebar to the current hissy fit roiling financial markets: It has turned out that Canada’s public debt is now dangerously low. Huh? We all know that where debt is concerned, private is good and public is bad. That’s why we cheer on consumers as they pump up their indebtedness to a record ratio (over 100%) of disposable income, […]
Read moreForgive me for greeting the latest financial meltdown with a big yawn. We are facing a combination of two textbook cycles, neatly overlaying each other: 1. Classic speculative cycle:Â something catches the eye of speculators, they drive it up in price in search of (utterly unproductive) speculative profits, the rising price produces a self-fueling speculative bubble, and then something happens […]
Read moreNice to see the Bank of Canada swinging into action the last couple of weeks, pumping many billions of dollars of liquidity into financial markets to ease the sub-prime-inspired credit crunch, and making very hard-nosed statements about its intention to “defend†its desired interest rate regardless of where the markets want to go. Now that’s my kind of central bank. […]
Read moreThere is a point in a good party when you decide either to stop and get home at a decent hour, or you throw caution to the wind and decide that there is no time like the present. In the current mess of the financial markets, how is it possible that any sane banker would not have noticed until now […]
Read moreThe term “hedge fund” sounds so innocent because hedging is protecting against risk. But hedge funds are precisely the opposite: largely unregulated, they are pools where millionaires put their cash, to then have it leverage (borrow) lots more money, in order to make speculative bets in the financial markets in a way that makes the whole financial system a lot […]
Read moreAs background to the “flight from risk” which underpins the growing financial crisis in the US and Europe, see the latest annual report from the Bank for International Settlements published in June, especially the chapter on financial markets in the advanced industrial countries. The BIS is a kind of central bank for central banks. http://www.bis.org/publ/annualreport.htm While cautiously stated, it’s not […]
Read moreNouriel Roubini invokes the great, but relatively unknown, Post-Keynesian economist, Hyman Minsky, in his latest dispatch about the state of US financial markets and economy. Minsky made the point that finance and financial markets matter, and in fact can have disastrous consequences for the real economy if left unchecked, and therefore institutions like prudent regulation and central banks are essential […]
Read morehttp://www.canada.com/ottawacitizen/news/opinion/story.html?id=6c433a24-f12a-4584-9706-9f123ded8234 A good piece from today’s Ottawa Citizen. I’ve been similarly struck by the concern re foreign state involvement in our resource sector, combined with evident lack of concern about loss of domestic control of resource development. Whether we would get that from greater Canadian capitalist ownership of resource companies as opposed to more public owneship and regulation is a […]
Read moreUnder the headline “IMF Admonishes Canada,” the Financial Post reported on Wednesday: The IMF added its voice yesterday to the growing chorus of observers urging Canada to undertake a 21st-century overhaul of its financial system, saying it should create a single securities regulator, open its banking system to foreign competition and mergers and tear down interprovincial trade barriers. . . . […]
Read moreIn the Globe and Mail it is reported: A flurry of increases in the past month has sent Canadian mortgage rates to their highest level in more than five years, and consumers shouldn’t expect a return to the low interest rates they enjoyed in the first half of the decade. The story quotes Benjamin Tal of CIBC World Markets, commenting […]
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